A potential tenant is asking about renting my property for their company employee and have the tenancy set up with the company’s director.
My understanding is that this is then not an AST; can openrent deal with this? I’ve used openrent for ASTs before (the RentNow product) but I have no idea if it can cover such non-AST tenancies?
Or I’d have to do it all offline then?
Besides I’d appreciate very much if anyone can give me some pointers on how I should proceed; or should I get an estate agent to set this tenancy up, or should I get a solicitor?
And in general is “company tenant” something we should avoid altogether? Is it more risky?
I have had one company let, and it was with a normal AST. It was lucky for me that it was, because the day after the company tenant (a wind farm company) signed the tenancy, he decided he was going to fly home (overseas). I took the matter up with the company and the company paid the six months of rent since it was a 6-month-term, which had been broken on the second day!
I would strongly urge you not to do this. Letting to companies comes with all sorts of problems and an AST is not suitable. I would stick to real human tenants iiwy
I would strongly disagree with @David122, Company lets in this current climate, in my opinion, would be a safer bet in regards to low voids, if a company does not pay, that said company has no legal recourse whatsoever. The landlord can remove them within 30 days and there’s nothing the courts can do to stop the landlord, if you have ‘real humans’ and they don’t pay you, all knowledgeable landlords know what this looks like, It could be the best part of a year. In this current climate it’s important to limit risk on your investment, hope this helps @otomo
My understanding is that this is then not an AST; can openrent deal with this? I’ve used openrent for ASTs before (the RentNow product) but I have no idea if it can cover such non-AST tenancies?
OpenRent does have guidance on company lets for those interested:
Please take a look and if anything isn’t clear feel free to ask.
Companies can liquidate at any point and the agreement would then be worthless to the landlord. What’s more as its considered a commercial contract, the landlord would not have the benefit of consumer protection.
Whilst company tenancies can be terminated more readily than human ones, the occupant of the property will likely become the direct tenant of the landlord when the tenancy ends. The landlord would then have to go through an eviction of that tenant without benefit of any of the relevant paperwork, which is likely to take a lot more time and expense.
@David122 You’re absolutely wrong on company lets, kindly do you research on this as its clear you are making assumptions. In addition there’re a number of legal commercial agreements out there for companies lets that legally protects the landlord and companies interest. Landlords DO NOT have to take on the current tenants, I take it you mean in relation to HMO’s @David122.
Whilst you’re 100% right that companies can liquidate at anytime the same can be said for a human that can loss his/her job at anytime which is a common excuse to why tenants stop paying rent.
Please note @otomo my advice is from the standpoint of protecting your monthly cashflow, a company as previously stated CANNOT stay in your property for more then 30 days after the contract has been breached, this you can search on the government site. The company will also lose the deposit which should hopefully cover the 30 day unpaid month.
A private tenant on the other hand could be in your property for min 6 months unpaid and it’s very unlikely for you to recoup that and NO you can’t drag them out sadly.
A full time working tenants is amazing to have but thousands of landlords will say they thought they had a perfect tenant until they didn’t.
I can understand why people are standoffish about company lets but remember companies let’s give you (Landlord) more power too. You can request more for example, ask for 3 - 6 months upfront, I personally know a number of landlords that have done this and requested quarterly rent so you get 3 months rent in advance. Any legitimate business wold be happy with these terms as this is standard in business.
If I was you i would way up my options, keep doing what you’re doing now by asking questions and more importantly do your own research on what anyone tells you including me lol, millions of landlords are doing very well on both strategies wherever it be private or company lets, you just need to carry out your own due diligence on both.
@Tobi I’m afraid its you that’s wrong. If you let a property to a tenant, whether company or natural person, in the knowledge of and with permission for them to sublet the space to another natural person, then you will inherit those occupants as your direct tenants if you end the tenancy you created. That’s just tenancy law. Nothing to do with HMOs.
@David122Lodgers - Shelter England this is from the same link/page you sent me. I think its important that we’re clear that property business is not clear cut, there’re a number of rules and loopholes that change constantly, thats why its important for people to carry out due diligence.
I was referring to company staff actually living in the property and if the company went into liquidation it wouldn’t be hard to vacate them as the agreement was made with said company that is no longer trading meaning that agreement is void and that does not come under tenancy law it comes under common law.
HMO’s is one of the main reason why companies come to OpenRent who then cloak themselves as a business that wish to house staff but really intend to rent out your property on a room by room basis, again those tenants that make an agreement with said company (second landlord) would still be easier to get out because they are consider as lodgers, please see linked attached from the same site you showed me, in addition comes under common law so they only get 8 weeks notice, so you don’t have to inherit them at all, thats the law.
As stated in my previous message company lets have many different contracts and if you choose the right one it works, if you choose the wrong one then yes you will have problems. All landlords should seek advice because both strategies can work if you have knowledge in that particularly field.
In other news it has been nice debating with you, as its made me think about the genuine worries that landlords face today with company vs private tenants.
Its a common confusion, but i think we can both agree landlords should research options available to them.
As stated previously there’re a number of company lets agreements, if the right one is in place it can be very lucrative, but of course if you choose the wrong agreement with the wrong company it can end badly.
@Tobi. Im aware that company tenancies are common law, which is why I said they can be terminated more readily than ASTs. However, its not the company that will reside there, its their employee, (who we have to assume would have an AST) or someone they sublet to, and when a common law tenancy is ended by the landlord, the sub-tenant will become a direct tenant of that superior landlord unless they can demonstrate to a court that sub-letting was prohibited in the contract, which would be difficult with a company let for the reasons I stated.
If it’s not about let-to-let but it’s about a company providing free residence for its employee/s, may I ask, because it’d then be a common-law tenancy rather than an AST, would this actually be relatively more preferential to the landlord side than an AST? e.g. in terms of eviction, etc, under a common-law tenancy would it be more straight forward?
I mean, personally I feel like in case a tenant fails to pay the rent it’s more important to take back the ownership of the house asap than to go after the tenant for compensation for any unpaid rentals. Please correct me if I’m wrong.
@otomo It depends on the use the company makes of the property. Usually if its just for their directors or employees, they would grant a licence to occupy, which doesn’t have the same protections as an AST. However, companies often don’t understand the law and If they grant their employee an AST then you have the issue I discussed above.
If the company runs into difficulties and either reduces or stops paying rent, then the landlord will have to go through quite a complicated forfeiture procedure, for which a solicitor will probably be required. At that point, the employee’s residential status will likely be examined by a court. Another scenario may be that the company doesn’t have enough employees and decides to sub-let the property to a third party. Unless this is prohibited in the company let agreement, then in the event of forfeiture, the superior landlord will likely become the direct landlord of the occupant under an AST.
I am certainly no expert on company lets and this is one of the problems with them, they are outside the scope of usual letting practice and there are few people who can guide you. You would certainly need a good agreement model that you source yourself, not one from the company, but if you have any questions about it or any problems down the line, you will need a solicitor to sort it out, which can be expensive.
If everything goes well and the people involved stick to the agreement, then like most tenancies, all will be fine, but I don’t think they are a safer bet than a housing act tenancy.
We have had 2 company lets so are speaking specifically about our experiences. We joined NRLA and used their contract templates.
First was a golf club who said it was their new director and wife who would be using property. It wasn’t, it was predominantly foreign kitchen staff, security men etc. This in itself wasnt a problem but they effectively created a HMO of people who didn’t care, didn’t buy loo roll, didn’t clean up after themselves, didn’t mow the lawn etc. These staff often didn’t last long and swapped in and out frequently. So first advise, be very specific in the contract about who and how many can stay. On the plus side we held their deposit in our own bank account and we had two months deposit, all allowed in company let. The damage bill came to more than their deposit but it was so easy to deal with because we had the money. We also had an extra month of rent because the accountant forgot to cancel the payment so we used that to pay for damages too. The tables are tirnednif you do this. It is up to the company to try and get the deposit back from you and their only recourse is county court. We had plenty of photos, receipts for carpets etc so we’re confident they wouldn’t pursue this route. They didn’t, happy days.
The second, was a company let for one individual. They looked after the place but we’re also out neighbours. He actually left the company, carried on paying the rent and we had no idea ! When he stopped paying the rent he hadn’t got a leg to stand in, no AST, easiest ‘eviction’ ever.
I would definitely consider a company let again, gives us back some of the control !
@Elizabeth7 In the HMO scenario you mention, the superior landlord is not necessarily protected from the blowback. Even if the Council decided not to pursue you, you would likely be in breach of your insurance, any mortgage and any lease/restrictive covenants, and they wont care that its not your fault. My brother-in-law couldnt get insurance because the company he let to put 4 tenants in there without checking whether it was licensable, which it was. My bil had to pay the licence fee because the company refused, just to get insurance.
