Renting to a company - non assured tenancy

Landlord Discussion
1

Hi - does anyone have experience letting to a company; rather than private tenants?

I have been approached by a limited company who have passed referencing checks and i know the one of the director personally.

I realise that the deposit protection rules do not apply in the same way and that the Housing Act is not applicable however i dont see any non Housing Act tenancy proformas on the open rent website so I was wondering if there is a reason that these tenancies are so few/not promoted by open rent.

Any hint or tips would be much appreciated please :blush:

2

Don’t do it. Its a disaster for many landlords and you don’t have the same protections.

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3

After you watch this you will think again.

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4

We got approached by one of these for the 1st time when we advertised our last property. Not interested.

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5

this is akin to the council wanting to put someone into your property without you having a say in who they are ,then leaving you in the lurch

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6

There is a webinar tomorrow on the landlord law site on the most resent case of a superior landlord being penalised for a rent to rent landlord
Rakusen vs Jepsen
Also you may want to read this

7

I haven’t actually let to any of them but engaged with a couple of them a few years ago.

Basically, they promise you more money and guaranteed rent, but in reality you end up paying their fees so in my case I would’ve got less.

8

Hi All - thank you for your advice on this, this is really helpful.

My case is a little different as I currently rent my house out to a tenant. He has been living there for 5 years, pays rent on time and is a proactive and positive tenant. I wish to exit the estate agency that I have been using to manage this tenancy and wish to move the tenancy to Open Rent as I have done this successfully with my other rental properties.

When talking to the tenant yesterday to let him know that we will move his tenancy to OpenRent, he let me know that he has set up a limited company to cover the niche professional services that he provides. He is an expat and asked me that when moving tenancy to Open Rent could I change the ‘tenant’ from him personally to the limited company (he is sole director) as this would benefit him from a tax perspective.

I have no issues with the credit worthiness of this tenant, and we have a good relationship, he is also a landlord himself in his home country however I was wondering about the pitfalls of this arrangement. I probably should have explained this more clearly at the outset.

Does anyone have any ideas of the negatives of this arrangement? there is a financial benefit for me if I move the tenancy to the limited company. If I exit the estate agency and maintain the same tenant, we still need to pay the agency 7% plus VAT for the duration of the tenancy, The tenant wishes to stay for 3 years (till his children complete their schooling) so that’s not an inconsiderable amount we will be paying to the agent for zero services. If we move the tenancy to the limited company, in effect the limited company is a new tenant so won’t need to pay the agency 7%

Thank you if you have got to the end, its a bit complicated! if you have any advice about this arrangement please could you let me know

9

So the question is not whether the tenant is credit worthy but whether his ltd company is. Obviously one negative is that if his company fails (it’s a new one?) or there’s outstanding debts against it you’d be an unsecured debt I think - last in line to get money from the company. He could then move on and not have a CCJ in his name.

Also, sounds odd that it would have a tax benefit to him unless he’s doing something dodgy like pretending the property is an office or something. Don’t sign anything that portraits the property as something else than residential - could backfire.

What kind of bad deal do you have with your estate agent? Did you really sign something like that?

10

The Housing lawyer David Smith featured above has also made a short video on company lets without rent to rent, which would cover your circumstance. As I said, there are still multiple risks for a landlord and you would have to use a bespoke contract, as the tenancy could not be an AST.

I could not find the video I mention, but I did find this one. Worth a look. Seven things to watch out for with Company Lets - YouTube

11

If we all followed advice from an experianced LL like Colin3, we wont go far wrong.

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thank you all for your help with this.

Yes I agree - letting to a limited company, even when I know the tenant is not the route that I want to go down.

I do have a very restrictive covenant with the agency - ie I need to pay them 7% plus vat even when I have ended my arrangement with the agency. This has never been a problem previously as we rent in a very transient area where young sharers live for a year or so and move on.the issue has crystallised as the tenant wants to stay for an additional 3 years, and I really want to end the relationship with the agency as I don’t think I have received value for money. Should have considered the small print more closely which is on me. We are moving our other properties to open rent, as the tenants vacate so this will not be an issue

Thanks again everyone

13

always avoid these type of agencies. We have all been there and learnt from it

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Some agency termination arrangements have been ruled unfair and invalid by the Courts. Google the Foxtons case and have a look whether yours is covered.

15

Leslie 1. That is good of you to say so. But there are more experieced people on this site than myself. Many more postings from them also. I would wish to reply to all postings but as you get older time is more precious and my garden calls !!

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16

If you rent to a company, Take the Directors as Personal Guarantors. There can be some legitimate company lets. Also, there is a different referencing process.