Company lets: FAQs

Landlords Dec 17, 2021

Many businesses, usually larger multinational corporations, choose to rent a property directly from a landlord under their name to provide housing for one or more of their employees; this is referred to as a company let. Company lets confer different rights and obligations on all parties compared to standard AST agreement. Traditional statutory rights, as per the Housing Act 1988, do not apply and the landlord does not have any direct contract with the occupier of the property.

To learn more about company lets, see our FAQ guide below.

What is a company let?

A company let is a nonstandard tenancy agreement in which a private company lets out a property as accommodation for its employees. The company rents out the property from a landlord, paying the monthly letting fees. Typically, the employees living on the property will pay utility bills and the council tax, though in some cases the company will also cover these expenses.

How is it different from a standard tenancy?

Company lets differ from assured shorthold tenancy agreements mainly because the Housing Act 1988 does not apply to them - they're government by common law instead. Rent increases, evictions, and tenancy deposits are governed differently for company lets compared to standard tenancies.

The occupier of the property and the corporate tenant have far fewer rights and protections under a common law tenancy than a private tenant with an AST. For example, it is comparatively straightforward to regain possession at the end of the fixed term, with shorter eviction notice periods and fewer obligations for landlords to meet in order for the notice to be valid (e.g. there is no requirement to demonstrate that the tenancy deposit was registered with an approved protection scheme).

What are the pros and cons of renting to a company?

Company lets provide landlords with a steady stream of rent income paid on-time, as the point of contact for rent payment is not the tenant but rather a designated individual working for the company. Talking to an HR representative, rather than the tenant, allows for a smoother letting process as well. Companies are also willing to pay higher prices for high quality properties.

However company lets have some significant drawbacks too. Occupiers under a company let may change without prior approval from the landlord, as their agreement is with the company rather than the resident of the property. Additionally, in the event of damage to the property, bureaucratic company procedures may lead to delays for landlords seeking compensation.

How long are company let notice periods for eviction?

Landlords cannot issue Section 8 or Section 21 possession notices for company lets, like they can with assured standard tenancy agreements. Instead, landlords will issue a Notice to Quit in writing. A Notice to Quit must provide tenants with a minimum of four weeks' notice, typically starting on the day the notice was issued, and ending on the day after four weeks is completed. The specific length of a Notice to Quit will depend on the particular company let agreement.

If a landlord wants to evict the occupants in a company let during the fixed term period, the tenants would have to be in breach of the lease agreement. If a breach occurs, the landlord can pursue forfeiture of the property. The average time length for this procedure varies on a case-by-case basis.

What are the rules regarding rent increases?

There are no regulations governing rent in company lets, meaning it is very difficult for occupants to challenge rents and claim they are too high. Usually, a rent review clause will be written into the lease agreement, which will describe the circumstances under which rent will change and by how much. Rent increases typically follow market rates.

What can the landlord do if the company doesn’t pay the rent?

Under a company lease agreement, landlords can make a statutory demand to ask rent arrears be paid in full. A statutory demand will give the company 21 days to pay back the debt or to reach a pay agreement with the landlord. After 21 days, if there is still outstanding debt, landlords can submit a wind up petition, also known as compulsory liquidation. Wind up petitions can only be filed if the company owes more than £750 and the landlord can prove the company is unable to fulfil the payment.

Some landlords may choose to include a bespoke guarantee clause in the lease agreement. In the event that a company faces financial difficulties, in which they are unable to pay rent, rent arrears can be recovered through the company’s guarantor.

In a company let, companies act as the ‘tenant’ renting out property from the landlord. While these non-housing act tenancies have the potential to yield reliable, lucrative monthly rents, it is important for landlords to use the proper contracts when making a deal with a limited company.

As common law tenancies are increasingly uncommon in the private rented sector, many landlords and tenants often forget what rights and obligations they hold under the relevant statues. It is therefore important to familiarise yourself with how non-housing act company lets work before signing any agreement with a corporate tenant.

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