Renting to a registered charity?

by Readers Question

8:48 AM, 9th August 2016
About 2 years ago

Renting to a registered charity?

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Renting to a registered charity?

We have agreed to rent to a charity and have been told that an AST can’t be used. Can anyone point us in the right direction for the correct tenancy agreement as the NLA don’t have one.charity

Also, does anyone know of any pitfalls we should be aware of?

We have been landlords for many years but never come across a scenario like this.

All help gratefully received.

Best regards,

Angela



Comments

Neil Patterson

8:50 AM, 9th August 2016
About 2 years ago

Hi Angela,

Can I ask if it is a fully repairing lease like the ones from the council and how long is the contract for?

Angela Askew

9:51 AM, 9th August 2016
About 2 years ago

Hi Neil,
We will be responsible for all repairs and maintenance as with a standard private let. I probably didn't make it clear, it's just a small house not a commercial building or anything. We normally do 6 month contracts and then just continue on a roll over basis.
Thanks,
Angela

terry sullivan

10:30 AM, 9th August 2016
About 2 years ago

try Stationery Office?

Romain Garcin

11:30 AM, 9th August 2016
About 2 years ago

Hi Angela,

You need to get a lawyer to advise and draft or check the agreement.

Robert Mellors

17:38 PM, 9th August 2016
About 2 years ago

Hi Angela

Although my company is not a registered charity, it is a "not for profit" housing association and we do lease properties in the Sheffield area from private landlords.

A standard tenancy cannot be given to the charity and what you need is a company lease agreement. This is different to a tenancy, but may have many similar terms and conditions (but a few more besides). So the document you need is a "lease".

Company lease agreements are not generally available as standard documents, so as Romain has advised, you perhaps need to get a specialist property solicitor to draft the lease agreement.
- It may be that the charity can provide you with a suitable lease agreement document, and you just get your solicitor to check it over before signing up to it. - This is what happens when my company leases a property from a private landlord, we provide the lease document, the landlord checks it (usually with their solicitor), and if everyone is happy with the terms and condition then it is signed and we take on the property for the lease term.

The lease will need special terms in it to allow sub-letting, and to specify the split of responsibilities between the owner landlord (you), the leaseholder landlord (the charity), and the tenants (tenants of the charity).

Also, most charities I presume would want to take on the property for a fixed term that is much longer than the standard 6 month term of an AST. For example, my company provides a 5 or 6 year lease agreement, so that the owner landlord can be assured of a regular monthly income (in advance) throughout that 5 or 6 year lease period, and can budget accordingly. Likewise we can invest our time and money into the property and ino finding the right tenants for the property. There is no way I could operate on the uncertainty of a 6 month lease period, it would not be financially viable, and would not give sufficient certainty (security of tenure) to then be able to sub-let the property to tenants.

In relation to possible pitfalls, many of these can be avoided if the documentation is legally correct and mutually agreed. However, you would perhaps need to change your insurance policies, and make sure your mortgage lender is agreeable to a company let of the property.

If you are based in/near the Sheffield area I would be happy to meet up and go through all of this with you over a coffee if you wish.

Angela Askew

11:47 AM, 10th August 2016
About 2 years ago

Reply to the comment left by "Robert Mellors" at "09/08/2016 - 17:38":

Hi Robert,
Thank you so much for the invaluable advice. It's much clearer now what we need to do. I'd love to meet up as I always like to talk property but unfortunately Sheffield is a long way from Portsmouth!
Many thanks to Romain and Terry also. I found that the RLA have a suitable contract which you can buy or is free if you are a member.
Thanks again,
Angela

Allan Wadsworth

9:32 AM, 16th August 2016
About 2 years ago

Hi Angela,
As you are in Portsmouth I though you might like to know that by joining the Portsmouth Landlord group PDPLA you will also become a member of the RLA and so hence could get your contract for free.
I am also Portsmouth based and have just arranged a charity support arrangement between PDPLA and the 2Saints homeless housing group so we may have some synergie as the PDPLA are covering the deposit side of the housing costs for 2Saints.
Please let me know if you are interested Allan.

ellie warburg

15:47 PM, 25th September 2016
About 2 years ago

I am very interested in this discussion.
I am about to rent to a charity two properties , like Angela they are 3 bedroomed houses
Do I need a company let agreement ? rather than a AST it will be for a minimum of 2 years The charity seem very relaxed but I am concerned.
Also if I am renting to the charity and they are the tenant and they then house recovering addicts with three in each house are there HMO implications?

Robert Mellors

16:25 PM, 25th September 2016
About 2 years ago

Reply to the comment left by "ellie warburg" at "25/09/2016 - 15:47":

Hi Ellie

Yes, it MUST be a company lease agreement. If you give them an AST then this will be invalid and the terms unenforceable.

Yes, if the charity lets out the property as a HMO (i.e. 3 or more unrelated tenants), then there are HMO implications, i.e. the property will need to comply with the raft of HMO rules and regulations. For the properties I lease from private landlords, I pay for the works to comply with the HMO regs (e.g. HMO spec fire alarm systems, fire doors, thumbturn locks, etc) but I can only pay out this level of expenditure because I get a 5 year lease so I have 5 years in which to recover those costs, I certainly could not afford this level of expenditure with just a 2 year lease. Has the charity agreed to pay all the costs of HMO conversion, or are they expecting you to pay this? (or worst still, are they going to ignore the HMO regs?). - Note. If the charity lets out the property as a HMO without complying with the HMO regs, then YOU could perhaps be held legally responsible.

Romain Garcin

16:55 PM, 25th September 2016
About 2 years ago

Reply to the comment left by "Robert Mellors" at "25/09/2016 - 16:25":

"If you give them an AST then this will be invalid and the terms unenforceable."

The terms will be binding. However the tenancy will obviously not be an AST.

The issue is that the agreement may include terms that you do not want, and lack terms that you do want.

It would be best to consult to knowledgeable solicitor for the drafting.

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