Switching AST to which contract type for tenants with Ltd co?

by Readers Question

16:15 PM, 2nd July 2020
About a month ago

Switching AST to which contract type for tenants with Ltd co?

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Switching AST to which contract type for tenants with Ltd co?

I currently have a really good tenant on an AST who would like to pay his rent through his limited company and register his company at the address. I have no problem with this so long as I get it right legally.

Also are their any pitfalls I need to know about doing this. I will obtain the appropriate insurance and get approval from my lender.

Apparently a standard AST is not suitable. Can someone tell me what type of contract I would require and better still if you have a copy I could have it would be really appreciated.

Stamford



Comments

Mervin SX

8:12 AM, 3rd July 2020
About a month ago

Hi Stamford,

You need a Company Let agreement. You should be able to download a copy from various forums on the internet. Or alternatively, subscribe with Simply Docs for £42/ye for all sorts of templates and documents.

Regards,
Mervin Xavier

Tony Hodge

9:54 AM, 3rd July 2020
About a month ago

Also check that your buildings/contents insurance are happy about your tenant registering his business at your property.
Tony

Tessa Shepperson

10:13 AM, 3rd July 2020
About a month ago

If the tenant is a limited company this cannot be an AST and will be a 'common law' unregulated tenancy. We have a company let agreement for members of Landlord Law. https://landlordlaw.co.uk/landlord-law-tenancy-agreement-service/

Remember that limited companies can fold up and disappear owing rent - I would recommend taking a guarantee from one or preferably two company directors.

Graham Bowcock

10:13 AM, 3rd July 2020
About a month ago

Hi Stamford

The logic here defies me. I am not sure why the tenant wants his company to pay the rent - does he think he can tax relief on it? If it's his own home then he's opening himself up to issues about benefit in kind. I know it's not your problem, but I wonder if he's really thought it through and had any advice.

From our point of view, why would you want a new start limited company as a tenant? What's in that for you? Very risky. If you do it then you certainly need the occupiers as guarantors.

As for the agreement, you're right that it's not an AST. You need a company let agreement. Personally I would get one properly drafted by a lawyer or chartered surveyor rather than relying on somebody else's, especially as you need a guarantor. The tenant should pay for this - I think that as it's not an AST, it will be outside the tenant fees ban (but double check).

Proceed with caution, though, as it doesn't seem like there's much in this for you.

moneymanager

11:19 AM, 3rd July 2020
About a month ago

Company letting contracts will normally permit an "any employee or director" to occupy which effectively means you lose control. We have done company lets and specifically excluded that and in some instances built in some provision for curtailment of the contract in the event of redundancy.

Robert Mellors

13:06 PM, 3rd July 2020
About a month ago

I agree with Graham Bowcock, this seems very dodgy and not thought through. I would urge extreme caution.

Why would an existing tenant want to give up his own tenancy rights, in order to lease the same property in the name of a company (and him still live in it)? It does not make sense.

If he wanted to lease the property in a company name, this would only make sense if he then wanted to sub-let the property to someone else (or multiple someone elses, i.e. an unauthorised HMO), or, like Graham says, he somehow (mistakenly) thinks there would be some tax advantages.

If you facilitate this, and it does turn out to be something dodgy, then you could perhaps be accused of collusion or contrivance.

There could of course be a perfectly innocent and well reasoned explanation for the request, but nothing in the post indicates what this could be, so again I would urge extreme caution, get more info from him, and seek proper legal advice as to possible consequences.

Mervin SX

13:17 PM, 3rd July 2020
About a month ago

Stamfor states his tenant has been really good - i.e. previous good experience.

There is nothing illeagal in what the tenant is proposing to do, provided the intentions are checked & understood. It is very much possible that the current tenant is planning to go self-employed and he is going to be running his business out of his residence. Of course there is BIK for the tenant, but that's nothing to do with the landlord (and none of the landlord's business either).

As long as the tenancy agreement is done using a Company Let contract and the company's directors are signed up as gurantor, there is nothing wrong in proceeding on this basis. You may want to carry out a fresh referencing of the gurantors to ensure he hasn't racked up debts or recorded CCJs, etc. against him. This can be done via OpenRent or other online companies.

For a company let, the deposit also does not need to be protected - i.e. this could be held by the landlord as security against further issues/non-payment of rent.

Puzzler

7:36 AM, 4th July 2020
About a month ago

Assume this is a house? If it's a flat it may not permitted by the lease.


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