What Is a Company Let?

Written By PropertyLoop
February 11, 2021
Can a company let have a guarantor?PropertyLoop

What Is a Company Let Agreement?

The company let agreements are typically taken out by a limited company that intends to use the accommodations for employees and directors. Whilst it is important to note that it is irrelevant if the landlord is a compact, solely the tenant, as this is will bring about changes to the “traditional” letting procedure seen with an assured shorthold tenancy.  

What Type of Tenancy Is a Company Let?

Traditionally a tenancy agreement will see an aspiring renter enter into an assured shorthold agreement, seeing them take possession of the rental property over the duration of a fixed period, with rent being periodically paid to the landlord throughout this time. However, when the owner of the rental property is letting to a company, no such agreement can be relied on. This is because, whereas with a typical tenancy the owner of the rental would be curating the tenancy agreement with a specific occupant in mind, ie: the tenant, with a company let the letting is made to an organisation. Most commonly when a business uses a let to house its employees the landlord will have entered into a non-assured tenancy agreement.  

What Is the Difference Between a Company Let and an Ast?

Perhaps the most significant difference between an assured shorthold tenancy and a company let is the protection granted to the tenants. As opposed to a traditional assured shorthold tenancy a company let is largely governed by common law, specifically because the piece of legislation that safeguards renters under an AST, the Housing Act 1988, details that its provisions will exclusively apply to individuals and not organisations. This essentially means that the regulations that dictate company lets predate both the Housing and Rent Acts and therefore have vital differences from the more common AST. Practically, this means that the way landlords are able to increase the rent during the tenancy, reclaim possession of the property and bring the tenancy to an end is altered.  

Is a Company Let an Assured Tenancy?

Put simply a company let is cannot be an assured shorthold tenancy due to the regulations established by the Housing Act 1988 can only be applied to individuals and not a company or organisation. 

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Rent Increases When Letting to a Limited Company

Unlike a traditional AST, with a company let once the tenancy agreement has been signed the “tenants”, or rather company is unable to challenge this increase. With this being said owners are still able to implement a rent review clause within the tenancy agreement. Such terms will stipulate when the rent is likely to increase and how much by, with any increase typically being in line with market rates. Alternately, if the landlord wishes to alter the amount of rent that is paid by the company, then they are able to do so through implementing a new tenancy agreement with a revised rental charge, however, this would not be implemented unless the company also agrees to this increase and signs the agreement. 

Company Lets & Notice to Quit

As mentioned as the rules and regulations of the Assured Shorthold tenancy do not apply when letting a property to a company, owners are unable to serve the occupants with a section 8 or section 21 notice to reclaim possession of the rental. However, this does not mean that landlords are left powerless over their investment and are unable to reclaim possession, but that the company let agreement eviction process is often found to be simpler. In order to bring the tenant to an end, the landlord simply needs to serve the occupants with a “Notice to Quit”.  

However, if the owner of the property wishes to bring the tenancy to an end before the fixed term has come to a close then they will be unable to do so unless the occupants have breached the terms of the tenancy agreement. If this is the case, the landlord is able to follow the procedure for “forfeiture” to pursue eviction. 

How Long Is a Company Let Notice Period?

Typically, the notice period for a company let after being served a Notice to Quit is at least four weeks. With this being said if the occupants of the company let are found to be in breach of the tenancy agreement and the owner pursues forfeiture then the amount of notice that could be given can vary.  

If the tenant is found to be in breach of the agreement by the landlord and notice is served, the notice must comprise specific information for the benefit of the occupants. The notice must clearly establish the nature of the breach and how the terms of the agreement have been violated, alongside a request for the tenant to amend this breach in order to prevent further proceedings; and when applicable, any amounts owed in compensation.   

Providing that remedial action can be taken to rectify the breach of contract the owner must permit the occupants sufficient time to do so, with any amounts sought in monetary compensation being “reasonable” in accordance with the Law of Property Act.  

Why Start Letting to a Limited Company?

Not only can landlords expect to charge more money for a company let, but this type of tenancy also tends to be for longer periods. Some company lets can even be for as long as 10 years.  

Although these long lets do provide a landlord with a certain amount of ‘freedom’ in that he or she doesn’t have to worry about the mortgage on the buy to let for the next decade, it’s not all a bed of roses.   

There can be cases where companies go under (ie insolvent), for instance. And, were this to happen, then there is very little chance of a landlord recovering rent which hasn’t yet been paid. One way to get around this is to ask the director/s of the company to be guarantors. This means that if the unthinkable happens (ie the company goes under) you can still sue the individual directors for that lost rent.  

Another downside to a company let as far as the landlord is concerned, is that you have no say over who lives in the property while the company abides by the rental agreement. This means an individual who has previously failed numerous referencing and checks could be put there, simply because he or she is a company employee. It could also be that the company have put a couple of young visiting colleagues there for several months who enjoy having parties at weekends – to the detriment of your furnishings. In other words, a company let doesn’t mean you won’t have to keep an eye on your property. 

What to Do When a Company Let Is Not Paying Rent?

Naturally, when traditionally pursuing a tenant for rent arrears there is little confusion on the parties to contact, however, when a company let is not paying rent things can be less clear for the landlord. If the landlord is letting to a limited company then they will be unable to recoup the unpaid rent from the members personally, this is because the director of a limited company is only liable for debts the company holds if the organisation is limited through guarantee or the directing members of the company are found to have committed wrongdoing.  

When faced with rent arrears from a company let landlords are able to serve a statutory demand, however, if the amounts are not settled after 21 days the owner can move to file a wind-up petition, essentially folding the company on account of the unpaid debts.  

Many landlords choose to include a bespoke guarantee clause within their tenancy agreements, allowing them to recover any rent arrears through a guarantor if the company were to encounter financial hardship. Similarly, to referencing any other tenants, many landlords will conduct credit checks on limited companies to ensure they are able to maintain their rental commitments.  

PropertyLoop is the world’s first commission free lettings platform. Our platform allows landlords to advertise their rental, reference tenants, curate an agreement, register the deposit and collect rent completely for free! There are no hidden charges, upfront fees or any catches.    

Built by experienced property investors and landlords, PropertyLoop connects renters with the owners directly. Your property is featured on all major search and comparison portals as well as advertised by PropertyLoop everywhere else on the Internet. You don’t have to worry about finding the good renters, that’s the job for the platform. Receive offers straight to your mailbox and select the renters that are right for your property. Need access to busy London property market? No problem at all! PropertyLoop is the London market specialist with years of experience and unique knowledge. Whatever your needs are, you can always speak to friendly support staff. Renting property is made as simple as one, two, three. 

Company LetCompany TenancyFixed Term LeaseLandlordsNew LandlordsTenancy Agreement

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