Norwich-based solicitor Tessa Shepperson answers questions on company lets.
I am about to rent a house out to a limited company for one of the directors to live in. Do I use an AST agreement?
No. Assured shorthold tenancies are governed by the statutory code set up in the Housing Act 1988 to protect tenants. However the act does not apply where the tenant not a real person, i.e. is a limited company. Here the underlying ‘common law’ will continue to apply. The tenancy agreement given should reflect this. If you use an AST form this will not mean that there is no tenancy. However some of the clauses in the form will be invalid as they will have been drafted for a different type of tenancy. You should get hold of a tenancy agreement which is specifically drafted for company lets. They are not as easy to find as standard ASTs but they do exist. For example, look in the larger stationers and online.
Are there any special checks I need to do?
You should make sure that the company does in fact exist. You can do a free search online at Companies House at www.companieshouse.org.uk. It is also generally a good idea to take a guarantee from one or more of the company directors, and ensure that the guarantors are properly referenced. Although many company lets can be lucrative, be aware that sometimes a company will rent a property for an employee to live in, knowing that the employee would not pass normal referencing and therefore is unable to rent a property in his or her own name. Make sure you protect your position therefore by taking guarantees and perhaps six months rent in advance.
What about ending the agreement. Do I serve a section 21 notice?
No, the section 21 (and also section eight) forms are prescribed under the Housing Act 1988 and only apply to assured shorthold tenancies. If a company tenant fails to pay rent during
the fixed term (or indeed afterwards), you can bring proceedings to ‘forfeit’ the tenancy for non payment of rent (forfeiture is not available for assured and assured shorthold tenancies). If the tenant stays on after the end of the fixed term, you can end this by serving an old style notice to quit (NTQ) and then issuing proceedings for possession. As the tenancy will have been ended by the NTQ, the court will have no option but to make a possession order.
*Tessa Shepperson is a solicitor, and author, and editor of the Landlord-Law web-site at www.landlordlaw.co.uk