If you’re a little bit confused and would like to understand what Company Letting Agreement and Assured Shorthold Tenancy Agreement (AST) are, their differences and the regulation, then read on…
What are Assured Shorthold Tenancies:
ASTs are usually generally for six or 12 months. This would give the landlord the chance to review the tenancy and renew the agreement at the end of the period.
Landlords can evict a tenant after an initial fixed term of six months without a legal reason. If a landlord decides not to renew the tenancy, they need to issue a Section 21 Notice to as it operates under section 21 of the Housing Act 1988.
Landlords can also terminate a tenancy before the fixed period elapses. The landlord must obtain an order for possession from a court. Before applying to the court for such an order, the landlord must issue the tenant with a Section 8 Notice to Quit, it operates under section 8 of the Housing Act, needs to state that the landlord intends to seek possession of the property and the grounds on which possession is sought.
A landlord must give the tenant just two weeks’ notice for most of the 17 grounds covered by section 8 of the Housing Act. These include rent arrears, antisocial behaviour and breaches of the terms of the agreement.
ASTs are not usually subject to rent controls, which gives landlords the right to increase the amount they charge tenants after they have signed the rental agreement.
What are company lets:
A company is in a sense a ‘person’. It has a legal identity and it is capable of owning a business, hiring staff, and owning and renting property.
A company can rent a property can be rented as a ‘residential tenancy’. However, it cannot live in the property itself, it lives in it through the directors and employees.
When a company rents residential accommodation for its own staff or directors this is known as a ‘company let’. If a property is rented for the purpose of subletting to customers, this will be a commercial tenancy and not a residential one.
Considering residential tenancies, there are significant differences between lets to people and lets to companies.
The Housing Act 1988 Does Not Apply
S1 of the Housing Act 1988 specifically excludes company lets from the statutory code set up by that act. Meaning
A property let to a company cannot be ‘an assured shorthold tenancy`.
The procedures set out in s13 for increasing rent by notice in periodic tenancies does not apply.
The eviction procedures set out in section 21 and in section 8, and the second schedule to the act, also do not apply.
The rules developed over the centuries under the ‘common law’ will apply instead. Society is used to the Housing Act 1988 rules that the old common law rules are generally forgotten.
Rent for company lets is unregulated. Therefore, there is no way that a company can challenge a rent – once they have signed a tenancy agreement – and claim it is too high. Instead, this can sometimes be done under the statutory codes.
A rent will be as set out in the tenancy agreement. If a landlord wants to increase this, it can be done via a rent review clause. Otherwise, there can be an agreement or the parties can sign a new tenancy agreement.
It’s very easy for a landlord to end a common-law tenancy after the end of the fixed term. They just serve an old style Notice. Then, if none gives up a vacant possession, they bring proceedings for possession.
If a landlord wants to end a tenancy during the fixed term, this can only be done if the tenant is in breach of the terms of the tenancy agreement, when the landlord can use the old ‘forfeiture’ procedure.
Living tenants are generally consumers.
A company being an artificial person for business purposes, cannot take advantage of the various consumer laws which exist to protect living tenants.
In particular, the unfair terms rules and the various other measures set out in the Consumer Rights Act 2015 will not apply.
Company lets can be very lucrative. For this reason, large, wealthy companies will often rent high-end properties at high rents for accommodation for their staff.
It is best to be cautious. A company can close down, it can become insolvent, in which case it may prove impossible to recover unpaid rent. It would be best to take guarantees from the directors.
Also, sometimes someone will seek to rent accommodation through their company because they would not pass normal referencing. Therefore, it is important to find out who will be living at the property and, if possible, take references.