A company let agreement is where a landlord has let their property to a company for residential purposes. The company is the tenant on the contract. If the landlord is a company and the tenant is an individual, this will not be a company let agreement. It is the tenant that must be the company.
Company let agreements are different to normal assured shorthold tenancy agreements to individuals. There is a different process to evict, and also different notices are served.
In most tenancy agreements there is a clause called a forfeiture clause. Allowing the tenancy to be terminated in certain circumstances. Most commonly, due to rent arrears remaining unpaid for a period of time (usually 14 days).
In this instance, the landlord can rely on this clause to end the tenancy only if they have not acknowledged the continued existence of this tenancy. The landlord either elects to continue with the tenancy or elects to terminate the tenancy.
If they have acknowledged the continued existence of the tenancy, then they will be deemed to have waived their right to forfeit. They will need to wait until the right to forfeit arises again. For example, if the landlord demands rent from the tenant this will be a waiver. If there has been a waiver they will need to wait until the next lot of rent falls due and look to terminate again.
What constitutes acknowledgement of the continued existence of the tenancy?
If the landlord contacts the tenant to ask for rent or conduct repairs for the benefit of the tenant, it can be seen as acknowledging the continued existence of the tenancy. As a result, the landlord may not be able to rely on the forfeiture clause in that rent payment period. The landlord would have to wait for the tenant to fail to pay their rent on the next rent due date. And, for the rent to be unpaid for 14 days (or whatever is listed in the forfeiture clause). Ending company let agreements can be very hard due to the issue of waiver. So it’s very important that landlords seek legal advice as soon as a company tenant falls into arrears.
What is the process of forfeiture?
If no contact has been made between the landlord, their agent, or the tenant from the date the rent was due and was unpaid, Woodstock can, on behalf of the landlord, assess whether there has been any waiver. They can then serve a notice to confirm the landlord has ended the tenancy. In most cases the company tenant will provide vacant possession and return the keys. But in some instances the tenant does not get in touch. In this case, the landlord will need to issue possession proceedings to get possession of their property.
What other problems often come up?
In company let agreements, usually the tenant will have employees/directors of that company living in the property. If the property is let to a company for the purpose of subletting to a tenant as a business, then this could be a commercial tenancy instead. In this case a company let agreement will not be suitable.
Legal advice will need to be obtained to check the type of setup. And, to see whether any occupiers have further rights. This is to avoid a situation where the “middleman” is removed (the company tenant). But vacant possession of the property is still not achieved, and the landlord is stuck with the occupiers. We recommend speaking with the occupiers, as sometimes the occupiers will be unaware that the company tenant is not paying the rent.
How can landlords protect themselves from difficulties in taking possession of company lets?
When entering into these agreements, it is crucial that landlords carry out the relevant reference checks on the company tenant. It’s essential to understand what their intention is with the tenancy. The landlord doesn’t have much control who the company places in the property. But it is advised to at least ask who will be living in the property and checking them too. We advise doing a search against the company on Companies House and checking their accounts.
Landlords should consider whether to have a guarantor. For example, the company director could act as one. It is also fine to have more than one guarantor.
A deposit should also be taken. If a deposit is taken from the company, then as this agreement is not an assured shorthold tenancy you do not need to protect it in a scheme. The deposit protection regulations do not apply.
The tenancy and the property should be monitored, and routine inspections carried out as permitted under the terms of the company let agreement. Finally, a well-drafted let agreement is a must.
It is also important that landlords get a copy of any paperwork between the occupier and the company tenant.
At Woodstock we are experts in our field with years of experience acting for landlords, terminating all types of tenancy agreements. If you need help, or are unsure what steps to take, please contact our specialist team.