A company let is when a company takes on a residential tenancy agreement as the tenant, rather than an individual. A company employee then occupies the premises as a licensee of the tenant.
In this capacity as tenant, the company is responsible for all the tenant's obligations under the terms of the lease, including the payment of rent, council tax and utilities bills.
However, it is common practice for the occupant to pay council tax and utilities, while the company pays the rent. The landlord's only concern is that the various costs are paid, and the company is fully accountable for any default of payments of any of these costs.
Not all companies pay a security deposit to be held against any unpaid bills or damages to the property agreed at the end of the tenancy. Often the company will instead produce a letter of indemnity confirming that in the event of unpaid bills or damages it will be accountable for the agreed amount. This letter is occasionally replaced by a clause within the agreement. Landlords should ensure they are happy with the wording.
In the event that the company pays a deposit in cash, it will invariably insist that this is held by a stakeholder, independent of both parties, who will only release the funds upon approval by both parties.
Companies invariably insist that a formal check-in and check-out is done at the start and end of the lease. The landlord should produce a complete inventory of contents and a schedule detailing the condition of the property, which is checked by an independent inventory clerk. The landlord is usually responsible for the cost of making the inventory and for the check-out, while the tenant pays for the check-in. The inventory clerk is effectively employed by both parties and should therefore be seen as independent and unbiased, so the report should be uncontested.
Company Let Agreement
Occasionally, companies request what is known as a premium lease, which can vary in term from two to four years, under which all the rent is paid annually in advance. As a result, a reduction in the asking rent is usually granted.
Unless the company wishing to take on the tenancy is a recognised name, it is advisable for the landlord to request company registration details, just as the tenant is entitled to request proof that the landlord is the registered owner of the property.
Rents can be paid monthly, quarterly or annually. The most popular method of payment for company lets is quarterly, and rents are always paid by standing order on the same day of each month or quarter.
Companies occasionally see a tax benefit to paying rent in lump sums in advance. However, this might have the opposite effect for the landlord, though at least he or she is assured of the money upfront and can invest it.
It is important for the landlord to know the name of the licensee of the tenant, i.e. the person living in the property. The agreement will usually allow the property to be occupied by the permitted occupier together with their family. Within a company let, the tenant usually reserves the right to replace the occupant with another employee of the company as a licensee of the tenant. While it may be possible to insist that appropriate wording is included in the agreement providing the landlord with the right to approve the replacement occupant, this is not in fact the landlord's legal entitlement under a company let.
The pros and cons of company lets
- There is an effective guarantee that rent and other outgoings will be paid on time
- The landlord's ability to contact the tenant isn't dependent on the availability of the occupant, as the point of contact is usually a member of the human resources department of the tenant company
- Negotiations are often more professional, resulting in a smoother completion of the letting transaction
- Companies are more likely to pay higher rents for quality properties
- If the landlord is a private, non-investment landlord, who takes a personal interest in the property, company lets can seem very impersonal and inflexible
- Cash deposits are not always paid, and where the company indemnifies the landlord against damages, the company can be slow in paying the agreed amount
- Company tenancy agreements can be difficult to negotiate
- Occupants can change without the approval of the landlord
- Occupants are almost always foreign, and for landlords who personally manage their properties, communication and cultural differences can cause complications.
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