Licences and Company Lettings

Company lettings enjoyed early notoriety; they were a device used by landlords who wanted to evade the statutory protection and rent restrictions of the Rent Acts.  The arrival of assured tenancies and market rents largely ended this practice. 

In Hilton v Plustitle Ltd. for example, the courts were asked to decide whether a company letting of residential property was in fact a sham agreement.  A landlord advertised his flat to let and a Ms. Rose answered the newspaper advertisement.  She was informed by the landlord that he would only let the flat to a company, and she was advised to buy an off-the-shelf company (which she did - Plustitle Ltd) for £150.  The tenancy  agreement gave the company the right to nominate the occupiers of the property who were to pay no rent (a measure which had the further effect of denying the occupiers any tenancy status). 
Ms Rose claimed that the tenancy was a sham and applied to the court for protection under the Rent Acts.  Although in this case, the court accepted the company letting transaction as valid, the principle remains that the court may not only look at the wording of the tenancy agreement but also at the circumstances of the tenancy when deciding what type of tenancy actually exists.  A string of similar attempts to evade statutory protection using company lettings came before the courts in the 1980s and early 1990s, and such lettings were, on occasions, declared void.

Lettings to an organisation

Many practitioners will be aware that, when letting a residential dwelling to a company or corporate body, it is not possible to use an assured shorthold tenancy – the tenancy will, instead, exist purely as a contractual tenancy, outside of the protection of the Housing Acts.  Why?  Because the Housing Act 1988 states that a tenancy can only be an assured or assured shorthold tenancy if:
‘the tenant or, as the case may be, each of the joint tenants is an individual’ (section 1(1), Housing Act 1988).

So, sitting as it does in the first part of the Act, there’s really no excuse for missing this provision!  However, practitioners sometimes forget that this definition also means that any type of tenant who is not an individual person is also excluded.  Thus, lettings to government organisations, embassies, charitable bodies etc. will all operate as common law tenancies, and it would be advisable to procure a tenancy agreement which is drafted specially for this purpose.

Contractual tenancies

Does it make a lot of difference to the nature of the tenancy?
From the tenant’s point of view, it makes very little difference; unlike the tenant of a resident landlord, the tenant will still have some security of tenure and the landlord will need to obtain a court order if he needs to evict a tenant.
However, the difference in the procedure for termination of tenancies will be one of the main practical implications for the landlord of using the company letting.  Because the tenancy is not subject to the Housing Act 1988, the various prescribed notices and procedures (termination of tenancy, rent increase etc.) relating to assured tenancies will not apply.  It is, for example, not necessary to serve a section 21 notice at the end of a tenancy, although a ‘notice to quit’ is required to end all common law tenancies which have become periodic.

Secondly, since the tenant will be the company, what is the status of the occupiers ?   In the general case, the company will have rented the property for a specific person or group of persons to occupy.  Depending on the circumstances, these ‘permitted occupiers’ will either occupy as licensees or subtenants of the company depending on whether they have exclusive possession or not.  A properly drafted tenancy agreement will include the required provisions for this.

Company lettings

There are some important points to bear in mind when setting up the tenancy:

• The names of the tenant on the contract should be the company's name and registered address and not the names of the individual occupiers.
• The tenancy agreement should be signed by a Director or other Proper Officer (normally Company Secretary) by putting his/her signing capacity under the signature.  The Director should also warrant that he is duly authorised to sign the agreement on behalf of the company.
• Care should be taken when letting to diplomats as they may have diplomatic immunity which may make it difficult to enforce possession proceedings.
• The agreement should contain a 'no business use' clause.