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Question Title: Premium lease
| Question: 107 |
| I have been asked by a client to produce a premium lease. It relates to a residential letting by a company. They wish us to draw up a fixed term contract for three years. Please enlighten us !
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| Answer: |
| Requests for premium leases from company tenants for residential lettings are becoming more and more frequent. A premium lease is simply a tenancy agreement whereby the rent, instead of being paid weekly or monthly as in a normal tenancy agreement, is generally paid as a lump sum in advance - this is called the premium. Larger companies are using this style of lease increasingly for tax reasons, so that the rent payment can be capitalised within a single tax year. There are two main things that need to be borne in mind when using a premium lease: 1) Demanding a premium where the premium exceeds the equivalent of two months' rent may give the tenant the right to assign the tenancy, (pass it on to someone else) unless the tenancy agreement says or implies he may not do so. 2) Because of the likely size of the premiums or rents involved (especially for lettings in London to companies), landlords should be warned (if applicable) that the rent or premium received may be taxable at the higher rate (i.e. 40%) 3) The rules regarding high rents will still apply. Thus, if the equivalent annual rent that the premium represents exceeds £25,000 per annum, the tenancy cannot be an assured or assured shorthold tenancy.
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References:
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Hyperlinks:
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Letting Handbook |
Chapter 6 |
letting-handbook-and-factsheets.html
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For more information, discuss on the Forum
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