When this happens, it puts you as a landlord in a difficult position. What are the ramifications for both you and your tenant if your tenant is subletting your property?
As a buy to let landlord, when you invest in a property, it's usually clear cut who you'll let it to. An apartment may go to a young professional and a terraced house to a couple with children. If you buy an HMO, you'll probably look at the student or migrant worker market. But have you ever considered a company let?
As the name suggests instead of letting your property to an individual, a company becomes your tenant. An employee will then occupy the rental. However, it's the company which will pay the rent. In most cases, the employee occupying the property will pay the utility bills and council tax. But in some cases, the company will pick up the tab for all the running costs as well as the rent.
Whilst it's undoubtedly a niche market there is demand. That demand though mostly exists in the large commercial and financial areas such as London and Manchester. However, any business or organisation which brings in workers from locations around the world could be looking for company lets.
For landlords, company lets do have some appeal. The first is that with the large companies involved payment (in theory) shouldn't be an issue. And as companies often insist on long contracts you no longer have to find tenants. Finally, company lets will suit you if you prefer to be a hands-off landlord. The company itself will handle much of the day-to-day management of the property.
Whether you should consider company lets depends primarily on location. But also, on whether you consider the risks acceptable.
There are risks or downsides associated with all types of tenancies. But company lets do present some unique challenges.
The first obstacle is actually setting up the tenancy. You need to agree on a contract. The assured shorthold tenancy agreement you normally use isn't sufficient. Only individuals can sign an AST. Not a company. Your letting agent can help with drawing up an appropriate tenancy agreement.
However, companies will often insist on using their own contract. The risk here, of course, is that you have little control over what's included in that contract. If you're in this position you should get advice from your letting agent and negotiate on any points you don't agree with or are unsure about.
When you let your property to a company you have no control over who occupies it. It's the company who decides who’ll move in. And because of the nature of company lets there’s likely to be a high turnover of occupiers. Most of whom will be workers on short-term contracts. This can cause issues with higher than usual maintenance and repairs.
Companies will expect a higher specification of rental for their money. The employees occupying the property are likely to be executives or high-ranking members of the organisation. They'll expect high-quality furnishings, appliances and standard of decor. This can lead to higher costs and put a strain on resources.
Collecting rent can be an issue. Quarterly or even six-monthly payments are common. As a buy-to-let landlord is used to receiving rent payments every month, you may find this hard to adjust to. And receiving the rent quarterly or at even longer intervals can put a strain on cash flow which makes managing your mortgage payments and other running costs tricky.
Companies can also be slow in paying other agreed costs. They will often work on a 60 or even 90-day payment schedule after receiving an invoice. You need to be aware of this when considering whether to let your property to a company.
So, there are some risks to company lets. But what about the upsides?
· Higher rents, as general rule companies will be happy to pay a higher rent than a comparable property would attract in the private residential sector.
· No void periods. The company will always pay the rent. Even if the property is unoccupied.
· Rent guarantee. Companies are highly unlikely to default on the rent.
There's no question company lets can be lucrative. But do carefully consider the risks before taking the plunge.
Private landlords can find tenants fast by listing their property with MakeUrMove the online letting platform bringing landlords and tenants together.