Many landlords see letting to a limited company as an advantage over letting to an individual tenant. This very often can be the case for several reasons, but there are also some disadvantages here as well.
Indeed, in the old days, before the advent of the Assured Shorthold Tenancy, letting to a company was the safest route for landlords because the tenancy avoided rent control and full security of tenure afforded by the then Rent Acts.
Lets to company employees are often for longer periods and as the rent is paid by the company you can usually rely on your rent money to be reliably paid on time, providing the company is a solvent and going concern.
Household name companies, local authorities, hospitals and academic institutions of course are totally reliable. This may not necessrily be the case with small companies and in particular new start-ups with little or no trading history or assets.
A company let cannot use an assured shorthold tenancy agreement (AST). A commercial (company) letting agreement (Common Law Letting Agreement) is required which in effect allows a person (employee) to occupy the premises as a licensee while the company pays the rent and must comply with the covenants.
Landlords and agents should ensure that the company does not allow a business to be carried on from the premises as this could in effect become a business (commercial) tenancy, giving security of tenure under the Landlord & Tenant Act 1954.
Letting to a small company, particularly in the case of a new start-up, whether a business (commercial) or a residential tenancy is more risky. It is common in there circumstances to seek personal guarantees from the directors.
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