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.
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?
