Letting to Ltd Co

[poshvilla@hotmail.co.uk]

My tenant is renting through his own Ltd Co on a 12 months contract. In the last 6 months his payments have been erratic (1 or 2 weeks late) but is now 3 months in arrears. Contract ends 3 June. His deposit will only cover 6 weeks rent with nothing left if there are delapidations to recover. My agent (one of the most reputable in Chester) has recommended serving section 8 to remove him within 2 weeks. Now it seems that sect 8 cannot (or maybe cannot) be served on a Ltd Co. The agent's solicitors (the most prestigous in Chester!) seem completely wrong-footed by this & are having lengthy navel-gazing sessions. Has anyone else had this problem? Is it a bad idea to let to a Ltd Co? My agents say this is the 1st time they have had this difficulty. His company is still trading (he is a debt collector!).

[Melboy]

His company is still trading (he is a debt collector!).

The irony of your situation!

Definitely one case for the legal profession I would suggest. Perhaps our very own LAW may have a comment to make on your position?

[Richlist]

His deposit will only cover 6 weeks rent with nothing left if there are delapidations to recover. My agent (one of the most reputable in Chester)

Oh come on.....they can't be very reputable if they didn't arrange for a guarantor or rent guarantee insurance to limit your risks.

What did you think you or your agents were going to do if your tenant didn't pay the rent ?

[Grampa]

Did they use an Assured shorthold tenancy? If so they are a bunch of idiots because they should have used a common law/company let tenancy and served a notice to quit (this is not a section 21) which you only have to give one months notice and dont need to protect the deposit.

This is basic knowledge for a letting agent and they should know better. Also if the tenant is a company they can chop and change the people living in the property and you have no say about it unless there was a provision in the agreement not to, which I doubt.

Also if letting to a company you should get a personal guarantor ideally from one of the directors (because the company can go bust). The agent should have credit checked the company and made sure it was based in the uk.. You can do a basic check you self here. http://company-director-check.co.uk/ & http://companycheck.co.uk/

The questions you need to ask your agent are:

1 What sort of contract was used?

2 Did they protect the deposit (this will clarify if they are idiots)

3 Is there a guarantor in place and if not why not

4 What refs were done on the company.

Let us know what they say.

[Grampa]

. My agent (one of the most reputable in Chester) has recommended serving section 8 to remove him within 2 weeks.

If that is what the agent said they have never evicted using the section 8 process. You serve a S8 that will state to can apply to the courts for a hearing in 2 weeks and you wont get a hearing for 5-7 weeks and the tenant will then be given another 2 weeks to vacate.

[poshvilla@hotmail.co.uk]

His deposit will only cover 6 weeks rent with nothing left if there are delapidations to recover. My agent (one of the most reputable in Chester)

Oh come on.....they can't be very reputable if they didn't arrange for a guarantor or rent guarantee insurance to limit your risks.

What did you think you or your agents were going to do if your tenant didn't pay the rent ?

As a first time landlord I went my agent's recommendations. I thought I had rent guarantee with the agent, but it seems that only covered the first few months. Let only because I couldn't sell.

[poshvilla@hotmail.co.uk]

If that is what the agent said they have never evicted using the section 8 process. You serve a S8 that will state to can apply to the courts for a hearing in 2 weeks and you wont get a hearing for 5-7 weeks and the tenant will then be given another 2 weeks to vacate.

It seems that S8 only applies to a private tenant. This is meant to protect an employee provided with accommodation when his employer goes bust. This guy is a one-man-band. The tenancy laws all seem to be in favour of the tenant with no regard to the owner of the property. I'm not going to quiz the agent too closely at this stage. I need him fully on my side, not smarting with criticism. I'll save that for later!!

[Grampa]

I can understand you wanting him on your side but I cant see what good it will do unless he can get the tenant to leave and or pay any rent thats due.

A notice to quit needs to be served on the tenant if you want him out and it is very unlikely he (the "agent") will know what one is or looks like but if you let him know that you know he has fxxxxd up he may just work a bit harder to resolve the problem before it goes legal.

But keep in mind any actions he takes has to be legal and if he does anything dodgy you could be held responsible.

[poshvilla@hotmail.co.uk]

His deposit will only cover 6 weeks rent with nothing left if there are delapidations to recover. My agent (one of the most reputable in Chester)

Oh come on.....they can't be very reputable if they didn't arrange for a guarantor or rent guarantee insurance to limit your risks.

What did you think you or your agents were going to do if your tenant didn't pay the rent ?

Actually I joined this forum to see if I could get a little moral support in a problem for a first-time landlord that's keeping me awake at night.. Know-all comments like this don't help anybody.

[poshvilla@hotmail.co.uk]

I can understand you wanting him on your side but I cant see what good it will do unless he can get the tenant to leave and or pay any rent thats due.

A notice to quit needs to be served on the tenant if you want him out and it is very unlikely he (the "agent") will know what one is or looks like but if you let him know that you know he has fxxxxd up he may just work a bit harder to resolve the problem before it goes legal.

But keep in mind any actions he takes has to be legal and if he does anything dodgy you could be held responsible.

The problem is that the contract is with the company & a notice to quit cannot be served on an employee.

[Richlist]

NOT agreeing to company lets is No 7 on my list of recommendations:-

The most important thing that any potential landlord can do ischoose their tenants very very carefully.

1. Get Referencies.....bank, employer and previouslandlord.

2. Take out rent guarantee insurance.....its not expensive.

3. Get a home owning guarantor. Carry out reference checks on the guarantor.Give the guarantor a copy of the AST. Make sure the guarantor document is drawnup as a deed.

4. Don't let to people with pets or children......the risk of them giving youproblems are big.

5. Don’t let to anyone under 18(minors). Draw up your own limits….I prefer nobody under 25.

6. Don't let to smokers........you won't get rid of the smell.

7. Don’t do Company lets.

8. Don’t let to anyone on Housing Benefits.

8a. If you do choose to let to applicants onHousing Benefit CHECK that your mortgage & freeholder (if your property isleasehold) allows it.

9. Don't let to anyone who isn't working full time.

10. Inspect properties every 3 months.

11. Only let initially on a 6 month AST.....that way you can both part companyafter 6 months if you don't get on.

12. Use a reputable Lettings Agent OR one who has been recommended OR do ityourself (only if you know what to do).

13. Meet your tenants personally. Make sure you ask all the right questions andgauge whether they are right for you.

14. Protect the deposit in one of theofficial schemes.

14a. If you have a dispute with yourtenant(s) over deductions from the deposit remember…..you can either go throughthe DPS adjudication process OR take the tenant to the Small Claims Court forrecovery of your losses where you may have a better chance of success.

15. Issue a section 21 notice as soon as thedeposit has been protected.

16. Make sure there is a detailed inventory& schedule of condition……signed by both parties.

17. Remember its a business....soavoid emotion & being overly sympathetic to your tenants.

18. Read as much as you can aboutrenting & letting i.e. educate yourself.

19. Don’t let to anyone who doesn’tspeak or understand English.

20. Don’t forget that you will needan Energy Performance Certificate (EPC)…….beforeyou market the property.

21. Don’t forget to get an annual GasCertificate.

22. You are responsible for ensuringanything electrical in the property is safe so consider getting the electricschecked professionally….and any appliances you provide.

23. Try to avoid having your propertyclassified as an HMO……meeting regulations is expensive and time consuming.

24. Make sure all adults living atthe property are on the AST & any other documents.

[Grampa]

The tenant is the company and that is who NTQ is served on.

[LLAW96]

sorry have been on holiday so I am now doing some catching up. The starting point is s.1 Housing Act 1988 basically you can only grant an assured tenancy to an individual, a limited company cannot reside at the property as it is artificial by nature. Given the fundemental flaw it should be argued that the tenancy agreement is void. By virtue of s.3 Protection from Eviction Act 1977 you would need an order of the court to remove the tenant. Following on from this you would argue that there is an implied 6 month periodic tenancy by virtue of s.21(5) Housing Act 1988, as we are dealing with a periodic tenancy then you would be able to rely on grounds 8,10 and 11 Housing Act 1988.

The above argument is simple enough to convince a judge and is the best I can come up with with the limited facts. Alternatively serve a statutory demand for the debt, this should make him take notice.

[Grampa]

A debate to get the brain going.

But isn't there confusion over who the landlord is and who serves any notice on the person who lives in the property. If the Ltd company is the tenant to the owner but had the right to sublet to the person living in the property, doesn't the Ltd company have to serve any notices to the resident tenant?

I am also yet to be convinced that the tenancy agreement is void. If you rented a garage or a room to a lodger (resident landlord) and used a AST which we know would be the incorrect contract surely any judge would just disregard the AST element of the contract but would still take notice of the basic elements of the contract such as rules & regs, rental periods, deposit & notice periods etc.

PS: Hope you had a good holiday LAW. Somewhere hot or somewhere wet?

[LLAW96]

ok lets see if we can clear up the landlord issue we have the landlord (L) the tenant (T) and as you see it a sub tenant (ST). L is the landlord of T and T is the landlord of ST. If all of the elements of street -v- mountford apply the ST will be an assured tenant. T cannot be an assured tenant as a limted company so lets assume there is a contractual tenancy or a tenancy governed by 1954 Landlord and Tenant Act. If L takes steps to terminate Ts tenancy and succeeds then he will be left with a mesne tenant ST. Given that we are dealing with an assured tenancy L will take ST as an assured tenant regardless of whether T surrendered their tenancy or was removed via due process of law. In the circumstances you would be left with with the position as per my earlier analysis.

The best argument would be the agreement was void with the fall back position being that the original AST was a contract to enter into an AST thereafter my analysis would still apply. The parties are a fundamental part of the agreement therefore it is voidable. Set out simply before a judge you should get the right decision. I will post the case law at some point if I get the time.

Good holiday, but plenty to catch up on now.

[Grampa]

So if the landlord is left with the ST would he have right to chase the T (LTD Co) for any loss/costs etc in getting the ST out.

Also if the T (Ltd Co) didnt have the right/permission to sub-let does that change the situation it getting the ST out.

Messy situation and the agent needs a rocket up his backside.

[LLAW96]

Where you are dealing with an assured tenancy the result can be extremely harsh. In general once the lead/mesne tenants tenancy is determied any sub tenancy automatically ends see Moore Properties (ilford) Ltd -v- McKeon 1976 1 WLR 1278, Chd. I will not set out the position in relation the right/implied right to sub let here however if the sub tenancy is lawful, then pursuant to s.18(1) the sub tenant becomes the assured tenant of the landlord subject to the exceptions contained in Schedule 1 Housing Act 1988 e.g resident landlord there are a loads more but I cant recall them as this issue is rare.

[poshvilla@hotmail.co.uk]

ok lets see if we can clear up the landlord issue we have the landlord (L) the tenant (T) and as you see it a sub tenant (ST). L is the landlord of T and T is the landlord of ST. If all of the elements of street -v- mountford apply the ST will be an assured tenant. T cannot be an assured tenant as a limted company so lets assume there is a contractual tenancy or a tenancy governed by 1954 Landlord and Tenant Act. If L takes steps to terminate Ts tenancy and succeeds then he will be left with a mesne tenant ST. Given that we are dealing with an assured tenancy L will take ST as an assured tenant regardless of whether T surrendered their tenancy or was removed via due process of law. In the circumstances you would be left with with the position as per my earlier analysis.

The best argument would be the agreement was void with the fall back position being that the original AST was a contract to enter into an AST thereafter my analysis would still apply. The parties are a fundamental part of the agreement therefore it is voidable. Set out simply before a judge you should get the right decision. I will post the case law at some point if I get the time.

Good holiday, but plenty to catch up on now.

[/quote

Thank you so much for that. I am filing all that comes in, hoping it will not be needed, but wait & see. Perhaps the tenant will pay up & move out as required on 2 June. There's nothing to do now but wait, as hard as that is!