What should UK landlords include in a company let agreement?

When you secure a corporate tenant, it can often be seen as a massive advantage due to the high level of rental returns, long-term occupancy, and the professional conduct that is often associated with commercial tenants. One of the most important things to remember is to treat a company let agreement differently from a residential let agreement because it functions under a completely different legal structure, and the statutory frameworks governing residential lets won’t apply.

Without a carefully tailored contract, you run the risk of letting unauthorised occupants in, complicating the eviction process even more, and potentially facing financial liabilities. Here, we’ll walk you through the essential information that needs to be included in a company let agreement, as well as protective measures for your commercial property investment. 

Why Is a Company Let Agreement Different From a Residential Let Agreement?

In order to make sure that your company let agreement is robust and legally sound, you’ll need to be able to recognise its legal basis. With residential properties rented to individuals, the tenancy agreement will fall under an Assured Shorthold Tenancy (AST) according to the Housing Act 1988. (gov.uk)

A limited company can’t physically reside in a property, which means that the type of tenancy can’t be an AST. Instead, it is ruled by common and contractual law. This is why it is crucial to review the different types of tenancies before entering a corporate arrangement. 

Identifying the Legal Tenant vs. the Occupant

Being able to have a secure agreement means that you are clearly able to distinguish between the entity responsible for the property and the individuals who are authorised to live there. Here’s how to be able to identify the difference between the legal tenant and the occupant. 

Naming the Company

The first thing to look out for is that the document needs to name the corporate entity as the official tenant. You’ll need to make sure that the full legal name that has been registered with Companies House, as well as the company number and the registered office address, are correct rather than just the trading name. 

The Permitted Occupiers Clause

Because a business cannot reside on-site, it will need to appoint people to live on the premises, for example, staff or directors. It is because of this that a strict Permitted Occupiers clause is implemented. This should include: 

• Residence is limited to designated company staff.
• Written notification of occupant names is required before move-in.
• Occupants cannot be changed without formal landlord approval.

If you don’t have this clause in place, it could allow the company to use the property for short-term rotation or lead to HMO licensing issues if multiple unrelated workers are housed together. 

Financial Protections and Liability Clauses

There may be a stigma that corporate clients seem financially stable; however, they can still encounter restructuring or insolvency. For this reason, the company let agreement will need to define the financial accountability clearly. 

Full Corporate Liability

The company let agreement should also confirm that the company is solely responsible for rent and all residential costs, including council tax, utilities, and broadband. This is for the entirety of the tenancy. 

The Director’s Guarantee

If the business is smaller, a Deed of Guarantee is advised, making the company director personally responsible for the contract. This will include covering rent arrears or damages if the business is unable to pay.

Handling the Deposit Outside of AST Rules

But what happens with deposits in a company let agreement? The management of deposits differs significantly in corporate lets compared to residential ones, and because these are contractual tenancies, landlords are not legally required to use a government-approved scheme. 

This may offer more freedom, but it is your responsibility to be as transparent as possible in the contract as a landlord. If you’re looking at how to write a tenancy agreement, it is crucial to include specific terms for the deposit. You’ll need to include the following: 

• The total deposit amount.
• The holding location (e.g., your business account).
• Deduction criteria, such as arrears or structural damage.
• The timeframe for returning funds post-vacancy.

To see how this varies from standard lets, check whether you have to use a tenancy deposit scheme and our guide to tenancy deposits.

Navigating Eviction Without Section 21

So, what is best practice when it comes to the eviction process without having the Section 21 process to lean on? The previous Section 21 ‘no fault’ regulation has been abolished, and the Section 8 regulation is not available for company lets. Because of this, you’ll need to rely on contractual notices and forfeiture terms. 

Having a robust forfeiture and re-entry clause will allow you to regain possession of your commercial property if: 

1. Rent remains unpaid for a set period (often 14-21 days).
2. Significant contract terms are breached.
3. The business enters liquidation or administration.

Make sure that you define clear notice requirements for both yourself and your commercial tenant. This should include how and where notices will need to be served in order to remain legally valid. 

Clear Restrictions

Commercial tenants will view the property completely differently from that of residential tenants. So, in order to protect your rental property, make sure that you include specific behavioural constraints, for example: 

• No Business Activity: Make sure you ban your tenants from running a business from the address to prevent it from becoming a corporate office. 
• No Sub-Letting or Holiday Rental: Prohibit tenants from listing the property on platforms like Airbnb. 
• Maintenance and Access Coordination: Make sure your agreement specifies a clear process for inspections, explicitly writing in a requirement to give the occupiers at least 24 hours’ notice.

What to Verify Before Signing

You need to keep certain verification steps in mind when finalising your company let agreement. This includes the following: 

• Run a Companies House Check: You need to make sure that it is an active business that is financially stable. 
• Obtain a Corporate Reference: You can request this from a previous landlord or an accountant. 
• Verify the Occupier’s Identity: Never miss implementing the Right to Rent checks on the actual tenants living at the property. 
• Review Your Landlord Insurance: Double-check that your landlord insurance policy supports corporate lets.

Corporate rentals provide great financial benefits for you as the landlord. If you ensure that you create and implement a robust company let agreement that covers liability, deposit terms, and occupancy, you’ll be able to make the most of your corporate tenancy while still making sure your investment is safe. 

Are you looking for landlord insurance to help protect your rental property? Be sure to get in touch with our team of specialists for a quote today on 01788 818 670, or you can visit our advice centre for more information on how to manage your rental property.