What tennancy agreements for Limited Company Landlords?

Roseville50

We have bought a property outright (no mortgage) through our limited company and, when the current AST agreement comes to an end in June, our son is going to move in. We then plan to let out the other 3 bedrooms individually, with shared communal rooms and bathrooms. What sort of tenancy agreement do we need to use in this situation? Or would it be better for us to let the whole house to our son and then for him to sublet the rooms as a resident landlord? Will we/he need to put the deposits in a deposit protection scheme in either of these situations?

Comms69

Roseville50 wrote: »

We have bought a property outright (no mortgage) through our limited company and, when the current AST agreement comes to an end in June, our son is going to move in. - not necessarily. You may need to evict (6-9 months) We then plan to let out the other 3 bedrooms individually, with shared communal rooms and bathrooms. What sort of tenancy agreement do we need to use in this situation? - depends. Your son could act as a resident landlord and these people be lodgers. if not use a standard AST available from WHSmiths Or would it be better for us to let the whole house to our son and then for him to sublet the rooms as a resident landlord? - yes (except it's NOT subletting!!) Will we/he need to put the deposits in a deposit protection scheme in either of these situations?

if you are landlords - yes
If your son is - no


In anycase there are HMO regulations involved. - surprised you are asking such a basic question having spent so much money...


(also stop saying we; it's not we. It's the company)

danlewi2

have the current tenants agreed to move out when the AST ends?

Roseville50

Yes, the tenants have already been served notice.
We don't need to rent it as an HMO as there are only going to be 4 tenants. HMOs are for 5 or more in this area.
We are considering that our company takes on the management of this property, as we want our son to be a tenant and then we want to let the other rooms to some of his friends. Whilst they are friends, it essential to safeguard them and us with a tenancy agreement, but are struggling to get advice on what form this should take. We are just trying to research this before we decide how to proceed.
The current tenants will be moving out as we have to do a complete refurbishment.

Comms69

Roseville50 wrote: »

Yes, the tenants have already been served notice.- that doesn't end a tenancy.
We don't need to rent it as an HMO as there are only going to be 4 tenants. HMOs are for 5 or more in this area. - No HMOs are 3 or more. Mandatory licensing might be 5 or more, but that is not the same thing.
We are considering that our company takes on the management of this property, as we want our son to be a tenant and then we want to let the other rooms to some of his friends. - that's fine. You still need to go through the process of protecting deposit, amongst other things; including right to rent check (including for your son) etc. Whilst they are friends, it essential to safeguard them and us with a tenancy agreement, but are struggling to get advice on what form this should take. - the same as any other AST We are just trying to research this before we decide how to proceed.
The current tenants will be moving out as we have to do a complete refurbishment.

Again, you assume they will, but until they do I wouldn't make any concrete plans

hazyjo

Rule number 1 - never let to friends or family. Sounds like a disaster waiting to happen by combining both.


According to the attached (simply googled), you may be wrong re HMOs.


http://www.landlordsguild.com/the-changes-to-hmos-you-need-to-know-about/
https://www.gov.uk/private-renting/houses-in-multiple-occupation

Roseville50

Thanks everyone, that is all useful to know and certainly help sway our decisions!

bris

It's an HMO, no doubt about it. It takes a lot of money to bring it up to regulations.


If you try and ignore this and get caught the penalties are severe.

G_M

Key question is who will be the friends' landlord? Who will they pay rent to?

1) If they pay rent to your son:

* he'll be their resident landlord
* they will be lodgers with few rights
* your son will have to declare the rent to HMRC as income (as I assume it will exceed the rent-a-room scheme)

2) If they pay rent to you:

* you will be their landord
* you could either grant a single 'joint and several' tenancy agreement (AST) to all of them including your son
* or give each of them individual ASTs

You will have to comply with all tenancy regulatons/laws (see link below) either for son (option 1) above, or for all of them (option 2)


* New landlords: advice, information & links

This will be an HMO. Whether it needs licencing depends on the localauthority, but other HMO regs apply.


see also

** Tenancies in Eng/Wales: Guides for landlords and tenants

00ec25

G_M wrote: »

Key question is who will be the friends' landlord? ....

2) If they pay rent to you:

yes, that is the key question
as the property is owned by the Ltd Company.
Presumably OP did so with the intention of passing any rental income through the company?

so if the company gets the rent, then surely the company is the LL and it is not an AST, it is a commercial lease?

G_M

00ec25 wrote: »

yes, that is the key question
as the property is owned by the Ltd Company.
Presumably OP did so with the intention of passing any rental income through the company?

so if the company gets the rent, then surely the company is the LL and it is not an AST, it is a commercial lease?

1 Assured tenancies.

(1)A tenancy under which a dwelling-house is let as a separate dwelling is for the purposes of this Act an assured tenancy if and so long as—

(a)the tenant or, as the case may be, each of the joint tenants is an individual; and

(b)the tenant or, as the case may be, at least one of the joint tenants occupies the dwelling-house as his only or principal home; and

(c)the tenancy is not one which, by virtue of subsection (2) or subsection (6) below, cannot be an assured tenancy.

http://www.legislation.gov.uk/ukpga/1988/50/part/I/chapter/I

Nothing to do with who the landlord is.


Of course the tax situation is different as the company pays tax on the rental income. The OP personally only pays tax on any dividends or salary he receives from from the company.