Leasing a property and what Act applies

beckysheffield

My friend has been offered a lease arrangement with a charity for her HMO property. She’s finding it hard work to get rent on time, as well as tenants. They would be offering her a good deal and will help as she’s a new mum.

Would the 1954 or 1985 Landlord and Tenant act be applicable? Their solicitor is pushing for the 1954 but I’m certain the 1985 act is applicable because it’s not a commercial property, it’s residential. Even though that business is making money, we have a Lease instead of an AST because we know they sublease. My friend is liable for the council tax, no one is responsible for business rates.

Any thoughts? 

eddddy

It's a bit difficult to follow your post. Are you saying the following:

• Your friend owns a property. She currently rents it out as an HMO.

• She is considering renting the whole property to a charity instead, on a commercial lease. The charity will then rent the property to their tenants, on whatever basis they choose.

Presumably, the commercial lease will be for a fixed period - maybe 3 or 5 years.



If that's correct, often problems with that arrangement might include:

• What happens to the charity's tenants after the commercial lease ends - e.g. after 3 or 5 years? The charity is unlikely to want to evict them - so typically, your friend will 'inherit' the tenants when she gets the property back. (The charity is likely to be housing challenging tenants, who would not normally be acceptable to private landlords.)

• There is often a cap on what damage the charity will pay for at the end of the tenancy.

I heard of a case where the the maximum damage payment was capped at 2 months rent, but the tenants had broken the bathroom fittings, punched holes in walls, painted the walls purple etc - which cost thousands to put right.

And another case where the front door had been repeatedly broken in police raids.


Also...

• If your friend has a mortgage, they need to check whether this arrangement is acceptable to the lender (it probably isn't)
• Your friend would probably need a different buildings insurance policy

dimbo61

What charity ?
Is it a real charity ?
Please check every document very carefully with a solicitor
Your friend as the property owner and Landlord is still responsible for complying with the Law !
EPC EICR GSC pat testing right to rent etc

Far too many unqualified people trying Get rich quick scheme.
We have a HMO and get letters every single week from " Housing professionals " offering to manage our HMO 

eddddy

dimbo61 said:

What charity ?
Is it a real charity ?
Please check every document very carefully with a solicitor
Your friend as the property owner and Landlord is still responsible for complying with the Law !
EPC EICR GSC pat testing right to rent etc

Far too many unqualified people trying Get rich quick scheme.
We have a HMO and get letters every single week from " Housing professionals " offering to manage our HMO 

I could be wrong - but I don't think the charity is offering to manage the HMO.

I think the charity wants to lease the building (or perhaps part of the building) from the friend on a commercial lease. So the charity would be the friend's commercial tenant.

The charity would then be a landlord who (probably) rents out the rooms on whatever basis they choose. So the charity is responsible for complying with residential landlord laws.


The friend would be a commercial landlord, so only has to comply with commercial landlord laws.

But the OP needs to clarify.

beckysheffield

The charity want the whole building. 

They will find their own tenants and give their own tenants their own AST. They will sublet which isn’t legal under an AST, but is with a lease. 

Regardless of every thing that everyone states may go wrong, can anyone tell me what law is appliance?

I don’t think it’s the 1954 Tenant and Landlord Act because no one is paying business rates. 

The lease they have presented means both sides give 6 months notice, applicable no sooner than 12 months from the start of the lease. 

A commercial licence is for a commercial business. Although this charity (who are 100% legit and very well known) may make money from this property, they aren’t paying business rates and the property is a residential house.

My friend has a solicitor, who has stated the 1954 act, which I don’t think is applicable. 

The lease is for 5 years and I think this would be applicable Part I Security of Tenure for Residential Tenants if it was for 7 or so years?

beckysheffield

Does anyone lease their property to a business? 

user1977

If your friend already has a solicitor advising her on this, why are you getting involved?

Why do you think business rates are relevant to whether it's a 1954 Act lease or not?

beckysheffield

user1977 said:

If your friend already has a solicitor advising her on this, why are you getting involved?

Why do you think business rates are relevant to whether it's a 1954 Act lease or not?

If my friend already has a solicitor advising her on this, why are you getting involved? 

I’ve explained above. 

beckysheffield

Because someone who knows the difference between the 1954 act and 1985 will know the difference between a long low rent lease and a standard agreement. Does a residential house fall into a business and all the 1954 acts, such as thee having to be another agreement written up to waive rights of automatic lease renewal etc.

I’ve researched this in full and my friends solicitor and their solicitor aren’t on the same page. So that’s why I’m getting some input from this forum for what relevant act will apply. 

theartfullodger

beckysheffield said:

Does anyone lease their property to a business? 

Very common, owner rents place to letting agent who then rents it out as letting agent as occupants' landlord.

Very often as part of a "guaranteed rent" scheme/SCAM.

theartfullodger

Don't let "charity" supply tenancy agreement between themselves and owner.

Get advice from solicitors specialising in such (dodgy.. rentwrent) "arrangements."

Is "charity" religious please?