Landlord has asked me to set up a limited company for lease

Smilyoctopus

We have been renting a property for the past three years and have an AST which is shortly about to expire. We would like to stay in the house as the family is really happy here and have asked for a new tenancy. The Landlord has said that he wants us to set up a limited company and move us to a Common Law Tenancy in the company name. 
I can't really see the rationale for this, we are good tenants, always pay our rent by standing order and have taken really good care of the property. I can't really get a straight answer as to why they are asking us to do this, other than it is "now company policy" and that it is something that they will be asking all tenants to do.
How on earth do I make this work? I work in a supermarket  and my husband works in marketing. Neither of us know the first thing about setting up a company - what would the company even do?! Surely we can't just have a company where the only transaction is paying rent to a landlord? This presumably means we'd have to file accounts, open a company bank account etc. This doesn't seem right that they can request this of us. Has any one else come across this? Any advise would be welcome.

HelpfulLittleHelper

That sounds like some dodgy way for them to try and avoid taxes or rules with regards to eviction. I would not even consider it.

And once your current AST expires it just rolls over into a periodic and rolls over each month so it's not like they can all of a sudden kick you out without a long process.

user1977

Never heard of similar requests, but I wonder if they think this is a magical way of avoiding all the tenant-friendly provisions which go with an AST. You could try ignoring them and allow the tenancy to run on as a periodic tenancy, see if they are bothered enough to try kicking you out.

Hoenir

Smilyoctopus said:

Neither of us know the first thing about setting up a company - what would the company even do?! Surely we can't just have a company where the only transaction is paying rent to a landlord? This presumably means we'd have to file accounts, open a company bank account etc. This doesn't seem right that they can request this of us. Has any one else come across this? Any advise would be welcome.

You have to ask yourself if the LL has any clue themselves. There's no rational logic in the request. Simply politely decline. Pointless getting involved in any further discussion. Await further events.  Though might be worth preparing yourselves for the worst and initiating a back up plan. 

PRAISETHESUN

Your AST doesn't "expire". All is happening is that the fixed term is ending. You have a legal right to continue on a periodic tenancy, the terms of which will either be governed by the existing wording in your tenancy agreement, or by housing law. There's no reason for you to need to sign a new contract, unless you want the added security of another fixed term. Only the tenant themselves (ie. you) or a court order issued following successful eviction proceedings can end the tenancy and compel you to actually leave the property.

Also, I'm no expert but from a bit of quick reading a CLT seems to have less protections than a standard AST - another reason to avoid.

marcia_

 Don't go along with this, as explained above just let it go into a rolling tenancy. 

 Looks to me to be the landlord trying do away with your rights as a tenant by making it a business transaction 

caprikid1

I have never heard of such a request.

Are you sure the landlord is not setting up a company and asking you to sign with the new company ? That would be more logical 

Olinda99

I am guessing there are differences between the provisions for letting to a person (using an AST) and letting to a company? Not certain what they would be.

PRAISETHESUN

caprikid1 said:

I have never heard of such a request.

Are you sure the landlord is not setting up a company and asking you to sign with the new company ? That would be more logical 

Even then the request for a CLT is strange. Limited companies are more then capable of letting out residential properties under AST terms. If ownership does change and a limited company becomes the LL instead, it still wouldn't change anything in the current AST nor compel OP to sign a new agreement.

caprikid1

Only being familiar with AST's a quick google and it would be a polite no.

Common Law Tenancies

There is no way I would do this or request that my tenants do it either.

You are literally increasing your costs and throwing away all of your rights.

I am not even sure you can have a common law tenancy legally in your circumstances.

I would suggest you tell the landlord we are happy with the current arrangement and are not comfortable with the costs and resonsibilities of being company directors. I suspect a court of law might still consider that the agreement in reality is an AST with all the rights that provides.

Whether a tenancy is an AST is not based on the wording of the agreement, or the title given to the contract.

It is a question of fact (not terminology) based on the circumstances.

If it falls within the definition of an AST as per the statute, then it's an AST. If that is the case, the deposit registration requirements, S21 Notice, and all other leglislative requirements of an AST apply irresepective of the fact that it might say 'Common Law tenancy' at the top of the contract.

Bookworm105

Smilyoctopus said:

 This doesn't seem right that they can request this of us. Has any one else come across this? Any advise would be welcome.

they can request it, you can decline their request and carry on with your existing AST

By letting to a non natural person (ie a company)  then as they have said, it is no longer an AST and would indeed be a tenancy under contract law ("common" law) which will give much reduced rights to the occupant.

you are very wise to be wary of the issues of creating and administering your own company. Don't do this is the bottom line.

If the LL is hell bent on forcing the issue then there is (for now) nothing you can do to prevent eventual legal eviction under the section 21 process, but you will get good warning that it has reached such an impasse and will take many months before you are physically made to leave.
That said, beware that the LL can seek to impose a rent increase even though you have not signed a new contract. Perhaps time to do a little learning on how tenancies operate?  
Challenging a rent increase - Citizens Advice