Who are corporate tenants?
Sharief Ibrahim, Director of Agency explains: There is still a degree of misinformation surrounding corporate tenancies in London and the South East. Largely, this confusion has been caused by Estate Agents misrepresenting the true nature of a corporate tenancy.
Many London residents will be familiar with the flyers and letters churned out by Estate Agents claiming to have a ‘corporate tenant’ ready and waiting to snap-up their property. Typically, what they are referring to is an individual or group of individuals working for a corporate entity such as a bank, law firm or accountancy practice. Such individuals are likely to be great tenants - they'll have a good salary; work long hours (less wear and tear); and, in all likelihood, once they’ve found a nice property, they’ll be too busy to move regularly meaning a longer term tenancy. However, this is not a corporate tenancy. In most cases, the property will be let under an Assured Shorthold Tenancy (AST) with all tenants named on the agreement.
So, what is a corporate tenancy? A true corporate tenancy is where the end user (the tenant) is a company. The tenancy is drawn up in its name and the company (not the occupier) pays the rent to the landlord via an agent. In the vast majority of cases, the company will make the property available to its staff for the duration of the tenancy. The exception to this being where the company is a Serviced Apartment Operator (SAO). In this case, the SAO rents the property from the landlord and makes a profit by sub-letting the apartment at a premium on a short term basis. In both of these cases, the property is let under a Non-Housing Act tenancy agreement.
Having cleared that up, the obvious question is what type of tenancy is preferable to a landlord?
As outlined above, the type of tenancy agreement required will vary depending on whether the tenant is an individual or a company. The nature of the tenancy agreement affects, amongst other things, whether a landlord is required to determine the immigration status of its tenant (Immigration Act 2016), which documents the tenant must be provided with prior to the start of the tenancy (Deregulation Act 2015) and whether they will be required to protect the security deposit. If it sounds complicated, that is because it is and, that is even before we consider the pros and cons (for a landlord) of having a private tenant as opposed to corporate tenant - an issue which very much depends on the individual circumstances of the landlord and their investment objectives.
There is clearly a lot for a landlord to consider when proposing to rent out a property and, to this end, it is key that a landlord selects an agent based on their ability to navigate this increasingly complex landscape and deliver the best possible strategic advice.