When it comes to renting out properties, landlords are often faced with several decisions. One of the most important choices is deciding between a company let and an Assured Shorthold Tenancy (AST). Both of these options have their advantages and drawbacks, and selecting the right one can significantly impact a landlord’s rental experience. In this guide, we’ll break down the key differences between company lets and ASTs to help you make an informed decision.
What Is a Company Let?
A company let involves renting out your property to a business or corporation rather than to individual tenants. In this scenario, the company acts as the tenant, and the occupants (usually employees or clients of the company) reside in the property. This type of agreement can be beneficial for both the landlord and the company involved.
Key Features of a Company Let:
- Tenant Is the Business: Unlike a traditional tenancy where individuals rent your property, in a company let, the business itself takes on the responsibility of managing the tenancy.
- Fixed-Term Contracts: These agreements usually have a fixed-term duration, typically longer than standard tenancy agreements.
- No AST Rules: A company let falls outside the scope of AST regulations, which means landlords are not bound by certain rules that apply to traditional tenants.
Pros of a Company Let for Landlords:
- Guaranteed Rent: One of the most significant advantages of a company let is the guaranteed rent. The company is contractually obligated to pay rent on time, regardless of whether their employees are occupying the property or not. This provides landlords with peace of mind and financial stability.
- Professional Management: Since businesses tend to have a reputation to uphold, they are more likely to ensure the property is well-maintained. Additionally, companies may have internal policies that result in better care for the rental property.
- Longer Tenancy Terms: Many company lets involve longer tenancy periods, reducing the risk of frequent tenant turnover and the costs associated with finding new renters.
Cons of a Company Let for Landlords:
- Potential Wear and Tear: While companies generally maintain properties well, some landlords worry that employees or clients residing in the property may not treat it with the same care as they would their own homes, resulting in increased wear and tear.
- No AST Protection: With a company let, landlords do not have the protections afforded by an AST, such as deposit protection schemes and specific grounds for eviction.
What Is an Assured Shorthold Tenancy (AST)?
An Assured Shorthold Tenancy (AST) is the most common type of residential tenancy in the UK. Under an AST, landlords rent out their property directly to individuals or families. These agreements are governed by specific regulations that protect both landlords and tenants.
Key Features of an AST:
- Direct Individual Tenants: The rental contract is between the landlord and individual tenants.
- Regulation by Housing Law: ASTs are regulated by housing laws, providing legal protections for both the landlord and tenant.
- Fixed or Periodic Terms: ASTs can be either for a fixed period (usually six months to one year) or operate on a rolling monthly basis after the initial term.
Pros of an AST for Landlords:
- Legal Protections: AST agreements are governed by strict legal frameworks, which provide protections for landlords. For example, landlords can take advantage of a deposit protection scheme to safeguard against damages caused by tenants.
- Clear Eviction Process: The eviction process under an AST is well-defined. If tenants fail to pay rent or breach the tenancy agreement, landlords can follow a legally outlined process to regain possession of their property.
- Flexibility in Tenant Choice: Landlords have control over who lives in their property, with the option to screen and select tenants based on references and financial stability.
Cons of an AST for Landlords:
- No Guaranteed Rent: While AST agreements may offer some legal protections, landlords do not benefit from guaranteed rent. If tenants fall behind on payments, landlords may face financial loss or delays in receiving rental income.
- Shorter-Term Tenancies: ASTs typically operate on shorter tenancy terms, leading to potential vacancies between tenants. This can result in additional costs for marketing the property and finding new tenants.
Which Option Is Best for Landlords?
Deciding between a company let and an AST largely depends on your priorities as a landlord. If guaranteed rent and long-term stability are important to you, a company let could be an ideal option. However, if you prefer to retain control over tenant selection and benefit from legal protections, an AST may be more suitable.
Company Let vs. AST Comparison Table:
| Feature | Company Let | AST (Assured Shorthold Tenancy) |
|---|---|---|
| Tenant Type | Business/Corporation | Individual Tenants |
| Rent Stability | Guaranteed Rent | Rent Dependent on Tenants |
| Property Maintenance | Often Professionally Managed | Tenant-Responsible |
| Legal Protections for Landlord | Limited | Extensive Legal Protections |
| Tenancy Duration | Typically Longer | Fixed or Rolling |
Conclusion
Both company lets and ASTs offer unique benefits and challenges. The best choice will depend on your preferences, financial goals, and the level of involvement you want in managing the property. While company lets provide the advantage of guaranteed rent and longer tenancy terms, ASTs offer greater legal protections and flexibility for tenant selection. As a landlord, carefully consider these factors to determine the right approach for your rental property.
