Company lets after the Renters’ Rights Act

Are they a legitimate and workable alternative or a hidden trap?

By Tom Entwistle, LandlordZONE

Since the Renters’ Rights Act came into force on 1 May, the idea of a company let may be appealing as a means of bypassing some of the Renters’ Rights Act restrictions. In fact, the evidence shows that more landlords are exploring this avenue.

There are guaranteed-rent operators, relocation agents and some letting agents now promoting tenancies granted to companies as a way of retaining fixed-term tenancies – unlawful under the RRA – and staying outside the new assured periodic tenancy regime. 

Technically, the legal basis of these tenancies is sound enough. The trouble is that the sales pitch tends to gloss over some of the facts. It starts with a contract with the operating company, while the real risks for a landlord are one layer below. It’s the interface with the residential tenants who live in the property.

Note: This article applies to the private rented sector in England. Wales operates a separate regime under the Renting Homes (Wales) Act 2016, and Scotland has its own tenancy legislation. This article is for general information only and does not constitute legal, tax or financial advice. Landlords considering a company let or guaranteed-rent arrangement should take independent legal advice.

This question isn’t new

During the Rent Act era of the 1970s and 1980s, company lets were a standard device used by landlords who wanted to be sure of getting their property back. At the time the courts were regularly called upon to determine whether those arrangements were genuine. 

Many of the lessons from that period still apply, together with some new issues introduced by the 2025 Renters’ Rights Act. 

Why a company cannot be an assured tenant

Section 1 of the Housing Act 1988 sets two basic conditions for an assured tenancy First, the tenant, or each joint tenant, must be an individual, and two, at least one of them must occupy the dwelling as their only or principal home. 

A limited company can’t satisfy either condition. A letting to a company (a corporate tenancy) is therefore a contractual, or common law, tenancy, governed largely by the lease terms.

Quite a lot changes for a corporate tenancy. They are not automatically converted to a periodic tenancy, all the Section 8 possession grounds, the Section 13 rent increase procedure, the ban on rent in advance, the pet request regime and statutory deposit protection depend on there being an assured tenancy. 

Corporate lets, therefore, can still be granted for a genuine, fixed term with break clauses, and the rent review can be whatever the parties agree. According to Black's solicitors, three to five years is typical for these corporate residential tenancies. 

Fixed-term residential or corporate leases require registration with HM Land Registry.

There are two very different corporate models 

The first of these is the occupier model. An employer, relocation agent or public corporate body rents a home from a landlord for the express purpose of providing accommodation for a named member of staff. It pays the rent from its own funds and stays responsible for the staff member. This is the traditional company let, and in the right situation this arrangement works well. 

The second is what’s known as the head-lease model, or sometimes colloquially known as the rent-to-rent model. A guaranteed-rent operator, a housing association or a local council takes a lease on the property and then places in there its own occupiers.

These may be individuals or families in the property, a conversion to HMO bedsits for multi-occupied tenants or whole households for which the council or housing association has a duty or a contract to house. In this situation the landlord receives a fixed guaranteed rent, usually whether or not the property is occupied, or the occupiers pay their rent. The tenants have no direct dealings with the property owner. 

This is the arrangement that most small landlords are being offered, and it is not without risks, many of which they are not fully aware of. 

What obligations still apply?

The claims set out in some promotional material for these corporate lets are that a company let is entirely outside the scope of the Renters’ Rights Act and all the residential property laws. This is a dangerous overstatement of the reality of the situation. 

Where individuals live in a property, the Protection from Eviction Act 1977 applies. Under section 3 of this act, the owner cannot recover possession from a residential occupier without a court order, and under section 5 a notice to quit must give at least four weeks’ notice and contain prescribed information. 

Guaranteed-rent providers often claim that when their lease term ends, it must give the property back to the landlord / owner, with no court proceedings required. That may well turn out to be true when the operator is cooperative and the actual tenant occupier hands back the keys and vacates. But these two conditions cannot safely be relied upon. 

One cannot assume you are dealing with a straightforward and honourable rent-to-rent operator, or tenant who has left or is willing to leave when the corporate lease ends. 

In addition to this uncertainty, it must be remembered that safety laws (HHSRS) are attached to the property, not to any leaseholder, tenant or owner or the type of tenancy. So, the fire, gas, electrical safety, smoke and carbon monoxide alarms, energy efficiency standards and HMO licensing regulations, all continue to apply and may be the joint responsibility of the operator and the owner.

Repairs are another area of concern. Section 11 of the Landlord and Tenant Act 1985 implies the landlord’s repairing obligations into a lease of a dwellinghouse let wholly or mainly as a private residence for a term of less than seven years. Therefore, it applies to any lease the landlord can end within seven years. 

There is nothing noted in this act that it depends on the tenant being an individual. The main exception to these repairing obligations is a tenancy let within the business tenancy code, Part II of the Landlord and Tenant Act 1954, where a company could be said to occupy the property for running its own business.

In most short company lets for residential occupation, therefore, the landlord / owner will carry the structural and installation repairs obligations whatever the contract says.

An exemption from the new private rented sector database and landlord ombudsman is as yet uncertain. Section 63 of the Renters’ Rights Act currently limits these duties to landlords of assured and regulated tenancies. 

However, it also allows the Secretary of State, by regulations alone, to add other kinds of tenancy and licence, and to extend the definition of residential landlord to superior landlords. 

Nothing has, as yet, been announced, so this is not a policy. Even so, anyone told that the company let model is safe from future legislation should note that the power to extend the rules is already in the Act.

Inheriting occupiers

The most serious risk in the head-lease (right -to-rent) model is the one that the marketing of these schemes rarely mentions. If the company grants its occupiers tenancies, those occupiers are individuals living there as their main home. Their sub-tenancies will almost certainly be assured periodic tenancies under the Renters’ Rights Act, which gives them far greater security of tenure than under the old tenancy regime when Section 21 was available.

Section 18 of the Housing Act 1988 then comes into play. When a dwelling is lawfully let on an assured tenancy and the superior tenancy ends, the sub-tenancy does not end with it.

In other words, the occupiers’ tenancies continue as a tenancy held directly from the owner. There has been at least one appeal to a county court on this point earlier where a superior landlord (owner) who ended its lease to a management company, found itself the direct landlord of the occupiers.

Consider this scenario. A landlord grants a five-year lease to a guaranteed-rent operator, with consent to sublet and obligations to comply with all residential letting regulations in force and the specified repairing obligations. 

The operator converts the property to occupy six unrelated tenants and it’s unclear whether they applied for an HMO licence and complied with the necessary safety requirements.

After four years the operator goes bankrupt and fails to return the keys. The landlord is now the unwilling landlord of six occupier tenants on assured tenancies with no end date, and they can only be ended on Section 8 grounds.

What’s more the conversion to an HMO has implications for the internal condition of the property, handed over as a single dwelling. Plus, the uncertainty of its licensing means that the owner could now face legal action if the council discovers this, or if one or all of the tenants apply for a rent repayment order.

The Renters’ Rights Act extended rent repayment orders so that they can be made against superior landlords. This now closes the loophole in Rakusen v Jepsen, as covered in my earlier article on limited companies and eviction. A landlord whose right-to-rent operator mismanages a property is no longer insulated by the lease.

All of this of course was precisely the position the company let was supposed to avoid, the operator taking over all the responsibilities for the letting and giving the owner a worry free guaranteed rental income.

There are some qualifications to this. Section 18 applies and protects only lawful sub-tenancies, though even an unlawful sub-let occupier would still need to be removed through the courts. 

Other exemptions apply because some temporary accommodation arrangements made by local councils under their homelessness duties are not classed as assured tenancies. They also apply where it can be shown that the operator has granted genuine licences rather than tenancies. Licences are not easy to justify. See our previous articles on licences

Lenders and insurers

Most buy-to-let mortgages restrict lettings to individuals on standard residential terms, so written lender consent is essential before granting a lease to a commercial operator. Lenders lose the protection given them under the Housing Act’s mortgagee possession ground. They will usually impose strict terms if indeed they are willing to accept such an arrangement.

Rent-to-rent arrangements require specialist Rent-to-Rent Property Insurance because standard landlord policies usually become invalid when a property is sublet. The insurer will be wary of the risks involved and will want to know all the details about the property, the operator and the tenant occupiers.

Genuine let or a sham?

A genuine company let remains a legitimate and useful arrangement in the right circumstances and with the right legal safeguards. 

This is particularly the case where an employer or a public body such as a housing association or a local council wants a home for its own staff or when it is obligated to house the homeless. It is not just an easy way out of the Renters’ Rights Act. 

In the head-lease (right-to-rent) model, the contract with the operating company may sit outside the Renters’ Rights Act, while the people living in the property will sit firmly within it.  If the operating company leaves, occupiers may stay on, in which case the owner takes on the landlord responsibilities and obligations. You may even be liable if the operator fails to comply fully with the letting regulations and you will most likely experience difficulties over dilapidation repairs.

If you understand that from the outset, you take proper legal advice, and you select a reputable operator, the arrangement may work well. 

Do your due diligence first

Make sure you seek legal advice from an experienced property lawyer. Use a properly drawn up lease agreement and check the operator company’s accounts, its trading history and include a director’s company guarantee if appropriate.

Make sure you obtain written consent from your mortgage lender and insurer before signing the lease. 

Agree repairing and licensing responsibilities clearly set out in the lease, bearing in mind that section 11 may apply. This will be the case regardless of your plan for what happens at the end of the term regarding dilapidations. Set out how these actions will be executed in case tenants remain and include how possession will be recovered.

Ensure that rent is paid to you by the operator not by the tenants and establish and set out in the lease exactly what the living arrangements will be, how many occupiers will live in the property, on what terms, and whether any sub-tenancy or licence will be granted. 

Be aware that you may be liable if the operator fails to comply with its letting regulations such as not having a valid HMO licence and you may have to assume being the occupiers’ direct landlord. Price all that into your plan. 

See also:

LandlordZONE - Why do limited companies face a tougher time with eviction?

LandlordZONE - Beware ploys to avoid Renters’ Rights Act, landlords warned