COMPANY LETS & CORPORATE LETTINGS - ADVICE FROM LETTINGFOCUS.COM
LettingFocus.com expert Lawrenson explains what you need to know about letting your property to a company.
For many companies buying a property and then using it to let out to their key employees is just too much hassle, so these companies are often in the market to let property from private landlords for the use of their employees. It is more flexible for them and meets the company's short-term needs.
TYPE OF PROPERTY FOR COMPANY LETS
But for the landlord, what are the pros and cons of letting to this market, how does this market break down into segments, what are the risks and what sort of property should you buy to achieve success in this market?
Let's start by looking at the structure of the market first.
Who is renting and why?
First, there are the foreign expatriates sent to work in the UK from their company overseas. They are concentrated in London but are also found in other major cities like Birmingham, Edinburgh and Manchester.
They prefer to be near the centre so that travelling to work time is reduced, though there are some - mainly those with families - who like to be in posh out of town locales like Weybridge in Surrey or Bridge Of Allan near Stirling.
Some will come with their families and will be after family houses that are close to foreign schools.
Most singleton foreign expats in London will only consider something like a one or two bed flat near the tube as that is about the extent of their mental map of London and the same also goes for British "out of towners" on company lets too. Well-off executives on company lets just don't travel on buses!
In London, if you are interested in this part of the exec market, but your property is not close to a tube (by which I mean less than 5 minutes walk away), then forget it.
FURNISHING FOR CORPORATE LETS
Don't come unstuck on furnishings. Find out what the market wants first.
Bear in mind that those relocating with their families may bring all their furniture with them whilst singletons may expect you to provide a fully furnished place.
And, of course, if you furnish, the standard has to be as good as any hotel. So forget MFI and Ikea.
Foreign expats in particular will look for large rooms and lots of storage space.
Generally, this market will be less price sensitive than normal lets - after all it is the company who is paying.
However, for that they will expect not only good furnishings but a prompt and efficient service if anything goes wrong. So if the washing machine breaks down on a bank holiday, you'll probably have to get it fixed that day and the extra call out cost will have to hang itself.
In terms of furnishings, lots of gadgets in the kitchen are good. Foreign expats prefer wood floors to carpets and will not put up with cold draughty windows that seem so common in British houses.
Carpets in bathrooms are completely out for this market and bathrooms must have a power shower. Broadband connectivity is a must as the average company exec never really switches off from his "information world".
Security must be good and the route to any local transport link safe and well lit.
Obviously, you will need to commission a very detailed inventory, especially if you are fully furnishing.
LETTING CONTRACTS FOR COMPANY LETS
With company lets the company may eschew the idea of a deposit in favour of a letter of guarantee, under which they agree to pay for any damages post tenancy.
This may be okay if it's a big company and you trust them but some landlords report that it can be an administrative struggle to get companies to pay up.
Some companies may insist on using their own form of lease, so check it carefully or ask them nicely if they would mind using yours. A standard Assured Shorthold Tenancy agreement type of contract is inappropriate if the tenant is a company.
The majority of companies will pay quarterly in advance which is obviously very good for your cash flow.
To get into the corporate lettings market, you have to have lots of cash to buy in a decent area and if the property is not up to scratch you will have to spend a lot to meet the high demands of this market.
At the lower, smaller end of the company let sector, there is a market from generally smaller companies to house, say, their middle management IT staff. Here, you can get away with letting in slightly less expensive areas, but forget any really gritty locations.
Overall, yields on company lets closely reflect the economy and in London, city bonuses, but remember the corporate letting market can quickly turn down and corporate rental budgets can be cut whenever the global stock markets and company profits slide.
UP MARKET LETTING AGENTS
To find tenants forget Gumtree and other free to advertise on sites.
You may need to plug into up-market letting agents and relocation agents with good contacts with firms. In fact, many firms will only work through agents.
Ask the Association of Residential Letting Agents (ARLA) or The Association of Relocation Agents about member firms.
The main type of let is the 12 month company let when a lease is taken out in the name of the firm and it will usually include a break clause after 6 months.
Alternatively, you could have an Assured Shorthold Tenancy (AST) just like a private tenancy in which the tenant is the individual.
If you accept an AST, insist on a guarantee from the company to pay the rent and against damages in the event of tenant default and check out the company's financial position too by getting their report and accounts to make sure the guarantee is really worth something.
Ask us for more detailed advice.
ABOUT DAVID LAWRENSON AND LETTINGFOCUS
We work in a consultancy role with organisations helping them with their products and services for the private rented sector.
But we also offer a limited amount of unbiased consultancy advice for landlords too.
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