BGBG

Granting a lease to your own company

Are you considering purchasing a commercial property for your company to occupy? Is your company in occupation of a property that you own personally, but without formal documentation? Beware the legal ramifications of such arrangements!

Are you considering purchasing a commercial property for your company to occupy? Is your company in occupation of a property that you own personally, but without formal documentation? Beware the legal ramifications of such arrangements!

If you own a property in your own name or perhaps in the name of your pension fund, you may, rather than rent it out to a third party, intend for it to be used by your own company. You may be tempted to simply let your company use the property with the minimum of formalities but should be avoided in almost all circumstances!

The simple point to note is that you and your company are not considered as the same entity legally.  A limited company has a separate identity to you or your pension fund and if you allow your company to use the property without proper documentation, you could find that an arrangement is implied by law that you were not expecting. This could have unforeseen circumstances for both you and your company.

Types of occupation

Your company will, whatever you do or do not do, be deemed to have one of the following types of legal occupation if it is in occupation of a property that you own:

  1. a licence to use the property either as a whole or as a sharing arrangement with you;
  2. a tenancy at will
  3. a business tenancy.

Full information on these can be found at Granting a Commercial Lease.  But the important thing to note is that in the absence of particular circumstances, your company’s occupation will most likely be regarded as a business tenancy in which case your company will have security of tenure under the Landlord and Tenant Act 1954.  This may well be unacceptable to any buyer of the property.

On the other hand, a licence to use the property or a tenancy at will is unlikely to be acceptable to any buyer of your company as both licences and tenancies at will can be ended at any time on practically no notice!

For more information on granting a lease to your own company...

Please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 for a free discussion or email geoffrey.cotterill@everymanlegal.com

Granting a commercial lease

In most circumstances, the best approach is to grant a commercial lease for a fixed term to your company and, if necessary, exclude the legal right to security of tenure.   This can be achieved very simply by serving a notice on the company and then making a declaration that the company understands the consequences of not having security of tenure and is willing to enter into the lease regardless. This arrangement will ensure that your company’s occupation of the property does not have any unintended consequences.

Before granting a lease to your company we would suggest that you look at our information on granting a commercial lease, in order to consider important lease terms such as rent and rent review, length of the lease and repair obligations as well as tax implications in relation to VAT and SDLT.

You need to be aware that your interests as landlord and those of your company as tenant are not necessarily the same and it is probably better if you do not represent the company if a specific point needs to be negotiated.  If the landlord is the SIPP, then the SIPP can probably represent the landlord, while you represent the Company yourself.

Our dedicated team of solicitors, based in Witney, Oxfordshire, would be happy to answer your questions.

Contact Us

The Everyman Legal team acted promptly and with us in mind. We were treated as an important client even though the services for the transaction were fairly routine. They always went the extra mile to keep the process moving efficiently.

Related Factsheets