Introduction

When relocating employees, companies often face the decision between opting for a personal lease, where the employee is the named tenant, or a corporate lease, where the company itself is the tenant. Understanding the distinctions between these two leasing arrangements is crucial for making informed decisions that align with both corporate policies and employee needs.

What is a Corporate Lease?

In a corporate lease, the company enters into the residential tenancy agreement as the tenant, allowing an employee to occupy the property as a licensee. The company assumes responsibility for tenant obligations, including rent, council tax, and utility payments. Often, arrangements are made where the company covers the rent, while the occupant handles council tax and utility bills. It’s important to note that the company remains accountable for any defaults on these payments.

Legal Framework and Documentation

Tenancy Agreement Structure

Corporate lets cannot utilize Assured Shorthold Tenancy (AST) agreements, as ASTs are designed for individual tenants. Instead, companies may draft their own tenancy agreements, subject to landlord review and potential amendments. In some cases, companies might negotiate premium leases, ranging from two to four years, with rent paid annually in advance, potentially securing a rent reduction.

Break Clauses and Flexibility

To maintain flexibility for relocating staff, companies typically require a break clause allowing for termination of the lease with 60 days’ written notice after the initial four months. Landlords may negotiate terms such as business or diplomatic break clauses, stipulating that termination is permissible only if the occupant is relocated beyond a 30-mile radius or is no longer employed by the company. Commonly, tenants agree to such conditions for the first year, requesting unconditional break clauses thereafter.

Key Considerations

Occupant Management

Landlords should be informed of the occupant’s identity and any accompanying family members. Corporate leases generally permit the company to substitute the occupant with another employee as needed. While some landlords may seek the right to approve replacement occupants, they are not legally entitled to do so under a corporate let.

Security and Deposits

Not all companies provide a security deposit for potential unpaid bills or property damages. Instead, a letter of indemnity may be issued, affirming the company’s accountability for such costs. Alternatively, this assurance can be incorporated into the tenancy agreement. If a cash deposit is made, it should be held by an independent stakeholder, releasing funds only upon mutual agreement of both parties.

Advantages and Disadvantages of Corporate Leases

Advantages

  • Greater control over housing arrangements
  • Flexibility in occupant assignment
  • Potential for premium lease negotiations

Disadvantages

  • No mandatory deposit protection schemes
  • Limited consumer protection laws
  • Business-oriented lease terms may be less favorable

Professional Support

At LSS Relocation, we understand the complexities involved in choosing between personal and corporate leases. Our experienced consultants are equipped to guide your company through this decision-making process, ensuring that your employees’ relocations are managed smoothly and in alignment with your corporate objectives.

For more information on our comprehensive relocation services, please contact us.