Is it legal for a landlord to own property in this way?

[Mr Pipps]

Is it legal for a landlord to use a Limited company for entering into an Assured Shorthold Tenancy (“AST”), instead of putting his own name to the contract?

I ask, because I am in a situation where the ‘veil of incorporation’ appears to be prohibiting me from seeking recompense from a landlord who is about to loose the property which I am currently renting and living in.

I entered into an AST which was arranged by a letting agent. On signing the agreement I noticed that the party which I was contracting with was in fact a Limited company. The stated address was that of a unit on a business park. The name of the company representative was also stated.

Today, I have received a letter from a firm of solicitors acting as legal representatives for the bank who provided the mortgage which funded the purchase of the property concerned. The letter states that repossession proceedings have now commenced and that the case will be heard in the County Court in six weeks time.

The letter also states the name and address of both the claimant and the defendant. However, whilst the defendant’s name is stated as the same private individual noted on my AST agreement, the company representative’s home address is listed as well, instead of that of his Limited company, which appears on the AST document.

It would appear that I have entered into an agreement with a party which is not the legal owner of the property concerned.

Can this be legal?

[Hobbie]

Mr Pipps,

It is 100% legal, so long as the owner and/or the mortgagee has given permission to the LTD to manage the letting of a property, then its' legal.

Letting agents who fully manage a property are usually limited liability companies, but because the owner/mortgagee has given express permission it is acceptable.

My personal views on this though is that it is unethical since I believe it is a way of circumventing liabilities and thus another way for "dodgy" landlords to treat tenants like ........ (fill in the blank).

[Mr Pipps]

Hobbie

Thank you for your repsonse. It's good to know, from someone more experienced, that this indeed the way that these immoral tennancy agreements are often arranged.

As an alternative, would I be correct in thinking that my usual common law rights would still provide the route for me to seek recourse from the landlord separately. After all, his behaviour will have caused me to suffer a loss.

What do you think?

[Hobbie]

Your common law rights are protected regardless if it is a Ltd/Plc/LLP or an individual. If you need to take action against "The Landlord" then you can still take an individual to the county courts.

Mortgage lenders very rarely lend to businesses UNLESS it is very successful in what it does, and still the lender would prefer to loan to the company director(s) direct instead the business, of course unless it was a business loan/mortgage.

If your landlord is "ABC-XYZ Holdings Ltd" and you have a problem with the landlord, you are still entitled to begin proceedings against "Mr Montgomery Burns" who is a company director of ABC-XYZ Holdings Ltd, since the company director(s) and company secretary are all jointly responsible for any wrong doings the Ltd Co. is involved with.

It gets very complicated, and I doubt that much of this will make sense, and by no means should this be taken as 100% accurate information, but as a guide only and information only.

[Aequitas]

A tenancy is a “legal estate in land”. If the tenancy is to be for a term exceeding three years it must be created in writing and by deed and can only be created by someone who holds a legal estate. This means it can be created not only by a freeholder but also by another tenant.


So, it is quite possible that the company that entered into the tenancy agreement with you has a tenancy of the property.


But what if it does not? A tenancy (but only if it is for three years or less) can be signed by an agent on behalf of the landlord and that includes the agent stating in the tenancy agreement that it is the landlord. Bear in mind that a tenancy for three years or less does not have to be in writing. If an agent accepts rent and allows you into possession without an agreement being signed then there is a tenancy. It would be odd if there was no tenancy simply because the arrangement was agreed in writing.


So long as the agent has authority, there is a tenancy. If someone purports to grant a tenancy when they have no authority there is no tenancy. The “tenant” has no claim against the true “landlord” but he does have a claim against the “agent” for breach of warranty of authority.


Again, so long as the agent has authority, nothing unlawful is being done because the agent is not representing that he has authority when he has not and the tenant gets what he expected he would get – a tenancy.


If the limited company which granted you the tenancy was the landlord's agent, then you can claim not only against the company, but also against the landlord. However, if the company had a tenancy so that it granted you a sub-tenancy, you cannot go against whoever owns the freehold. All this is a matter of landlord and tenant law and nothing to do with piercing the corporate veil or any other aspect of company law.

[Aequitas]

Originally Posted by Hobbie

If your landlord is "ABC-XYZ Holdings Ltd" and you have a problem with the landlord, you are still entitled to begin proceedings against "Mr Montgomery Burns" who is a company director of ABC-XYZ Holdings Ltd, since the company director(s) and company secretary are all jointly responsible for any wrong doings the Ltd Co. is involved with.

In the absence of fraud or any other crime, rarely the case. The officers of a company are distinct from the company itself.