Sole Trader to Limited Lease

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    Sole Trader to Limited Lease

    Hi

    I am looking for some advice if possible. I have been a tenant in an industrial unit for 8 years now and am half way through my second 5 year lease. I decided to go limited for tax reasons a few months ago and didn’t think I needed to tell my landlord as the lease is my name and I am personally responsible for paying the rent. He has now seen the rent come from a different bank account with the ltd name and has gone ballistic at me and accused me of being underhanded and lying to him. My accountant says there is not an issue from a financial point of view but can anyone tell me where I stand with regards to the lease. Have I broken the terms of my lease for going limited as there is nothing written about it in the lease. As far as I was concerned if he had a tenant with a personal guarantee he was covered. I always pay the rent on time and keep the building clean and tidy and do everything he requests. I am a bit baffled by the whole situation.

    #2
    I don't see a problem with the lease, but I hope you are declaring the rent as a benefit in kind on your income tax return.

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      #3
      My accountant said this was not an issue so unsure why you would say I need to declare the rent as a benefit in kind. I am just worried that the landlord will have grounds to evict me as he claims what I have done is a major breach of the contract. I personally don’t see it’s an issue as the rent is still personally guaranteed but it’s coming from a ltd company

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        #4
        The company is paying a rent that you personally owe, without your paying the company in return. That seems to be the same principle as the company paying your medical insurance.

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          #5
          Ok that makes perfect sense. Didn’t see it like that. Does anyone know if there are grounds to evict me? I know it’s difficult without anyone seeing the lease but any advise is appreciated.

          Comment


            #6
            In my experience, the op's situation is not unusual, particularly amongst small businesses. In principle, there is nothing to prevent a person(s) using the premises to trade through a limited company, but for purpose of the lease the person is the legal tenant regardless. Rent is payable by the legal tenant so it is understandable the landlord is concerned. A landlord accepting rent from a party other than the legal tenant could be deemed to have acquiesced to an assignment by operation of law.

            To regulate the situation, either request the landlord to grant consent for assignment of the lease to the ltd company with the person as guarantor and complete a deed of assignment, or to agree with the landlord that the rent is payable by the limited company as agent for the legal tenant.

            Assignment is likely to cost you: the landlord's legal costs (including possibly surveyor's fees) as well as your own. An agreement that the ltd co is agent for the legal tenant can be done by simple letter signed by both landlord and legal tenant.

            On expiry/renewal of the lease, under LTA 1954, section 23(1A) (provides that occupation or the carrying on of a business: (a) by a company in which the tenant has a controlling interest; or (b) where the tenant is a company, by a person with a controlling interest in the company, is to be treated for the purposes of s.23 as equivalent to occupation or, as the case may be, the carrying on of a business by the tenant.


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