Corporate Lets: what should employers and employees agree before moving in?

When a company takes a corporate tenancy to provide a home for a relocating employee moving to the UK, and particularly to London, there are actually two important relationships to consider.

The first is between the landlord and the company, which is governed by the corporate tenancy agreement.

The second – and sometimes overlooked – is between the company and the employee who will actually live in the property.

For international relocations to the UK, corporate lets can be an excellent solution. But before the keys are handed over, employers and employees should be very clear about their respective responsibilities.

Who is paying for what?

The starting point should be a clear agreement about costs.

The company may be paying the rent directly to the landlord, but what about the deposit, council tax, utilities, broadband and other household expenses?

Employers and employees should agree exactly which costs are covered by the relocation package and which remain the employee’s responsibility.

If the employee is expected to contribute towards the rent or repay certain costs to the employer, this should also be documented clearly.

It is also important to be clear about the tenancy deposit. In UK corporate lets, the deposit is typically paid by the company as the tenant, and employers should ensure that the tenancy agreement and deposit protection arrangements clearly state that the deposit is to be returned to the company at the end of the tenancy, not to the employee. We have seen situations in London where this has not been properly documented, leading to confusion and disputes.

Who is responsible for damage?

Under a corporate tenancy in the UK, the company is the tenant and is therefore likely to be contractually responsible to the landlord for damage caused by the employee or their household.

The employer should make sure the employee understands their responsibilities for looking after the property – and what might happen if the company incurs costs because of damage caused during their occupation.

A detailed inventory and schedule of condition at the beginning of the tenancy are particularly important in the London rental market. Employees should be encouraged to review these carefully and report any discrepancies immediately.

What happens if the employee leaves the company?

This is one of the most important questions to answer before the tenancy begins.

If an employee resigns or their employment is terminated, does their right to live in the property end immediately? Will they have a period of time to find alternative accommodation in London or elsewhere in the UK? Who pays the rent during that period?

The company’s tenancy obligations to the landlord may continue regardless of what happens to the employee’s employment.

Employers should therefore have a clear policy covering what happens to company-provided accommodation when employment ends, while employees need to understand that their right to occupy the property may be connected to their employment.

What if the assignment ends early?

International assignments to the UK do not always run exactly according to plan.

An employee might be transferred to another country, return home earlier than expected or move into their own privately rented or purchased property in London.

The employer and employee should agree what happens in these circumstances.

Can the employee simply move out? Does the employee have any responsibility for costs if the company remains tied into the tenancy? Is there a break clause, and when can it be used?

These questions are much easier to resolve before the tenancy starts than halfway through an unexpected change of plans.

Can partners and family members live at the property?

The employer should confirm who is authorised to occupy the property.

If the employee is relocating to London with a spouse, partner, children or other family members, they should be correctly identified where required under the corporate tenancy agreement.

The employee should also understand that adding another occupier later may require the landlord’s consent.

Pets should be discussed at the same stage. An enthusiastic new puppy acquired six months into a UK assignment may be excellent news for the family, but potentially less exciting for the landlord.

Who deals with the landlord or managing agent?

It should also be clear who manages the property relationship on a day-to-day basis.

If the boiler stops working in a London property, does the employee contact the managing agent directly or report the problem to HR?

Who arranges access for repairs?

Who deals with the landlord at check-out?

Having a simple process in place avoids minor maintenance issues becoming unnecessarily complicated.

Don’t forget the potential tax implications

Employer-provided accommodation in the UK can have tax implications for both the company and the employee.

Depending on the circumstances, providing accommodation may constitute a taxable benefit in kind. Different rules and potential exemptions can apply to relocation expenses and accommodation associated with temporary workplaces.

Companies should take appropriate UK tax advice before agreeing the arrangement and should explain to the employee whether the accommodation is expected to create any personal tax liability or reporting requirements.

This is particularly important for international employees relocating to London, whose tax position may already be affected by their move to the UK.

Put the agreement in writing

The practical arrangements between employer and employee should not be left to assumptions.

Before an employee moves into a property taken under a corporate tenancy in London or elsewhere in the UK, both sides should ideally understand and document:

• what accommodation the company will provide and for how long;
• which costs the company will pay;
• which costs the employee must pay;
• the employee’s responsibilities for the condition of the property;
• who is permitted to live there;
• what happens if the employee’s assignment or employment ends;
• what happens if the employee wants to move out early;
• how any damage or deposit deductions will be dealt with, including confirming that the deposit is returned to the company; and
• any potential tax implications for the employee.

For larger relocation programmes, employers may want to incorporate these points into a formal corporate housing or relocation policy so that employees are treated consistently.

Clarity at the beginning makes for a smoother relocation

Corporate lets can remove a significant obstacle for employees relocating to London and the wider UK, particularly when they have no UK credit history or are unable to meet conventional referencing requirements.

But the fact that the company signs the tenancy does not mean that the employee’s responsibilities disappear.

A successful corporate let requires clarity between all three parties: the landlord, the employer and the employee.

Agreeing the practical and financial details before the employee moves in can prevent misunderstandings later – and allow everyone to concentrate on the more enjoyable parts of relocating to London.

Further reading

Before agreeing the practical arrangements between employer and employee, it is also important to understand how a corporate tenancy works and the responsibilities a company takes on when signing.

Read our guide to Corporate Lets in London: What Companies Need to Know Before Signing.

You can also discover why corporate lets are making a comeback in the London rental market following the Renters’ Rights Act.

Need help navigating a corporate let?

At Simply London, we support companies and their employees throughout the London relocation process, including navigating the rental market and the practicalities of securing accommodation.

Read more about our Home Search services, and contact us today if you need help with your Corporate or Private let.

 

This article provides general information only and does not constitute legal, employment or tax advice. Employers and employees should obtain appropriate professional advice for their individual circumstances.