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  • Buy-to-Let

    End of Section 21 - Possible loophole...

    I am looking to hear people's (sensible) opinions.

    so for example. landlord is ltd company a.   landlords leases out property to ltd company b under a commercial lease.  company b sublets to tenants under ast.

    in the lease between ltd-a and ltd-b there is a break clause of one month.   furthermore there is a clear clause in the lease stating that ltb-b is NOT allowed to sublet. (although no one besides ltd-a and ltd-b will know about that).

    afterwards when one wishes to evict the tenant that company b has unlawfully subletted to him,  then ltd-a will action the break clause with ltd-b.

    so from what i understand is that landlord can never, upon the expiry or termination of a tenancy, be bound by a sublease (whether created lawfully or not).  especially in this scenario where it is unlawful

    the only way out for the unlawful sub - tenant would be to apply for relief from forfeiture

    I have seen an article here   https://www.jmw.co.uk/services-for-busin...l-sublease     but it seems quite complex.

    so looking to hear people's views

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    Surely the problem here is that the two limited companies have a clause banning sub-lets but with absolutely no intention that this clause should be binding so its a sham. Obviously one would need to show that but its pretty risky when you face a potential unlawful eviction prosecution!

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    David Smith
    Landlord & Tenant Solicitor
    Anthony Gold Solicitors

    Find me on LinkedIn: uk.linkedin.com/in/dsnsmith

    All opinions are my own and do not reflect those of my firm. No comment made should be taken as legal advice and you should consult a solicitor or other legal professional for advice on your specific situation.

    i understand that if investigated it might be a sham.  but it would be virtually impossible to prove that in court. especially if ltd-b has a different director/shareholder/address than ltd-a   the whole idea of removing s21 in the first place is terrible as discussed many times that landlords don't evict for no reason.  so to counteract that i thought this loophole might help.

    what do you think?

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    What your describing is like a Mortgage Lender repossesses a property from a landlord who has a Tenant, it's not so easy for them to gain possession. They do but its costly and takes time.

    Im no expert but I think Company A would have to evict via the court and still be obligated to put the Tenant in a good position. Then pursue Company B for any costs incurred for sorting the Tenant situation.

    Then there is always the chance your "Trick" (not a loophole). Will be found out and you end up facing a Judge to explain your actions.

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    _________________________________________________________________________


    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

    _________________________________________________________________________


    company a would have to evict via court but it would be like a trespasser (unlawful tenancy) so would be much easier.  if you wish to call it a trick fine.  but i can't see what could go so wrong.   worst case is that the tenant is considered the tenant of ltd-a.  which you are basically back to square 1.

    isn't it similar to tax whereby amazon and the big companies have shell companies in other places whereby technically they manage to save a lot on tax.  here as well technically ltd-b has broken their lease agreement.

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    I think if you had different directors/shareholders it is fairly watertight.  Never any guarantees but seems quite a clever trick to me.

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    If you were only going to evict the tenant for sound reasons, like non payment of rent, etc, then surely you would still end up with a situation where you, company A or company B, have to go to court. The tenant would probably stop paying and be advised to wait for bailiffs to arrive. The judge would look at the whole can of worms and probably throw it all out anyway.
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    Personally if it were just for non payment of rent I'd use a S8 anyway.  Where it gets more murky is for ASB as the burden of proof is very high and can cause a lot of distress for neighbours or other tenants.

    Not something I plan to implement myself but purely in answer to the OP's question I still think it is quite a clever trick that should work.

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    thank you paul for your support and understanding.

    i don't think many people understand the trick/loophole by their responses

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    I think you risk the tenants lease being set aside in court and scrapped if there tenant can show that reasonably believed it was a normal tennancy and the terms which were hidden made meant their were unfair contract terms. Probably Impossible to evict. Tenancies are contracts and are supposed to have fair terms that both parties understand. Any tenancy deemed to be deliberately constructed to hide material facts from a tenant to the landlords advantage will make the courts angry.
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    I think you would run the risk of

    a) having the tenant applies to the court for relief from surrender of the tenancy under section 146 of the Law of Property Act 1925. This could be expensive for you to defend, particularly if the tenant gets legal aid/help from Shelter

    b) having the tenant sue company B and its directors for loses/emotional distress etc for issuing a tenancy in breach of their own lease.

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