When investing in supported living properties, one crucial aspect that investors often misunderstand is the type of agreement needed between the property owner and the registered provider, or direct with the supported living provider. Many assume that an Assured Shorthold Tenancy (AST) is appropriate, but this is not the case.
Understanding ASTs vs. Leases
An Assured Shorthold Tenancy (AST) is common in residential lettings but has a significant limitation: it can only be signed by a natural person as the tenant. While the landlord can be a corporation, the tenant must be an individual – someone with "a pulse and a heartbeat."
In the supported living model, you're not renting directly to the end-user. Instead, you're leasing your building to an organisation, which in the case of a registered provider then sublets the property to the supported living business, or to the tenant directly. This arrangement requires a different approach.
The Need for a Lease in Supported Living
As a property investor in the supported living sector, you'll be leasing your building to a corporate entity – be it a limited company, registered provider, housing association, charity, or another type of organisation. Since you're dealing with a corporate body rather than an individual, an AST is not legally valid for this arrangement.
Instead, you need to use a lease or a commercial rental agreement. A standard commercial lease is typically the most appropriate document, granting the supported living provider the right to sublet the building to the underlying supported living tenants.
This distinction is crucial for legal compliance and for clearly defining the terms of the arrangement. By using the appropriate legal document, you protect your investment and establish a clear framework for your partnership with the supported living provider.
Given the complexity of leases and the specific requirements of the supported living sector, it's crucial to seek professional advice when drafting these agreements. Specialist advisors can help ensure that your lease is comprehensive, legally sound, and tailored to the unique aspects of supported living arrangements.
We run training courses to help you understand these nuances in supported living. We also have legal partners that can help you. If you would like to understand more, get in touch at hello@supportedlivinggateway.com .
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