Contractors' Questions: What if I can't rent a house as a PSC owner?

Contractor’s Question: I need to change from my rented flat which I took on as a permie to a new rented house that I’ll need to secure as a contractor, which I’ll be via my own PSC next week. But the referencing company, which the lettings agency uses to verify people’s income before they become tenants, is apparently going to regard me as self-employed and therefore may not proceed with my application. Please explain.

Expert’s Answer: Firstly, I’m sorry that you’ve been put through the mill with your letting agents’ referencing company. There is a Property Ombudsman on hand to help with disputes, but your issue does not appear to be within its remit.

Secondly, bear in mind that a fair number of reference companies tied to rented property agents do tend to be pretty progressive nowadays. It’s therefore a bit unfortunate that the one you are dealing with in relation to the house you mention does not seem to understand how limited companies work.

That said, it is definitely not the first time we’ve heard that despite a seemingly minor change in employment, the referencing company will now pigeonhole you, the PSC worker, as self-employed. It is our experience that most traditional letting agencies will want you to fit neatly into two categories; either employed or self-employed. As a contractor running your own limited company, you will actually tend to fall somewhere between the two.

Paradoxically, you may find that you have more chance of securing a mortgage than a rental property. This is because some banks and building societies have started to view contractors as a third cohort and, generally-speaking, will be happy to lend to you based on your contract rate, with just a 5% deposit required. Not having many days’ earning history behind you as a contractor does not instantly preclude you from getting started with this attractive arrangement. I appreciate this proposition does nothing to solve your letting agency-related woes, but learning more about your mortgage options could be a worthwhile next step.

The expert was Luke Somerset of IFAs ContractorMoney.

Monday 25th April 2016