SPV and Leases

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    SPV and Leases

    My husband is one of three directors of a limited property development company that has converted a house to 3 flats. The flats are currently rented. Please can someone tell me if, in order to get leases on the flats, we have to at the same time put them into an SPV. To put them into an SPV will be expensive and my husband is retiring from the company that owns them, we dont really want to be paying out the stamp duty on this. Also the company may not continue as a property development company so do they even need an SPV? Please let us know. Thanks for your help.

    #2
    There isn't really a black and white answer to the question, which I think if because there's a shed load of information missing.

    If your husband is retiring from being a director of a company, there's no need for anything else to happen - so I suspect that he wants to exit an existing arrangement taking some value/equity with him as he leaves.
    Which is very different.

    SPV's are normally necessary for mortgages or to isolate one part of a larger business from being affected by changes elsewhere.

    You'll either need to give us a lot more background or get some proper professional advice (I can easily imagine that you don't want to give us a lot of background in public).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      1. The property development company has purchased one house ( held under freehold title ?) and converted the property into 3 flats.

      2. The 3 flats are now rented out by the property company which still holds the property under one freehold title. The problem in this situation is any borrowing must be done by the property company because the flats are not under separate title and cannot borrow.

      3. Under the leasehold property system in E & W, the flats must be transferred to next owner ( or sold to next buyer ) under leasehold title, or the flat will not qualify for mortgage loan from the mortgage lender .

      4. If the property development company wishes to keep ownership of the flats , it will have to operate through a subsidiary company so that the development company becomes the "freeholder" and the subsidiary company ( SPV company ) becomes registered owner of 3 flats under separate leasehold title..

      The mortgage lender offering a loan to a company for property purchase usually requires the borrowing company to be SPV to reduce the risk of loss, in case the development company falls into bankruptcy.

      Comment


        #4
        Thank you very much for your replies.

        Comment


          #5
          Thank you for your replies jpkeates and Gordon999. We have spoken to a solicitor and have another meeting next week with same. I have also contacted a separate accountant. I am still no clearer tbh.

          There is no proper communication with one director and the other stays silent. We feel we are being bullied into their options, ours are ignored. The only option seemingly on offer is to buy us out with a mortgage on 2 of the flats. But they are requiring all the flats to be leased in a SPV. I am trying to avoid that option, believing that only 2 of the flats might need transferring to an SPV as only 2 would need mortgaging. OR that they can give us a flat in payment. Could you pls make any suggestions for our best way forward.

          Comment


            #6
            I suspect that the problem is that your husband wants to leave the arrangement and that all the directors have equal shares.
            That leaves the other directors in control, and, providing nothing that they do enriches them to your husband's detriment, there's unlikely to be much he can do about it.

            It's quite possible that what you are suggesting is better for you than the alternatives being proposed, or that they're much of a muchness, but that doesn't help.
            The directors have to act in the interests of the shareholders, which sounds like the three of them, so they're entitled to take a view on what benefits the most of them the most.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              In UK, flats have to be sold under leasehold title or future buyers cannot get a mortgage loan. The freeholder cannot offer a lease to itself..

              If the directors in a small company disagree , its better for one side to buy out the interest of other side.

              When there is disagreement , you should not leave your business interest under control by the other side.

              Comment

              Latest Activity

              Collapse

              • Reply to HPI out-pacing PRR accumulation
                by lllccc
                Hi Gordon, unfortunately it was not, hence the question.
                04-12-2021, 16:07 PM
              • HPI out-pacing PRR accumulation
                by lllccc
                I wondered if anyone else has been in this situation and what would you do about it? I now only own the one property (and live in it), but due to substantial renovation period before moving in the CGT will only increase now (assuming HPI increasing at 3.6% which is not unreasonable). I didn't understand...
                04-12-2021, 14:20 PM
              • Reply to HPI out-pacing PRR accumulation
                by Gordon999
                If the property has been your "main residence" since purchase, there is no tax on capital gain .
                04-12-2021, 14:40 PM
              • Reply to Will they raise taxes again?
                by Gordon999
                The Daily Mail reported on 29 Oct 2021 the 1.25 p increase for social care levy commencing in 2022 , will take £16 Bil from our pockets. The freezing of personal allowance for income tax at £12570 until 2026 will take £19 Bill by 2025/2026.
                ...
                02-12-2021, 11:18 AM
              • Will they raise taxes again?
                by JK0
                My accountant just finished my 2020/21 tax return, and my income is half of the previous year. I did not think it would be quite that bad. (Half my tenants moved out, and I had a job to replace them. Plus had to get fourteen EICR's!)

                I'm guessing you guys are in a similar boat. Never mind...
                27-11-2021, 20:20 PM
              • Reply to Will they raise taxes again?
                by Gordon999
                Corporation tax for large companies ( over £250K profit ) will be raised from 19% to 25% rate commencing from April 2023.
                30-11-2021, 21:35 PM
              • Reply to Corporation Tax
                by Gordon999
                There seems to be 2 problems ( I am not an accountant ) :

                (1.) The company has to pay £30,000 tax due to revaluation of property asset increased higher by £150,000 ( estimated). Does it have the cash in its bank account to pay ?

                ( 2) husband owns one third interest of property...
                30-11-2021, 14:09 PM
              • Reply to Will they raise taxes again?
                by theartfullodger
                Taxes bound to go up, huge amounts to pay for Covid & BR*X*it. Death & taxes, death & taxes.

                Holding off working out my position, wishing to remain cheerful for Christmas.

                Best wishes to all...
                28-11-2021, 10:45 AM
              • Reply to Will they raise taxes again?
                by Neelix
                ^^ please don’t take this the wrong way but £10 k down on what turnover or number of properties?

                i’ve done a lot of EICRs and remedial work over the last 18 months and a lot of it was because properties hadn’t been inspected and some were just dangerous....
                28-11-2021, 10:29 AM
              • Reply to Will they raise taxes again?
                by jpkeates
                I'm about £10k down and it's mostly electrical work.

                I can't see this government putting up taxes anymore before the next election, although there's nothing to say that they won't figure out how to tax landlords more specifically - there's few votes lost there.

                My candidate...
                28-11-2021, 10:07 AM
              Working...
              X