SPV and Leases

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    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.

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            #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.

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