Can any solicitor or conveyancer help with limited company buy to let mortgages?
Please can I start by saying we are not a legal firm but a Mortgage Broker that advises on limited company buy to let mortgages. From my perspective I take the recommendation of a Solicitor to a client very seriously as it will reflect on my judgement.
Limited Company conveyancing is in my opinion unsuited to small solicitor firms particularly for sizeable portfolios. They are more involved and need careful project management. Here are some of the extra steps and considerations they have to go through:
- Tax on transfers
The solicitor will need check whether CGT and SDLT exemptions on the transfer from an individual name to a limited company can apply. As CGT could be 28% and SDLT at the highest rate with the 3% surcharge this can make a profound difference to your bottom line.The exemptions are also a “one off” so the whole portfolio must enter at the limited company at the same time so all the mortgage changes need to be carefully co-ordinated. To expand say you have 6 BM Solutions, 4 TMW, 3 Leeds BS, 2 NatWest, those 15 mortgages need to be remortgaged to a lender(s) that accepts limited companies on the same completion date. - Negative pledges.
This is for trading companies that have existing buy-to-lets within them. Effectively it is written consent from each the existing lenders agreeing to the new lender’s charge on the new security to be ahead of theirs. - Letter of crystallisation.
This is further written consent from the existing lenders to be taken no earlier than 24 hours before completion else it becomes invalid. Pressurised indeed when the existing lenders really have no reason to prioritise their responses ahead of their own business objectives other than the greater good. - Companies House.
In addition to the land registry, the property purchase also has to be registered at Companies House as this is a significant change to the business. Notification must be made with 21 calendar days otherwise the Lenders legal charge is automatically rendered ‘void’ and would require Court Proceedings to rectify the situation. - Personal Guarantees / Floating charges
In my experience Mortgage Lenders will seek to take the personal assets of the Limited Company Directors if in the case of default the security property is unable to make good the debt. This requires every director to seek independent advice and the evidence this has taken place will need to be co-ordinated by the lead solicitor. Large solicitor firms may be able to deal with this with multiple Partners.
Other considerations that affect buy-to-let mortgages generally:
- HMOs
Determining whether a licence is required and if so, making sure it’s in place. - Energy performance certificates (EPCs).
Making sure they reflect the current energy consumption of the property and checking they at least meet the ‘E’ grade required on let. - Planning permissions
It’s not uncommon for let properties to be reconfigured. So checking alternations comply with building regulations will need to done. - Tenancy Agreements
Checking that a AST is in place otherwise tenants in-situ could attempt to claim they are sitting tenants in the event of a repossession.
Complex indeed. And, a 2016 survey taken by a leading Professional Indemnity provider revealed that poor conveyancing accounts for over 50% of all legal claims which is perhaps unsurprising.
Niche Advice is happy to make solicitor recommendations when applying to us for limited company buy to let mortgages. We will use save the duplication of paperwork by certifying supporting documents such as ID, proof of address, proof of deposit, copy tenancy agreement and EPCs for the solicitors use.
Author: Richard Stokes
Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.
Niche Advice is not tied to any bank, building society, estate agent or insurer and offers Independent Mortgage Advice and Insurance advice.
