Landlords who opt for limited company status face legal demands too
In Commercial Watch for 16 September, 3mc director Doug Hall raised many important financial points for buy-to-let landlords to consider when assessing whether to operate their portfolio through a limited company.
I very much agree with his observations and sentiments. However, there are also a number of legal issues that differentiate these transactions from the ‘normal’ buy-to-let.
The lawyers acting for lenders must conduct an extra layer of due diligence, which, among other aspects, includes: obtaining the memorandum and articles of association and certificate of incorporation to ensure the company has the power to borrow money and hold property; acquiring full identification for company directors, significant shareholders and any other significant beneficial owners; conducting a company search for other borrowings and orders and obtaining the current annual return for the company; scrutinising the latest company annual report and accounts to ensure the company is solvent; satisfying themselves regarding the source of the funds; and conducting any other searches and investigations that the particular transaction dictates.
The lender’s lawyers must also comply with the requirements of Companies House to register the charge within the prescribed 21 days and satisfy any Land Registry requirements to register the property.
In some circumstances the lender requires personal guarantees from the company directors, and in others the lawyers must ensure that any conditions regarding the conversion of directors’ loans have been satisfied.
As with the financial considerations, there is no one-size-fits-all approach.
Whether establishing a limited company will be beneficial for the individual buy-to-let landlord will depend on their circumstances, both financial and legal.
Edward Goldsmith, partner, Goldsmith Williams
Relaxed spending habits may prove hard to break once rates start to rise
The reality of affordability calculators and the stress tests therein will come to bear once rates rise.
Even where an affordability model says a client can afford the mortgage at a point in the future at a given rate, the fact is clients invariably spend whatever comes in and will have to redirect spending towards the mortgage once rates rise.
However, 70-plus months in to such low interest rates, many people’s spending habits will be hard to change – and that is probably why 52 per cent of borrowers in the Building Societies Association’s survey say they will run into difficulty when rates eventually increase.
Chris Hulme, Clayton Hulme
OneSavings Bank will be the envy of many for hiring Adrian Moloney
Nationwide corporate accounts manager Adrian Moloney is one of the rising stars of the mortgage industry and his departure from the mutual is a considerable loss.
However, it is a huge coup for OneSavings Bank.
I suspect a lot of lenders out there are kicking themselves for missing such a huge opportunity.