A key part of any property purchase is the conveyancing stage. For a limited company buy-to-let mortgage, this process can be more challenging than a typical residential mortgage application. To protect your interests, it’s important to choose a solicitor with experience in this sector.
Limited company conveyancing is often too complex for smaller solicitor firms. There are additional steps to be considered and these could have a significant impact on the outcome of your purchase. These are just some of the extra steps to be considered:
- Tax on transfers. Your solicitor will have to determine if CGT and SDLT exemptions on the transfer from a named individual to a limited company will apply. Remember that CGT could be as high as 28% and SDLT at its highest rate with a 3% surcharge could make a significant difference to your bottom line. These exemptions will only apply as a one-off, so your entire portfolio must be transferred to your limited company at the same time. This requires careful coordination.
- Negative pledges. For trading companies with existing buy-to-lets within them, you would need to get written consent from each lender to confirm they are content with the new lender’s charge to be ahead of theirs.
- Companies house. In addition to updating the Land Registry, you would also need your solicitor to register the property with Companies House as this is considered to be a significant change to the business. This notification is required within 21 days, otherwise, the lender’s legal charge is rendered void. You would have to go to court to fix this issue.
- Letter of crystallisation. In addition to the negative pledges, you also need a letter of consent from existing lenders which has to be delivered no earlier than 24 hours from completion. This isn’t always simple to achieve when there isn’t much incentive for existing lenders to agree to prioritise this above their own business goals.
- Personal guarantees and floating charges. Lenders will also seek to secure the personal assets of company directors in the case of a limited company mortgage default. This means that every company director involved will need to seek their own legal advice, but this process needs to be overseen by the lead solicitor. With a larger firm, this can often be arranged in-house.
The other considerations to take into account when looking for a solicitor for your limited company buy to let mortgage are:
- HMOs. If you are planning to operate a house of multiple occupations, you will need a license in place.
- EPCs. These are legal requirement for all rental properties. You will need to arrange an energy performance certificate review, and ensure that your property meets the “E” grade or above.
- Planning permission. If you need to reconfigure your property, you might need planning permission. Working with a larger firm can ensure you have access to all of the specialities you need.
- Tenancy agreements. You should ensure that an assured shorthold tenancy agreement is in place, otherwise, tenants could claim to the sitting tenants in the event of a repossession.
Conveyancing for a limited company director is certainly complex, so it’s important not to cut corners to save money. A 2016 survey by a professional indemnity provider revealed that poor conveyancing was at the heart of 50% of all legal claims.
If you need support finding the right conveyancing solicitors for your needs, Niche Mortgage Info can put you in touch with the right people. We work with several brokers with experience across buy-to-let and limited company property purchases.