Exchanged but thinking of buying via company now?

by Readers Question

10:41 AM, 24th May 2017
About 2 years ago

Exchanged but thinking of buying via company now?

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Exchanged but thinking of buying via company now?

I have exchanged on 2 flats to complete at the end of the year and starting to set up the finance for them, I need to know if I can now switch to purchasing via a company (I will have to set up) although I’ve exchanged in my own name.

Obviously I’ve put this questions out to my accountant and solicitor who are both notoriously slow to react to anything.

Harlequin Garden



Comments

Neil Patterson

10:48 AM, 24th May 2017
About 2 years ago

If you have exchanged you are now contractually locked in to purchasing normally on a set date.

In order to change anything it would need to be negotiated through the solicitors, but if it is a long exchange they may agree if you have everything in place.

Mark Alexander

10:55 AM, 24th May 2017
About 2 years ago

I think there might be a way to deal with this, but if I am right it would be a reserved legal activity hence you would need professional advice.

Mark Smith at Cotswold barristers may be able to help - see https://www.property118.com/member/?id=1945

My thoughts are that you MIGHT be able to back to back the purchase with a Declaration of Trust transferring the beneficial interest in the property to a Limited company at the point of purchase as a linked transaction. I believe there is an SDLT exemption for such linked transactions to ensure you don't have to pay twice but that is a point which would need to be checked.
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Ian Narbeth

12:50 PM, 24th May 2017
About 2 years ago

First get you solicitor to ask the seller if he will agree to a transfer to your company at the same price. If so job done.
If not, you may be able to avoid double SDLT by obtaining subsale relief. On the day of completion and immediately after the transfer to you, you transfer the property to your company. Take advice from your solicitor/accountant.

Mark Alexander

13:27 PM, 24th May 2017
About 2 years ago

Reply to the comment left by "Ian Narbeth" at "24/05/2017 - 12:50":

Thank you for commenting Ian. "Subsale relief" was the one I was thinking of.

The problem with sub-sales is that mortgage lenders are unlikely to provide finance for six month after completion. That's not a problem if the property is being purchased for cash of course.

My suggestion of using a Declaration of Trust to move 100% of the beneficial interest to the company would resolve that.

What I am uncertain about is whether subsale relief would apply. If in doubt there would always be the option of seeking non-statutory clearance, subject to timescales of course.

Naturally, the mortgage conditions would also need to be checked to ensure that transfers of beneficial interest are not precluded within the lenders T&C's too.

Would you happen to know whether subsale relief could be applied using the strategy I've suggested?
.

Mark Alexander

13:27 PM, 24th May 2017
About 2 years ago

Reply to the comment left by "Ian Narbeth" at "24/05/2017 - 12:50":

Thank you for commenting Ian. "Subsale relief" was the one I was thinking of.

The problem with sub-sales is that mortgage lenders are unlikely to provide finance for six month after completion. That's not a problem if the property is being purchased for cash of course.

My suggestion of using a Declaration of Trust to move 100% of the beneficial interest to the company would resolve that.

What I am uncertain about is whether subsale relief would apply. If in doubt there would always be the option of seeking non-statutory clearance, subject to timescales of course.

Naturally, the mortgage conditions would also need to be checked to ensure that transfers of beneficial interest are not precluded within the lenders T&C's too.

Would you happen to know whether subsale relief could be applied using the strategy I've suggested?
.

Ian Narbeth

13:38 PM, 24th May 2017
About 2 years ago

Hi Mark
I am not sure about a declaration of trust. Legally, it works but the mortgage lenders would need to be told about it. The lenders may run a mile because they are not familiar with it.

I would first try the route of getting the mortgage broker to explain what was going on and see if the lenders will waive the 6 month rule. Lenders are now alive to problems caused by s24 Finance Act and may be flexible where, as here, it is obvious there is nothing funny going on and the second transfer is at the same price as the first.

Mark Alexander

13:59 PM, 24th May 2017
About 2 years ago

Reply to the comment left by "Ian Narbeth" at "24/05/2017 - 13:38":

Hi Ian

Providing the Declaration of Trust doesn't affect the lenders security and they have no conditions preventing its use I can't see why it is any of their business.

If there is a mortgage offer, and that lender provides mortgages to companies, then I agree that it would be far cleaner if they were just to re-offer in the company name.

However, having been a mortgage underwriter in my youth, and subsequently worked with several of them, I don't have as much confidence as you appear to have in regards to their ability to understand what is going on here. I suspect most underwriters would simply take the easy option and withdraw the loan offer if they were approached with such a request. That would be inevitable if their company doesn't lend to companies of course.
.

Nick Pope

9:47 AM, 27th May 2017
About 2 years ago

Not sure if it's the same now but when I purchased my property (30+ years ago) I bought from a builder whio was buying the property as a part exchange. I agreed to buy after he had exchanged and the benefit of the contract was transferred to me and I completed on the due date. I also got a good discount as I had saved the developer agents fees and stamp duty. I do not know if this can still be done but it's worth checking particularly as you would avoid the stamp duty surcharge.
Your main problem will be the lender. Perhaps you could look at a quick application to a company which will lend to companies.

Harlequin Garden

22:30 PM, 5th June 2017
About 2 years ago

Thanks all for your thoughts - and apologies for my silence, I've been exploring New York and if we think prices are high in London - think on!

I've had a very late response from my firm of solicitors (the one I wrote to left without saying anything - very rude and unprofessional as we had a very good relationship) - anyway the response from them is that the deal will be void and treated as a new sale in which case I will pay the 3% surcharge Stamp Duty, no one has mentioned this in the threads so I was wondering if this was in fact correct or if there is some way I can work around this.

Ian Narbeth

10:11 AM, 6th June 2017
About 2 years ago

Reply to the comment left by "Harlequin Garden" at "05/06/2017 - 22:30":

Hi Harlequin
If you buy a residential property through a company you have to pay the extra 3% SDLT. Property investors are aware of this. You are buying two flats. Even if you bought one as your main residence you would have to pay the additional 3% SDLT on the other. If you already own another residential property (in the UK or elsewhere) you will have to pay the 3% on both whether you buy in a company or your own name.

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