Buy to let purchases and company mortgages


It’s very common for investors to purchase properties to rent out to tenants. It’s worth remembering that if you are not purchasing a property to be your main residence, there are currently higher rates of stamp duty land tax to pay on your purchase, so you will need to factor in these costs before you decide if the investment is a good one.

When buying a property to let out, you must ensure that the Energy Performance Certificate for the property is valid and has a rating which is E or above. If the EPC does not have this rating then you won’t be able to let the property out until this has been rectified.

Your solicitor will check that there are no covenants or restrictions in relation to the property which would prevent you from using the property for your intended use. If the property is being used as a Home in Multiple Occupation then your solicitor will also check to make sure that all of the required permissions and licences for this use are in place.

Mortgage lenders have different products and criteria for buy to let applicants. Buy to let mortgage offers will include special conditions which set out the terms on which you can let the property, and it is very important that you read through these so that you know what is permitted and what the lender expects you to do. Most buy to let mortgages will stipulate that neither you nor any member of your family can live at the property or rent the property from you.

Your mortgage valuation is likely to contain a statement from the valuer or surveyor confirming the rental value of the property. You may want to have your own survey or valuation carried out to confirm that these rental estimates are correct.

If you decide to buy an investment property in a company name, your solicitor will need to obtain identification documents for all directors and shareholders of the company. Your solicitor will be acting on behalf of the company in relation to the purchase, and not for you in your individual capacity.

When a mortgage lender grants a buy to let mortgage to a company, they nearly always require the directors of the company to provide a personal guarantee. This is to cover the lender should the company go into administration, so they can still pursue the company directors personally for the debt. In order to sign a personal guarantee, you will need to obtain independent legal advice from another solicitor who can advise you in your personal capacity about what it is you are signing and the implications of it. The solicitor acting for the company in the purchase cannot advise you on the personal guarantee as there is a conflict of interests, they can’t advise the company in the purchase and advise you in giving a personal guarantee.

This can all take time, so if you are buying a property in a company name with the aid of a mortgage please factor in that you’re going to need to instruct another solicitor to provide you with independent legal advice and sign the guarantee forms. There will also be further legal costs to pay to the solicitor who provides you with the independent legal advice.

It is very important that any company mortgages are registered with Companies House immediately following completion. Your solicitor will deal with this for you, as there are strict timescales within which this has to be done.

Whenever you’re buying a property as an investment, make sure you do your homework before you start the process so that you know all of the costs and requirements involved, and you know that it is a good investment.

Suzanne Dixon is a Senior Associate in the residential conveyancing department at Sintons. To speak to Suzanne, please contact her at suzanne.dixon@sintons.co.uk or 0191 226 7805.


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