I need to make one thing very clear before I go any further – these types of transactions are in no way as straightforward as when an individual buys an investment property.
You must be aware of this before you act on behalf of any client who is purchasing through a limited company.
Although the examination of title when acting for a limited company is the same as when acting for a private individual, there are a number of differences and added complexities.
These quite often result in solicitors charging much more than they originally quoted as the chances are the solicitor had no idea about all these added extras.
Some of these added complexities include:
- Full ID will be required from all the directors (and any shareholders who hold more than 25% of the issued capital in the company). This could mean reviewing ID for a number of individuals;
- Examination will be needed of the Memorandum and Articles of Association to ensure that the company has the power to borrow money and hold property (SIC Codes);
- Company search will be required to identify the directors and controlling shareholders and check there are no adverse entries or pre-existing charges which would prejudice the intended lender;
- All directors or shareholders must have Personal Guarantees completed by the solicitors;
- Directors or shareholders will be required to take independent advice from a third party firm of solicitors;
- Review of the company annual return if filed for information of other directors or shareholders;
- Solicitors will need to comply with any other special conditions of the lender, for example, confirmation of the registered address of the company;
- Registration of the charge at Companies House within 21 calendar days – otherwise the charge is unenforceable, and void against a liquidator, administrator and any other creditor of the company. The company will remain liable for the repayment of the debt but in effect it is unsecured. In the event that the application to Companies House is returned then the 21-day time limit does not begin again. A charge of £23 is required by Companies House. Failure to register the charge leaves the solicitor open to a claim for negligence and breach of their duty to the lender;
- Registration of the charge at HM Land Registry is still required within the priority period or there is a risk that the lender’s charge may be devalued.
There are of course plenty of conveyancers around who will do an admirable job for both the borrower and the lender in a company buy-to-let, but out of the 7,000-plus conveyancing firms in the country, there are plenty that won’t.
Choosing an inexperienced specialist conveyancer is just too big a risk to take for the lender and the borrower.
You never know what problems will arise during this complicated process and how much extra money the client will be forced to fork out in solicitor bills.
I’ve said it before and I will say it again – for specialist property transactions, you need a specialist lawyer to do the job right.