Andy Valvona is national account manager at CHL Mortgages for Intermediaries
One of the most significant changes to the buy-to-let market in recent years has been the striking growth in the number of purchases taking place through limited companies rather than by individual borrowers.
A succession of changes to the tax setup around investment properties over the last five years by the government has made it far more attractive for landlords to purchase as a business rather than in their own name.
And landlords have responded by doing just that. Data from Hamptons found that in 2020 there was a record number of new limited companies set up to hold buy-to-let properties, with 41,700 incorporations taking place.
That’s not only a 23% jump on the number of incorporations seen in 2019, but means that numbers have more than doubled since 2016.
In fact, Hamptons reckons that between the beginning of 2016 and the end of 2020, more companies were set up with the intention of holding buy-to-let properties than in the preceding 50 years put together.
Lenders and brokers alike have responded to this demand. Lenders have expanded their product ranges, designing products specifically to cater to this purchases alongside more traditional landlord purchasers. Limited company buy-to-let has been a central feature of the CHL Mortgages range since we relaunched last year, for example.
Brokers have also stepped up to this new challenge, educating themselves on the various additional considerations that their clients need to include in their plans, for example on areas like debentures, and fixed and floating charges.
Yet there remains another area where expertise is vital for a limited company case to go through smoothly, but which is often overlooked.
A big element for any purchase is the conveyancing side. There are always legal processes to handle for all purchases, and these only increase when the property is not being bought by an individual but by a limited company.
For example, the conveyancer will have to carry out additional checks around any potential capital gains tax or stamp duty exemptions apply, register the purchase with companies
House within a specifically timetabled manner, and organise negative pledges if the company holds existing buy-to-lets.
The reality is that this process can be significantly different for limited company deals, which is why it’s really important to make use of a conveyancer who has the necessary experience and understanding to ensure that all goes off without a hitch, and can pinpoint any particular problems early in the process.
However, there are occasions when brokers are presented with only a limited range of conveyancers from which to choose. All too often lenders introduce closed panels, restricting brokers to only picking from a select few legal firms to aid their client.
This lack of choice can not only mean that brokers miss out on the specialist skills which would support the case, but their clients may also be subjected to higher fees precisely because of that lack of competition.
It’s an approach that we don’t agree with at CHL Mortgages. We want our borrowers and their brokers to have more autonomy over their conveyancers, to have more say in who they trust to handle the legal side.
By working with the full range of conveyancers, buyers can benefit from the expertise of legal firms they trust, and usually at a lower cost than if we imposed a closed panel to boot.