Buying a property through a limited company - how does the conveyancing process work?

Our guide 'Buying a property - how does the conveyancing process work?' explains the legal steps involved in buying a property. Many people choose to buy property through a limited company however, often because it may have tax advantages. It can be a complex procedure and involves a lengthier conveyancing process, as there are additional checks your conveyancer will need to make compared to purchasing a property directly. It can also involve extra costs, so it’s important to understand exactly how the process is likely to work before proceeding. We always recommend seeking professional advice, particularly around the tax implications when using a limited company to purchase a property. Here’s a guide to how the legal process works. This guide covers properties purchased in England and Wales:

Lisa Parker

November 8, 2023

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Limited company checks

Your conveyancer will need to make several checks on the limited company the property is being bought through to ensure that it’s legally entitled to hold property. Information they’ll want to see before the purchase of the property proceeds includes:

• Company director proof of identity

All company directors must provide proof of their identity, such as a passport or a photo card driving licence. Shareholders with over 25% of the company’s issued capital must also provide proof of their identity.

• The company articles and powers

The company’s Memorandum and Articles of Association set out and regulate the internal affairs of the company. For example, they contain information on the issue and transfer of shares, along with the duties and obligations of the directors, and show whether the company is entitled to purchase and own property. Company articles are subject to relevant provisions of the Companies Acts.

• A company search

The conveyancer will need to carry out a company search to check whether there are any issues the lender needs to be aware of, for example if there are any pre-existing charges which may influence the lender’s decision whether to offer a mortgage.

• Annual return

The company’s annual return will need to be reviewed by your conveyancer to make sure everything’s in order.

• Proof that limited company directors have taken independent legal advice

Many lenders require that company directors personally guarantee any mortgage they take out, so it’s vital they seek legal advice to fully understand the implications of doing this, along with any possible liabilities they could face. This advice generally needs to be taken from a solicitor who’s totally independent from the property transaction. The solicitor will also need to confirm to the lender this advice has been provided before the mortgage advance can be released. In addition to these checks, the conveyancer will need to carry out all the relevant searches on the property the company is buying, including Land Registry searches, local authority searches, environmental searches, water authority searches, and location specific searches. You can find out more about searches in our guide 'What are solicitors’ searches when buying a house?'

Costs

Taking independent legal advice if you’re purchasing a property through a limited company can typically cost between £300 and £500, plus Value Added Tax. This will need to be arranged locally as any personal guarantee made by a company director must be witnessed by the conveyancer. The additional legal work required for purchasing via a limited company means there will be extra costs over and above that of a standard conveyancing transaction. The limited company element alone will usually cost around £500 plus VAT. So once you factor in fees for independent legal advice you may be looking at extra charges in the region of £550-£750 plus VAT in addition to those required for a standard purchase. You should also be prepared for the conveyancing to take a bit longer than usual due to the additional checks required, typically around six weeks from your mortgage offer date.