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Btl Scum Regrouping And On The Offensive. -- Merged

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Why am I saying this? Is that not what this thread is for? Discussing the approaches BTLrs are using to try and get out of c24? It's kind of what the thread title suggests. This is what is actively being discussed on 118. So can we not discuss it? Or should I limit my posts to generic, they're all doomed type posts? Just trying to have a discussion about the legality's / effectiveness of their approach is all. Sorry I bothered.

Your posts had me thinking things through. Keep going. Interesting.

Edited by Venger

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I've got a copy of the Coventry mortgage conditions (applicable to mortgages of freehold and leasehold properties in the England and Wales). Not sure if that includes BTL:

Assignment of Payments and Powers of Attorney

Until the balance owing is fully paid off, you transfer to us (so far as you are able to do so) the right to receive any payment of money arising from any source in relation to the property. You will hold that right (and any money received by you as a result) on trust for us (that is, on our behalf).

Does that mean that the beneficial interest already lies with the lender? That would make sense because how else would they be able to appoint a receiver and collect rents for a property in arrears?

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Good spot crash, I'm pretty sure I've seen something similar in another lender's paperwork posted some time ago! Although it wasn't quite as explicit in that it didn't say "you will hold that right on trust of us"! :)

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Just about the discussion you seem to have sparked.

Not much - just following it with interest. (Although I suggest everyone avoids giving full name individuals in their examples - although not sure if anyone has).

At the moment I am wondering if the banks/tax-authorities will really accept any of this, in time to come.

Also I'm wondering how lenders go about appointing LPA Receivers with late switch to some 'company / partnership' structure claimed to offer advantages against Clause 24.- but with BTL mortgages still in applicant(s) own name(s). Whether it would slow down or complicate appointment of LPA Receivers, in event missed payment or tax demand. (I doubt it). So I'm just following line of thoughts from you and other posters.

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Spyguy, I find that tone a bit condescending mate - no need to 'type slowly'.

It's all very well you saying this, but according to Shirley on 118, she has spoken to the lender and they are aware. The change in beneficial interest has happened, whether you believe it possible or not. So, she's either lying about notifying her lender, or what you are saying is incorrect. Are you in the mortgage business, have experience in it or have you spoken to some of the lenders to get their view?

I don't want them to find a loophole anymore than anyone here, but it's no good sitting here saying they can't do it, if the reality is that they are!

Cand you link to where Shirley says this please?

I'd like to see exactly what she says and I can't find anything about her having cleared matters directly with her lenders either at your link or on her profile page (only the top half of posts are shown there so I may well have missed something).

You probably know this already but just in case not, on Property118 the timestamp for each post also provides a direct link to that particular post.

Thanks.

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I've got a copy of the Coventry mortgage conditions (applicable to mortgages of freehold and leasehold properties in the England and Wales). Not sure if that includes BTL:

Assignment of Payments and Powers of Attorney

Until the balance owing is fully paid off, you transfer to us (so far as you are able to do so) the right to receive any payment of money arising from any source in relation to the property. You will hold that right (and any money received by you as a result) on trust for us (that is, on our behalf).

Does that mean that the beneficial interest already lies with the lender? That would make sense because how else would they be able to appoint a receiver and collect rents for a property in arrears?

I will see your Standard Coventry T&Cs and raise you The Mortgage Works (Nationwide's BTL arm and the second largest BTL lender in the country) Standard BTL T&Cs ;)

5. Additional security

5.1 As a continuing security for payment to us of the debt you charge to us with full title guarantee by way of mortgage the benefit of any interest you have to and in the occupation leases and the rents together with the benefit of any guarantees, suretyships, indemnities, rent deposits or other security (whether proprietary or by way of personal covenant and whether from a tenant or a third party) from time to time or in respect of any of the occupation leases providing that nothing in this condition shall constitute us as mortgagee in possession.

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This is the post by SH

Read about me on my member profile

27/04/2016 at 18:43

We used Mark Smith to incorporate via BICT but luckily incorporated before 1st April so there was no Stamp duty due. We were deliberating but took the plunge a week before the deadline. Re capital gains, it turns out that the only benefit of no price increase since we purchased our properties is the fact that we didnt have capital gain to pay on the transfer. I think we r in a very unique position as this is not the case for most landlords. Our deliberation was around the lenders, however we have spoken to all our lenders and they said that we cant pay our mortgages out of a ltd company, but thats fine, mark has devised a contract so we pay the mortgage out of our existing personal account then just transfer all profits into the Ltd company so everybody is happy and it is compliant.

On reflection I may have read too much into it, she did speak to lenders and then says everybody is happy - now whether that means the lenders are aware of the specifics I'm not so sure... It does imply they do..

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she has spoken to the lender and they are aware. The change in beneficial interest has happened, whether you believe it possible or not. So, she's either lying about notifying her lender, or what you are saying is incorrect. Are you in the mortgage business, have experience in it or have you spoken to some of the lenders to get their view?

I don't want them to find a loophole anymore than anyone here, but it's no good sitting here saying they can't do it, if the reality is that they are!

I think perhaps you're taking a statement that the leveraged landlord had contacted their lender to find out about paying the rent from a limited company bank account (and been told no) and reading into it the idea that she had made the lender aware of her BICT plan and been told that was OK.

I am sure that everybody over the way who is countenancing using a BICT is checking that their mortgage T&Cs allow the transfer of the beneficial interest.

Of course we know that at least one investor passed on the BICT solution and bought a plane ticket. DYOR.

But say anyone was silly enough to ignore their legal advice and enter into a BICT that breached mortgage T&Cs, what's the worse that can happen? The mortgages get called in when a breach is discovered?

Edited by Ghost Bird

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Reading between the lines, they appear to have set up a company to receive the rent. The co. then pays out the mortgages.

I'd guess the mortgage remains with LL personally.

I think they've been had.

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This is the post by SH

Read about me on my member profile

27/04/2016 at 18:43

We used Mark Smith to incorporate via BICT but luckily incorporated before 1st April so there was no Stamp duty due. We were deliberating but took the plunge a week before the deadline. Re capital gains, it turns out that the only benefit of no price increase since we purchased our properties is the fact that we didnt have capital gain to pay on the transfer. I think we r in a very unique position as this is not the case for most landlords. Our deliberation was around the lenders, however we have spoken to all our lenders and they said that we cant pay our mortgages out of a ltd company, but thats fine, mark has devised a contract so we pay the mortgage out of our existing personal account then just transfer all profits into the Ltd company so everybody is happy and it is compliant.

On reflection I may have read too much into it, she did speak to lenders and then says everybody is happy - now whether that means the lenders are aware of the specifics I'm not so sure... It does imply they do..

I think you may have done. It seems to me that she spoke to her lenders and they said that no, they wouldn't accept money from a limited company for a personal loan and she then assumed that the only stumbling block was the name on the accounts and that her lenders had no problems with the arrangement beyond this. I would be very surprised if her assumptions proved to be correct in the fullness of time.

(Link to the post in question here, BTW, for anyone who wants to look in on the general discussion around that point.)

Edit: which I can now see you posted in above, thanks. :)

Edited by Neverwhere

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If - and I am not at all saying that this is the case here - someone were to breach their mortgage terms and mislead lenders in the breaching then that definitely would not be the worst that could happen.

Edited by Neverwhere

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If - and I am not at all saying that this is the case here - someone were to breach their mortgage terms and mislead lenders in the breaching then that definitely would not be the worst that could happen.

Maybe some of the more ghastly HMOs could be turned in to mini prisons to hold the BTLers done for fraud/tax evasion.

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This is mentioned on one of the BICT threads over the way, I think it was flagged further up the thread.

The Holy Grail for portfolio landlords following Clause 24 is to be able to transfer their personally-mortgaged properties to a company without needing to re-finance, and claim incorporation relief on the transfer to avoid CGT.

However, lenders would almost certainly not agree to this, and so a landlord would have to knowingly and deliberately conceal the transfer, which would be a serious matter. In the worst case scenario, the lender only needs to suspect a mortgage breach to be able to appoint an LPA receiver to control the property, collect the rent, and sell the property – all without needing a court order. Therefore, it could be argued that landlords who choose to breach their mortgage terms by transferring personally-mortgaged property to a company are taking a ‘low likelihood / high impact approach – i.e. although the likelihood of detection by a lender may be low, the impact of detection could be severe.

Source: Clause 24: Why can’t I just transfer my personally-held properties (with personal mortgages) into a limited company?

From the body of the article

However, this is clearly against the terms and conditions of the mortgage lender, and any landlord who doubts this can simply write to their lender to clarify the lender’s view. It is highly unlikely that any BTL lender would agree to the transfer.

Some mortgage lenders – such as Mortgage Express – are actively trying to reduce their loan book, and are looking for any reason to cite a mortgage breach as a reason to call in the mortgage. Other lenders with large loan books stuck on unprofitable (for them) Base-Rate trackers would be keen to learn of borrowers who had breached their mortgage terms and conditions, since the lender would then have a reason to call in the loan.

All it would take is a confirmation letter from the lender to the borrower, requesting written confirmation and sign-off that the beneficial owner of the property is still the individual and not a company, and the landlord would be in a difficult position. In my experience, most landlords do not want to deliberately lie in writing to a mortgage lender, as they recognise this could be a criminal offence.

Also, the borrower would have to account for the transfer of the properties to the company on their personal tax return – which would of course show the capital gains position, plus an SDLT1 Tax Return would need to be filed with HMRC. These would be irrefutable proof for a lender that the borrower had deliberately transferred the property to a company, and it wouldn’t be possible for a borrower to conceal this.

Or, on future mortgage applications, lenders may check the rents declared on personal tax returns to the borrower’s credit report (which discloses the personal mortgages they hold), and which could easily show up any serious discrepancies.

Or, simply by checking Companies House, lenders could review the accounts for any company their borrower is involved with, and the balance sheet in the abbreviated accounts on the Companies House public record would show any new properties acquired by the company.

In short, landlords who choose to transfer the beneficial interest in a personally-mortgaged property to a company are relying on the lender’s currently passive nature – post Clause 24, with lenders being fully-aware of the benefit of a company transfer, and looking for a reason to call in unprofitable mortgages, it is entirely possible that lenders may wish to commence checks on their borrowers, and it that scenario it would be quite difficult to conceal the beneficial property transfer.

(Emphasis is in the original)

Edited by Ghost Bird

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Why am I saying this? Is that not what this thread is for? Discussing the approaches BTLrs are using to try and get out of c24? It's kind of what the thread title suggests. This is what is actively being discussed on 118. So can we not discuss it? Or should I limit my posts to generic, they're all doomed type posts? Just trying to have a discussion about the legality's / effectiveness of their approach is all. Sorry I bothered.

You're good, please stay.

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It's surely unsafe to rely on the unlikelihood of the lender ever discovering the transfer into a company. Eventually there will be some level of disgruntlement from a tenant who might well then be smart enough to grass up the landlord in revenge.

Of course still doesn't mean anything bad necessarily would happen but you do have to remember the uncanny skill of the average bank when it comes to "screwing the customer".

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This is the post by SH

Read about me on my member profile

27/04/2016 at 18:43

We used Mark Smith to incorporate via BICT but luckily incorporated before 1st April so there was no Stamp duty due. We were deliberating but took the plunge a week before the deadline. Re capital gains, it turns out that the only benefit of no price increase since we purchased our properties is the fact that we didnt have capital gain to pay on the transfer. I think we r in a very unique position as this is not the case for most landlords. Our deliberation was around the lenders, however we have spoken to all our lenders and they said that we cant pay our mortgages out of a ltd company, but thats fine, mark has devised a contract so we pay the mortgage out of our existing personal account then just transfer all profits into the Ltd company so everybody is happy and it is compliant.

On reflection I may have read too much into it, she did speak to lenders and then says everybody is happy - now whether that means the lenders are aware of the specifics I'm not so sure... It does imply they do..

Woah neddy.

You now have a LTD company. yet you promise to keep paying the lenders from a private account and someone has devised a contract that makes this seem reasonable.

Even though, an LTD is a separate legal entity to you, your advisor is saying that, like a self employed person with a business account, can choose from where to pay the legal debts of the firm.

This cannot be the case and I am sure the fact it required a further legal device to hide the transaction from the lender, is bound to cause trouble at some stage.

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Woah neddy.

You now have a LTD company. yet you promise to keep paying the lenders from a private account and someone has devised a contract that makes this seem reasonable.

Even though, an LTD is a separate legal entity to you, your advisor is saying that, like a self employed person with a business account, can choose from where to pay the legal debts of the firm.

This cannot be the case and I am sure the fact it required a further legal device to hide the transaction from the lender, is bound to cause trouble at some stage.

If the Lenders allow them to do this (I highly doubt it), what is to stop them putting the properties in to a LTD company that they are not the only share holder of? Or even not even a share holder at all, and going bankrupt on a personal level. What happens to the Lenders claim upon the property against which the Loan is secured? Is it much like buying a car with outstanding finance on it, the Lender can simply come and take the property off the LTD company? Surely this is a legal cost/headache the Lenders don't want.

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My take is that the Ltd Co. collect the rents.

They then give this money to the LL in order for the LL to pay the mortgage interest from their personal account.

Surely this will be seen as simply income from a source and subject to 20/40/45% tax as appropriate?

The LL is no longer receiving rents from a property and therefore able to claim the over generous Government BTL tax subsidy.

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My take is that the Ltd Co. collect the rents.

They then give this money to the LL in order for the LL to pay the mortgage interest from their personal account.

Surely this will be seen as simply income from a source and subject to 20/40/45% tax as appropriate?

The LL is no longer receiving rents from a property and therefore able to claim the over generous Government BTL tax subsidy.

So excuse my ignorance having never owned a 'business' and so never completed a tax return but how easily would this be picked up and calculated by HMRC? Really quite easily, I assume.

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So excuse my ignorance having never owned a 'business' and so never completed a tax return but how easily would this be picked up and calculated by HMRC? Really quite easily, I assume.

Oh you don't have to file accounts/pay tax but sooner or later Mr Tax-man will come looking for you.

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My take is that the Ltd Co. collect the rents.

They then give this money to the LL in order for the LL to pay the mortgage interest from their personal account.

Surely this will be seen as simply income from a source and subject to 20/40/45% tax as appropriate?

The LL is no longer receiving rents from a property and therefore able to claim the over generous Government BTL tax subsidy.

why not have an agent to collect the rents if this was the method of avoidance.....the issue is who borrowed the money and how they claim tax relief....in your scenario, the BTL loan was made to the self employed landlord, and he has simply farmed out the process of collection to a third party.

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