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JGM, Solicitor
Category: Law
Satisfied Customers: 12067
Experience:  30 years as a practising solicitor.
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A person is a sole trader and owns property which he lets out.

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A person is a sole trader and owns property which he lets out. The property title deeds are in the business name but the business is not incorporated i.e. it is not a limited company, it is the sole trader's trading name. The property is used to secure the borrowings of a limited company and the rental income goes to the limited company's bank account to pay off the borrowings. On death does this property fall into the movable or the heritable estate under Scots Law?
Thank you for your question.

The property is heritable irrespective of the security or to whom or what the rents are paid.

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Customer: replied 5 years ago.

Thank you for the response. One additional question. If the property is used for business purposes by the sole trader does that change the status of the property or does that status arise from being a sole trader?

The status of the property is heritable because it is by nature heritable, ie, bricks and mortar.

Happy to discuss further if I have picked you up wrongly.
Customer: replied 5 years ago.

Sorry maybe being silly here but as I understand the postion: if the propertly is owned by a company then it would be part of the company's assests and the shares in the company are part of the movable estate. A sole trader may use a trading name and the title to the property is in the trading name. It is this situation, a property title being in the trading name of a sole trader, that is of interest. Is it a business asset and so movable estate or, as a sole trader owns everything to do with a business, it becomes heritable estate under Scots law?

You are correct. The difference is that a limited company owing a property is just that. The property is still heritable but of course the actual person owns shares which are moveable.

If a sole trader owns a property the property is heritable and as it is the actual person that owns the property it is heritable for estate purposes.
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Customer: replied 5 years ago.

Thanks that clarifies it

You are welcome.