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Alex J.
Alex J., Solicitor
Category: Property Law
Satisfied Customers: 3840
Experience:  Two years conveyancing experience.
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I am Director of a company which sells educational courses

Customer Question

I am Director of a company which sells educational courses overseas (and here) and provides accommodation to attendees if they so require. In 2007, the company contributed towards a substantial house which i personally bought for £1m. This house is now worth £2.5m. It also has permission to convert it into 5 separate flats/units which would help the company significantly. Currently the house deeds are in my name but the accountant regularly assigns 27% of rental profits (worked out according to the initial contribution) to the company accounts. As a director of the company, i would very much like to develop the flats and rent to more lucrative families wishing to stay in London and attend one of our courses. My question is: a) can i get the company (i own 75% shares and my husband owns 25%) itself to purchase the entire house from me directly b) does the mortgage company recognise that the company has 27% of the property already (no paperwork) c) will the mortgage company ask for a 30% cash deposit (or20%,40% etc??)or will the 27% share count d) can the company raise finance to purchase 50% of the house and pay me if it is not permitted to purchase the entire house e) or is this all illegal??
Submitted: 2 years ago.
Category: Property Law
Expert:  Alex J. replied 2 years ago.
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
To answer you questions in turn:
(a) Yes the company can purchase the house from you, the purchase will have to be approved by Special Resolution as it is a substantial property transaction under S.190 of the Companies Act 2006;
(b) If the mortgage is in your name, the mortgage company never had notice of this arrangement then all the company has is a beneficial interest in the rent/proceeds of sale. The mortgage company will not recognise this ownership - all that would happen is the company would have a beneficial interest in the property meaning it would entitled to 27% of the proceeds of a sale - this would not be binding on the mortgage company if it was not disclosed.
(c)If you are transferring ownership to the company's name so that you can release the cash -the mortgage company will need to consent if you want to transfer the mortgage to the company.
(d) Yes the company could buy the other 23%, but if you wanted to be release from the mortgage you would need the mortgage company's consent.
(e) No this is not illegal per say but you need to discuss with the mortgage company about releasing you from the mortgage - but I would bare in mind that if you went insolvent, the company's beneficial would not be binding on your creditors.
I would perhaps not mention the company's beneficial interest in the property to the mortgage company/bank at this stage. I would first ask what they would be prepared to consent to.
Kind regards