Buying a property SPV vs buying the property itself

Property investors often face a key decision: purchase a property directly or buy the Special Purpose Vehicle (SPV) that owns it.

An SPV is typically a limited company established solely to hold a property or a small portfolio, with no other business activities. Buying the shares in an SPV can sometimes be more efficient than buying the property itself — particularly when it comes to tax.

When you buy property outright, Stamp Duty Land Tax (SDLT) is payable at residential or non-residential rates, often with surcharges for corporate buyers. By contrast, purchasing an SPV through a share purchase typically attracts only 0.5% Stamp Duty on the price paid for the shares. For high-value assets, that difference can amount to hundreds of thousands of pounds.

If you are weighing your options, contact our solicitors who can work with your tax advisers to structure your deal and protect your position throughout.

What are the pros of purchasing an SPV?

For buyers, an SPV purchase can deliver several advantages:

• Tax efficiency: On larger deals, the savings can be substantial. For a £5m property, SDLT could exceed £250,000 if bought directly. By contrast, the Stamp Duty on shares would be £25,000.
   
• Continuity: Tenancies, contracts, licences, planning permissions, and bank accounts usually remain in place, reducing disruption.
   
• Speed and certainty: Share deals may require fewer third-party consents than property transactions, helping to streamline completion.

What else should I consider?

Despite the benefits, buying an SPV is not without risks:

• Inherited liabilities: On acquisition, you assume all existing and historic obligations of the company. This includes potential tax liabilities, unresolved compliance issues, or involvement in litigation. Comprehensive due diligence is essential to identify these risks before proceeding.
   
• Heavy reliance on warranties: The value of the protection you receive depends on the strength and accuracy of the warranties, indemnities, disclosures, and representations in the share purchase agreement. If these are inadequate or not sufficiently tailored, they may offer limited recourse against unknown or undisclosed risks.
   
• Funding limitations: Lenders may be more reluctant to finance a share purchase if they cannot secure their interest directly against the property. You should confirm with lenders early whether they support share transactions and understand any additional requirements they may have.

How is a share purchase structured to protect the buyer?

A typical share purchase is shaped by carefully negotiated Heads of Terms, which address:

• Price and completion payments.
• Existing debts and whether these will be discharged.
• Cash in the bank and how it will be dealt with before completion.
• Warranties, indemnities, and representations.
• Tax covenants protecting the buyer from past liabilities.

Your solicitors would also carry out due diligence on both the company and the property, including:

• Enquiries into the company’s financial and legal position.
• Property-specific checks on leases, licences, and contracts.
• Drafting ancillary documentation, such as board minutes and director/shareholder changes.
• Reviewing all underlying company and property documents.

We would also liaise with lenders to satisfy any specific conditions before funds are advanced.

Why should I sell the SPV?

For sellers, disposing of the company that owns the property can also be attractive:

• A cleaner exit: It may avoid double taxation compared to selling the property first and then winding up the company.
   
• Potential for a higher price: Buyers often pay a premium because of their own SDLT savings.
   
• Continuity of contracts: Existing leases, service agreements, and supplier contracts are unaffected.
   
• Quicker turnaround: Share sales can sometimes be faster as fewer third parties are involved.
   
• Tax reliefs: Corporate sellers may be able to claim exemptions such as the Substantial Shareholding Exemption (SSE), meaning no tax is payable on the sale of shares (subject to conditions).

Conclusion

Buying or selling a property SPV can deliver significant tax savings and a smoother transfer of assets, but it also exposes both parties to complex risks. Inherited liabilities, funding requirements and the need for robust contractual protections all demand careful handling.

Our solicitors combine property and corporate expertise to manage the entire process, from detailed due diligence on the company and property to drafting warranties, indemnities and tax covenants that protect your position. We also work closely with lenders and your tax advisers to ensure the transaction is structured efficiently and completed with confidence.

Speak to our specialist solicitors today for tailored advice on your SPV transaction.