Remortgaging a property held in an SPV limited company: what investors need to know

Many property investors use a special purpose vehicle (SPV) limited company to own residential investment property. While much of the focus is often on arranging finance when the property is first purchased, the company may later need to refinance or remortgage.

This might be to move to a different lender, secure new borrowing terms, release equity for another investment or replace an existing facility that is coming to the end of its term.

Remortgaging a property owned through an SPV involves additional legal considerations compared with a conventional residential remortgage. Understanding these early can help investors prepare for the transaction and reduce the risk of delays.

If you are considering remortgaging a property held through an SPV, contact our real estate finance solicitors for advice on the refinancing process, lender requirements and security arrangements.

Can you remortgage a property owned by an SPV?

Yes. An SPV limited company can refinance a property it already owns, provided it meets the new lender's requirements.

The company, rather than the individual directors or shareholders, will be the borrower. The new lender will take security over the property and will usually check both the company and the individuals behind it.

On completion, the existing mortgage will normally be repaid from the proceeds of the new loan. The existing lender's security will then need to be discharged and the new lender's security registered.

Why might an SPV refinance a property?

There are several reasons why a property investment company may look to refinance, including:

• Moving to a new lender when an existing mortgage product or facility ends
• Obtaining different borrowing terms
• Releasing equity following an increase in the property's value
• Raising funds towards another property purchase
• Restructuring existing borrowing
• Refinancing properties within a wider investment portfolio

The reason for refinancing and the structure of the new facility can affect both the lender's requirements and the legal work involved.

How does an SPV remortgage differ from a standard residential remortgage?

With a conventional residential remortgage, the borrowers and registered property owners will generally be individuals. With an SPV transaction, the property owner and borrower is a limited company.

This means the legal work can extend beyond the property itself. The solicitor may need to review the company's structure and constitutional documents, check its existing borrowing and charges and ensure that the company has authority to enter into the proposed finance arrangements.

Depending on the lender and transaction, the lender may also require appropriate board resolutions or minutes to approve the borrowing and security.

Dylan Leet, head of real estate finance, explains:

"An SPV remortgage can look straightforward, particularly where the company already owns the property and is simply moving from one lender to another. However, the transaction adds an extra corporate layer. The new lender will have its own requirements around the company, its directors and the security being provided, so identifying those requirements early can make a significant difference to how efficiently the refinance progresses."

What security might the new lender require?

The lender will usually require a legal charge over the property being refinanced. However, depending on the lender and facility, the security package may extend beyond the property itself.

For example, a lender may require a debenture creating fixed and/or floating security over certain company assets, alongside the legal charge over the property.

The precise security package will depend on the lender, the borrowing and the structure of the transaction. The solicitor acting on the refinance will review the relevant security documents and ensure they are correctly executed and registered.

Changing lender when remortgaging an SPV property

Moving from one lender to another is common when refinancing investment property.

The solicitor will obtain a redemption statement from the existing lender showing the amount required to repay the current borrowing. On completion, the appropriate amount is paid to the existing lender and its security is dealt with before the new lender's security is registered.

Because the borrower is a company, registration requirements can arise at both HM Land Registry and Companies House.

A charge created by a UK company generally needs to be registered at Companies House within 21 days from the day after it is created. Missing the deadline can have significant consequences and may require a court application to register the charge late.

Will directors need to provide personal guarantees?

A lender may require directors or shareholders of the SPV to provide personal guarantees as part of the refinancing.

A personal guarantee creates obligations for the individual giving it which sit outside the limited liability protection normally associated with the company. If the company defaults, the lender may be able to pursue the guarantor under the terms of the guarantee.

Depending on the lender and documentation, a guarantor may also be required to obtain independent legal advice before signing. We explain the potential liabilities and other considerations in more detail in our guide to personal guarantees when borrowing through an SPV.

Investors should therefore treat personal guarantees as substantive legal commitments, not simply another document required to complete the remortgage.

Can the same solicitor act for the SPV and the lender?

This will depend on the lender and its requirements.

Some lenders will permit the same firm to act for both the borrower and lender provided the firm satisfies their panel and other requirements. Others may require separate legal representation.

It is therefore worth checking this before instructing a solicitor. Discovering later in the transaction that the chosen firm cannot act for the lender can introduce additional cost and delay.

What legal work is involved in an SPV remortgage?

The precise requirements will vary, but the legal work can include:

• Reviewing the title to the property
• Checking the company's structure and constitutional documents
• Reviewing existing charges against the company
• Checking the company's authority to enter into the new borrowing
• Preparing or reviewing relevant board minutes and shareholder resolutions
• Reviewing the new mortgage offer, facility documents and lender instructions
• Dealing with searches or search insurance where required
• Responding to the lender's legal enquiries
• Obtaining redemption figures from the existing lender
• Reviewing and arranging execution of the new security documents
• Dealing with personal guarantees and any independent legal advice requirements
• Repaying the existing borrowing on completion
• Dealing with the discharge of the existing security
• Registering the new security at Companies House where required
• Registering the new charge at HM Land Registry

Additional issues may arise where the property is leasehold, there are restrictions on the title, the company has other existing borrowing or the lender requires a wider security package.

Remortgaging an SPV is different from transferring a property into one

It is important to distinguish between refinancing a property already owned by an SPV and transferring a personally owned property into a limited company.

If the company is already the registered owner, the transaction may be a straightforward refinance from one lender to another.

Moving a property from personal ownership into an SPV is a different transaction. The company is acquiring the property from the existing individual owner, which can involve a full conveyancing process as well as mortgage, tax and other considerations.

Investors considering transferring an existing property into a company should therefore obtain appropriate legal and tax advice before proceeding.

What can delay an SPV remortgage?

Although refinancing may appear simpler than purchasing another property, delays can still occur.

Common issues can include:

• Title defects or restrictions
• Outstanding charges
• Leasehold information or consent requirements
• Issues with the company's records or existing security
• Lender-specific requirements
• Personal guarantee and independent legal advice requirements
• The solicitor not being able to act for the proposed lender

Where released equity is being used to fund another acquisition, delays can have a knock-on effect on the connected purchase. Starting the legal process early can therefore be particularly important where transactions are linked.

Planning an SPV refinance

Investors considering refinancing should speak to their lender or mortgage broker and solicitor at an early stage.

Providing details of the existing borrowing, proposed new lender, company structure and property can allow the legal team to identify potential issues before they affect the timetable.

For investors with several properties, refinancing may also form part of a wider strategy for funding future acquisitions or restructuring borrowing across the portfolio.

Legal advice on remortgaging property held through an SPV

Remortgaging property owned by an SPV involves both property and corporate lending considerations. Having solicitors familiar with real estate finance and limited company property structures can help ensure that the lender's requirements, security documents and registrations are dealt with correctly.

Our real estate finance team advises property investors and companies on financing and refinancing residential and commercial investment property, including property held through SPV limited companies.

If you are considering refinancing or remortgaging a property held through an SPV, contact our real estate finance solicitors to discuss the proposed transaction.