Buying Property SPVs

Many structures for funding property developments use a Special Purpose Vehicle, or SPV. To put it very simply, a property SPV is a company which owns one or more properties. This means that ownership of the property can be passed by transferring the shares in the SPV, rather than transferring the property directly.

Buying property through an SPV can be attractive for many reasons. It can be tax-efficient, particularly for Stamp Duty Land Tax. It makes it easy to transfer assets such as any leases that are attached to the property. And it is often used when buying a portfolio of properties.

However, there are – as always – particular options, legal features and risks that you need to be aware of before deciding to buy shares in an SPV. LCN Property can guide you through those in detail. Here are just a few of the questions that our clients typically ask us – and that anyone who is considering a purchase, or advising on one, should be thinking about.


How should a property SPV purchase be structured?

There are different ways to do this, but typically the purchaser pays the seller the purchase price for the property SPV’s shares (i.e. the net asset value of the SPV). The purchaser also repays existing shareholder debt, on behalf of the SPV, to the previous lender, which may be the seller or another party. At this point the previous lender’s security over the property is released, and a new security is created in the purchaser’s name.

The diagram below should help to make this clear.

Structure Of A Typical Property SPV Purchase

Structure Of A Typical Property SPV Purchase


How is holding property through an SPV different from buying it directly?

People using a property SPV often want the commercial position to be essentially the same as it would be if they were buying the property directly, and this is usually possible. However, there are some important differences in the underlying legal position, which create a very different risk profile for SPV purchases. The two main ones are:

  • With a direct property purchase, the purchaser can rely directly on property searches and the process of land registration in order to obtain good title to the property. With a property SPV purchase, however, searches give only indirect protection.
  • When you buy shares in a property SPV, you also take on its liabilities. In order to assess those liabilities, the purchaser must rely on information provided by the seller. This includes information made available in the due diligence process, backed up by warranties and indemnities. Those warranties and indemnities will be of no value if the seller is unable to meet possible claims.

These are the most important differences between a property SPV and a direct purchase, but there are many others.


How should we calculate the purchase price of the SPV?

People often assume that the purchase price of the SPV is the same as the commercially agreed value of the underlying property. This is not the case. The actual purchase price for the SPV’s shares is usually the net asset value of the SPV. The negotiated value of the property is a factor in this, but it also reflects any cash or debt the SPV has, and the SPV’s income and outgoings (for example if the property it owns is rented by tenants).

In general, it is advisable for the share purchase agreement to provide for a completion balance sheet to be prepared.

Find Out More

This was just a very brief summary of the key issues to consider when purchasing a property SPV. You can download a more detailed guide for free or contact us any time at info@lcnproperty.com or +44 20 3432 3269.

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