Property management company - financial setup
Property management company - financial setup
Author
Discussion

Sebastian Tombs

Original Poster:

2,133 posts

208 months

Monday 31st January 2022
quotequote all
There is a dormant company which exists to own a piece of land near my house.
The director of the company lent, by way of legal mortgage, the company money to buy the land, and has registered a charge against it.

In the company's accounts the fixed assets are the value of the land, the current assets are the £1 share capital, and the same value of the land is listed under creditors, leaving the capital and reserves at £1.


What are the advantages/disadvantages of this setup, rather than there being no mortgage, and the company not owing the director?


surveyor

18,400 posts

200 months

Tuesday 1st February 2022
quotequote all
I would imagine that the owner has development plans, and does not want to put their personal wealth at risk, hence behind a company.

They have presumably put the money in to buy the land, and likewise want to make sure that it does not walk off into the sunset, leaving them out of pocket personally.

It's all fine and dandy until they need to borrow to develop, in which case their first charge will likely be told to do one.

Sebastian Tombs

Original Poster:

2,133 posts

208 months

Tuesday 1st February 2022
quotequote all
The land in question cannot be developed on. It’s basically a driveway.

The reason I ask is that I own the adjoining land. I basically copied what he did when buying that as I didn’t really know anything about the subject

However I want to change the the land buying company I have into a regular management company, split between me and my neighbour. I looked up my other neighbour - a residents association/property management co, and it has never owed the directors anything.

That 2nd option seems simpler but there must be downsides. Do I keep the charge or clear it?