I went to see a building in a gentrified area of North London. An often heard story, the sellers are owner occupiers who have been based in the same location for the last 40 years; and now they wish to sell and move to the countryside and enjoy some of their hard earned cash. I haven’t done the numbers but I suspect the money they will get from selling the property will be far in excess of what they have made running their business; or perhaps the business has been running them for all these years.
Luckily for them the property is held not in their personal names but in the vehicle of their company. I say luckily as this gives them the option instead of selling their property they can sell the company shares which own the property. This allows them to benefit from Entrepreneurs Relief; this can amount to a substantial saving.
I got to the appointment an hour early, as my watch still hadn’t adjusted to going back; the agent wasn’t there unsurprisingly! This gave me the opportunity to get the seller to show me around the building and talk about the business. This is very important as it helps to understand the psyche of the seller. She let me know that many buyers could not get their head around why they had to purchase the company and not the property.
By purchasing the company one benefits from the rate of stamp duty which is only 0.5% as opposed to the commercial rate. There is a lot more involvement in regards to warranties and guarantees in regards to the transfer of company shares. There was the added problem here of a failed planning application which on the surface looks worrying but speaking to the owner and understanding the context it all made sense. The architect they had used was from out of town, and not the fastest tool in the box. By the time the application was submitted the planning criteria had changed and therefore the application failed. Speaking to the owners it was clear this wasn’t their game and they had abdicated the whole process; and it appeared he had dropped the ball.
We will be bidding for this property, or company rather. But perhaps not at the asking price, as we are on a downward slope, and today’s prices will not hold up in times to come. Therefore, we aim to go below the asking price. This will be a project focused on the income generated not the capital growth or value add; we will be counting the pennies generated every month.
We aim to secure the planning through permitted development and not through planning. This places the process in the framework of national criteria and not on local ‘opinions’.
It may well be that we are not the front runners, therefore we will not get the contract. However, it’s worth still hovering around the deal, until it’s at least exchanged; as there could be much delay involved, the market may change, offers may get pulled. A deal is not done until it is done.