Specialist buy-to-let mortgages:

Special purpose vehicles (SPV)

A Special Purpose Vehicle (SPV) is a limited company established for a specific purpose. In buy-to-let, that purpose is normally to purchase, own and let property.

An SPV is not a separate legal form of company or a particular type of mortgage. It is an ordinary limited company whose activities are restricted to property investment. Most limited company buy-to-let lenders prefer this straightforward structure because it is easier to understand and underwrite.

Why lenders prefer SPVs

An SPV separates the property portfolio from unrelated commercial activity. Its assets, income and liabilities should relate principally to its property business.

This gives the lender a clearer picture of the properties owned, existing mortgages, rental income, expenditure and other claims over company assets.

A trading company may also have employees, suppliers, commercial borrowing and other business risks. Some lenders accept trading companies, but the mortgage choice is usually narrower.

SIC codes

An SPV must be registered at Companies House using Standard Industrial Classification (SIC) codes describing its activities. The three codes most commonly accepted by buy-to-let lenders are:

  • 68100 – Buying and selling of own real estate

  • 68209 – Other letting and operating of own or leased real estate

  • 68320 – Management of real estate on a fee or contract basis

Some lenders accept additional property-related codes, but their permitted lists differ. The codes should therefore be checked against the proposed lender’s criteria before an application is submitted.

New and established SPVs

Many lenders accept companies incorporated specifically for an upcoming property purchase, even where they have no accounts, income or trading history.

The lender instead assesses the directors and shareholders behind the company. This commonly involves personal credit searches, evidence of income and assets, details of existing properties and confirmation of the deposit’s source.

Established SPVs can also be accepted, although their accounts, portfolio, borrowing and Companies House filing history may require further examination.

Personal guarantees

Most SPV lenders require personal guarantees from the directors and from shareholders with a significant ownership interest or level of control.

The threshold varies. Some lenders require shareholders owning more than 20% to join the application and provide a guarantee, while others use 25% or require every shareholder to participate. Small minority shareholders may sometimes be excluded from the application, personal assessment and guarantee.

A personal guarantee gives the lender recourse to the guarantor if the company defaults and selling the property does not repay the mortgage. The SPV is the legal borrower and property owner, but it does not necessarily remove personal responsibility for the debt.

Ownership structure

Lenders differ over the number of directors and shareholders permitted, minimum shareholdings and who must join the application. The entire ownership structure, including any person with significant control, should be disclosed from the outset.

Adding or removing directors or shareholders later may require lender consent, and a change in control can affect the mortgage.

An SPV can provide a clean, flexible and widely accepted structure for building a rental portfolio. Borrowers should discuss the proposed ownership with their mortgage broker and obtain appropriate tax and accountancy advice before establishing the company.

See Limited company buy-to-let mortgages for more information about company ownership, deposits, affordability and transferring existing properties.