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  • Entrepreneurs

    Shared Ownership & LTD Company

    Afternoon all, not sure if I’ve posted in the right thread - mods please feel free to move.

    I gave a client who lives in a shared ownership property which precludes him from owning any other properties (standard for shared ownership schemes). He wants to start developing other properties. Presumably if he purchased them via a limited company the company would of course own them and there is no issue. Is that correct?

    Thanks in advance for your thoughts.

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    Ahem!  Shared ownership is a scheme to assist people who would otherwise struggle onto the property ladder and that is why there is a rule that only one property can be owned.

    If your client can afford to develop properties, then perhaps he should not be part of the scheme which is for people who earn £80K or less or he should pay down more of his SO property as he benefitted from a 5% deposit, which is one of the features of the scheme to assist people onto the property ladder.

    The scheme says you cannot own a BTL investment, so to my mind, that includes purchasing one in a company structure.  There is the additional issue that Government money is used in shared ownership schemes, which is another reason why people cannot profit or take advantage of them to build their own wealth, other than by purchasing one property through the scheme.

    If your client wants to buy additional properties legitimately, he would have to close out his SO agreement first.

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    Your client should consult a solicitor with the shared ownership agreement in hand. Remembering that a LTD Co' in law is a separate legal entity.

    These contracts should never preclude someone from setting up a company and earning a living, in my personal opinion. Though im sure such contracts do exist and your friend would be foolish to break the conditions. A contact design to keep someone down, who once needed assistance is deplorable to me.

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    _________________________________________________________________________


    My posts are not financial advice but often me rambling - passing time on a coffee break.
    Our team at Bespoke Finance offers Limited Company Buy-to-Let and Cheap Life Insurance.

    _________________________________________________________________________

    That's an interesting way to look at it Adam.  I think the rules are in place to make sure the people who access the scheme are the ones who need it most. 

    ​If you have an entrepreneurial flair and additional funds, and you went into the scheme knowing the rules and that you were benefitting from a much lower deposit, then you shouldn't be looking to break the rules. 

    Likewise, if you were once "down" but no longer need assistance are now able to move, then simply close out the SO.  That clears the way for someone else who might be in need to benefit from the scheme.

    A lesson here is don't go into a shared ownership scheme if you want to develop a BTL business.

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    The scheme has entry requirements, to ensure the people who access the scheme are the ones that need it. Though the rules should not prevent those who benefit from it, to reach above those entry requirements.

    Where you say - simply exit the scheme. They are no longer as you say "entrepreneurial" they are someone who is refinancing. Should that choice is taken away? I say not.

    It is great those that wish to do that, releasing funds back into the shared ownership scheme for those that need it. Though there is a loss of opportunity. A loss of not only putting oneself in a better financial position by starting a company, employing people, contributing to the economy and paying tax's.

    It's a fun debate though right.

    Take two people on shared ownership scheme, one prudent at saving making tough choices and putting in hard work. Is theoretically penalised. If we compare against the other enjoying extravagant holidays or putting menial effort into work. What's the solution? The state sets a budget to make it equal? or what you suggest prevented from investing in private business and instead required to exit the scheme.

    Take another comparable subject. At what income, should someone be evicted from a council home to make way for another. If such as person gets a pay rise and about to reach that threshold, isn't there an incentive to do less hours, to ensure you don't reach that income. Isn't this the definition of lost productivity.

    Whilst we may disagree, I see the moral argument you make. Mine comes from Conservative leaning of opportunity. I don't think their is a clear answer, it's more political choice.

    "A lesson here is don't go into a shared ownership scheme if you want to develop a BTL business."

    Well perhaps, if those the conditions of the scheme prohibit your plans for the future dont sign up for them. The idea that opportunities are available for people who don't inspire to be entrepreneurial compared to those that do, certainly grinds my gears.

    My personal opinion is entry requirements are fine but once accepted onto the scheme. Someone on it should have the free choices and free market opportunities as the next man.

    (P.S. Im talking ideals, check your contract if you are allowed or not allowed to do something. What my politics may think is right, may not be what the contract sees as permissible. )

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    _________________________________________________________________________


    My posts are not financial advice but often me rambling - passing time on a coffee break.
    Our team at Bespoke Finance offers Limited Company Buy-to-Let and Cheap Life Insurance.

    _________________________________________________________________________