ASK532: Why are there so many solicitors involved when purchasing a buy-to-let? PLUS: Should I be planning for future tax changes?

0:02Rob B:Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Hey everyone, welcome to Ask Rob and Rob, the show where you give us your wonderful property questions, normally property anyway, and we do our very best to give you a great answer in return. We'll try that format once again this week. But before we do, let's give you a quick reminder of how you can get your question on the show.

0:23Rob D:Yep, it is so easy. You just have to go to propertyhub.net slash ask. And once you're there, you can leave us a voicemail, which is amazing because we get to hear other people's voices on the show and we get to hear questions that take us into areas that we would never otherwise cover. So we love it. And helping us to do that today is Colleen.

0:41Rob B:Hello, Rob and Rob. My name's Colleen. I've been listening for about 12 months now and at the stage of making a purchase of two buy to let properties under a limited company. I'm just thought I'd done all my research and I thought I was prepared, but just hit some unexpected hurdles. And I just wondered if this is something you've kind of heard of before. I've managed to get a mortgage with a company that, because I'm not using their solicitors, has said that I need to pay the fees for their solicitors, which I've accepted because time pressure and that's where I was in the process. But today I've also found out that they've written to my solicitors and said that I will also need to get independent legal advice from another set of solicitors.

1:32Rob B:I'm just really confused. So I just wondered, I don't know, what have I done wrong?

1:37Rob D:Kaleen, thank you for your question. And I completely understand your frustration here. It's like, hang on, I've got a solicitor, they've got a solicitor who I've got to pay for, and now I've got to get another solicitor for my solicitor? What is going on? I can see why it seems like you've done something wrong but you haven't necessarily a lot of this is just how it works there's a possibility that one of these sets of solicitors could have been avoided but let me explain so when you're taking out a mortgage you are entering into a legal contract between you and the mortgage lender so as is normal when you've got a legal agreement like that each side will have their own solicitors but because from the lender's side it's pretty templated this is something that happens all the time they will normally allow the same set of solicitors to act for both sides so they will have a panel of solicitors who they are happy to have representing their side of the deal so if you then choose one of those firms to represent your side then great they can do both you still end up paying for both but the amount is lower because they're doing effectively one set of work for both parties what can end up happening though is you end up using solicitors who are not on the lender's panel, which means that then they need to instruct a separate set of solicitors who you do end up paying for.

2:52Rob D:This can sometimes happen if you end up using, for example, a very niche lender who has a small panel who they work with, or if you're in the middle of a transaction and then you end up changing to a different lender and suddenly they're not happy with the solicitors you've already got. It can happen. Could it have been avoided? I don't know enough about the particular case, but generally your mortgage broker should be helping you with this and making sure that you are using a solicitor who the lender will be happy to have act for them as well. Now the other set of legals that's come into the mix here is the independent legal advice.

3:25Rob D:This is a part that you can't avoid if you're buying through a limited company because technically you and the company are different people and the company is taking out the loan but you as an individual will be guaranteeing the loan. So to make sure that you and your company are getting independent advice you need to have another set of solicitors who comes in and basically reads a whole load of stuff to you to make sure that you understand what it is that you're agreeing to. Is it annoying? Yes. Is it a lot of fun? No but it's just something that you have to do for the privilege of investing through a company.

3:54Rob D:So have you done anything wrong? Probably not. It is just the nature of property transactions that there are a lot of parties involved. They all want to charge you. It's very annoying and it takes a long time but I completely understand why as a newcomer coming into all this and going like what why is going on here you don't know what's normal and what's not so i really appreciate you answering the question because that's allowed us to hopefully not just give you some context and set your mind at rest a little bit it would have done the same for a lot of other people as well so thanks clean for your question okay thank you clean and let's

4:26Rob B:listen to our next question which comes in courtesy of nick hi rob and rob many thanks for the podcast and all the free information you share in your newsletter and website i noticed that you've started to address many of the concerns for current and potential landlords, but I greatly appreciate you answering one more question. I've noticed a change in the discourse of national politics and also in the output of many policy think tanks. I'm concerned that new taxes or other charges may be introduced on capital investments. Landlords could face extra costs for holding property in what HMRC classifies as passive investments.

5:02Rob B:I'm aware that some countries do have such costs and the UK has also taxed capital investments differently in the past. What changes do you think are possible and how does that change our calculations for the future? Many thanks once again, Nick. Thanks, Nick. Appreciate your question. It's an interesting one, right? Where do you go with your planning? You know where I go? Not very far. With this type of planning anyway, because what you are doing is disaster planning. If this happens or if that happens where does it end at what point do you draw the line and say okay that's enough now gone far enough with this speculation and with this planning if we had listed off all the things that have been talked about over the years on this podcast and not delivered when it comes to around policy change or anything to do with vital air it would be the longest podcast we've ever done lots gets talked about as we've learned with governments over the years not always action is delivered off the back of it and lots of different people within government have lots of different opinions which may be one of the reasons why things don't get done.

6:06Rob B:So I personally don't do this type of planning nor do I plan the upside. You might have a different framing on the world and plan for upside and go okay well the property market will boom in five years and I'm going to take my money out then. I don't do that either so I don't do it on the negative side but I also know do it on the positive side. What I think you should do though if you're listening to this and thinking well how can I play on the defensive is if you don't already look at investing with a limited company. Now of course take all the tax advice around that and Rob's just talked about limited companies and there are nuances you need to understand that makes a difference from traditional buy-to-let.

6:49Rob B:But the reason I suggest that is because that's in a company structure and the most likely changes will be to properties held in your own name, so when it's owned by an individual, because most of the government's tax policies have been targeted at individuals rather than companies. And if you think about build-to-rent, the billions that is invested in there does the government want to attack that market does it want to attack companies that invest in property I would suggest no certainly much less likely so a defensive play is actually to invest like the big boys there are tax advantages currently for doing it that way as well compared to investing in your own name again not necessarily true for everyone but once you've got that tax advice you may feel that's the best course of action you may be doing it that way already and you don't realize that you've put that defense play in place already and if you have amazing just a bit of good news for you nick but also as rob said for everyone else listening to the podcast you may be thinking i invest for a limited company for the benefits that brings from a taxation point of view but you're also investing like the big boys where the institutional money adds up to billions of pounds.

8:07Rob B:And that is something that the government would be nuts to disrupt because that's what's getting homes built at the moment, that money, the clever money, the investment money. And if that was to dry up, there wouldn't be much built at all. So invest like the professionals because you'll probably be protected as they are protected because the huge sums of money involved. Of course, I can't promise you that, Nick. This is just my belief, but you have it now. And what you do with that information is up to you. But what I wouldn't do is plan out for all the negative things that could happen. Because one, you're not going to get much sleep.

8:42Rob B:And two, most of the bit won't happen.

8:44Rob D:Indeed. So thank you, Nick. Thank you, Colleen, for a pair of great questions that's allowed us to put out another helpful episode of Ask Rob and Rob. We'll be back to do it again next week. But before then, we'll see you back here for the Property Podcast on Thursday. Until then, have a great week. Bye-bye. Bye-bye.

9:01Rob B:Hi, it's Tracey here from Property Hub. We know there's a lot going on right now. Interest rates, regulation changes, negative sentiment. It's a lot to process. So we want to know, how are you feeling about it all? Are you buying? Are you selling? Are you hiding behind the sofa waiting for it all to pass? We've put together a short survey to find out. It takes two minutes and it'll genuinely shape what we cover on future episodes. You can find the link at propertyhub.net forward slash survey to have your say.