What Does SPV Mean In Property Investment? ⋆ Property Finance

What Does SPV Mean In UK Property Investment?

The acronym ‘SPV’ is an abbreviation of the phrase “Special Purpose Vehicle”. In the world of property investment and property finance/mortgages, it is referring to a limited company set up specifically for property investment.

The limited company cannot carry out any other types of “trading” now or in the past. Its sole purpose must be to hold property investments. Even certain types of property business may be considered trading, such as serviced accommodation, estate/letting agents or property construction and development.

It is possible to take out a BTL Mortgage or Bridging Loan with a brand new SPV limited company. In fact some mortgage products specifically require the company to be an SPV.

How To Set Up A SPV For Property Investment?

It’s possible to set up a new limited company as a SPV yourself or by using a professional, such as an accountant.

It really is just as simple as heading over to Companies House and registering a new ltd company with the correct SIC (Standard Industrial Classification) code. It costs about £12.

If you don’t feel confident doing it yourself, then a professional such as an accountant will usually help (for a fee of course).

What SIC Codes Should I Use For A New SPV?

The SIC codes related to property investment are:

68100: Buying and Selling of own Real Estate

68209: Letting and Operating of own or leased Real Estate.

What Is An SPV Mortgage?

When buying a buy to let property with a mortgage, you may decide to do this within a limited company. Many buy to let mortgage lenders require the limited company to be an “SPV” which stands for Special Purpose Vehicle”. This simply means that the limited company is used purely for property investment and not for any other business trading activities, property related or not.

What is a SPV ltd company?

‘SPV’ is an abbreviation and it means a “Special Purpose Vehicle”. An SPV Ltd company is when you set up a limited company for one specific purpose, usually for the purpose of property investing. This means the company cannot now or in the past have any other trading activities within it. It is to be used purely for investing and usually requires the correct SIC code when setting it up. For Property investment this would be 68100: Buying and Selling of own Real Estate and/or 68209: Letting and Operating of own or leased Real Estate.

How Lenders Treat An SPV

Most limited company buy to let and commercial investment lending is now written to SPVs rather than to trading companies, and lenders assess them differently from a normal business borrower. A handful of points come up on almost every case.

The SIC code has to be right at the point of application. Lenders check it against Companies House, and a trading code on the record will fail their criteria even if the company has never actually traded.
A newly formed SPV is not a problem. Lenders underwrite the directors and shareholders behind it rather than the company’s trading history, so a company incorporated last week is perfectly fundable.
Personal guarantees are still required. Holding property inside a company does not remove personal liability for the borrowing.
Shareholders get credit checked. Anyone holding above a threshold, commonly 20% or 25%, is usually assessed and asked to give a guarantee.
Adding a trading activity later can breach the loan conditions. If the company starts doing something other than holding property, check the facility terms before it happens.

Whether an SPV is the right structure for you is a tax question for your accountant rather than a finance question for us. What we can tell you is which lenders will fund one and on what terms. See buy to let mortgages and commercial mortgages for current loan to value bands.

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