I have the pleasure of announcing that recently Cromwood Housing Ltd was registered with the FCA for the purpose of consumer buy-to-let activities. In this blog I will try and provide a summary, without all the legal jargon, and set our structure for reference purposes so that it may be of help to others. Please do not use or take this summary as legal advice or opinion. As part of our due diligence, when setting this up, we sought legal opinion from a counsel whose expertise was in financial structures.
Consumer Buy-to-Let (CBTL)
As the above name suggests, consumer buy-to-let is different to the recognised and regulated buy-to-let market in terms of mortgages and lending. The FCA realised there were people, who were not professional landlords or companies that were becoming ‘accidental landlords’ through the bringing back into use of their empty properties (that subsequently gets let in the private market or via some council arrangement). The FCA introduced this new regulation to protect these homeowners.
Since 21 March 2016, the following types of firm involved in activities relating to CBTL mortgages must register with the FCA:
- Lenders (including firms engaging in pre-contractual activities);
Its application is related to mortgage activities on the assumption that owners of the empty properties are borrowing money, through or from an organisation (described above), to fund the refurbishment or development of the empty property.
Our example – Cromwood Housing Ltd:
Homeowner introduced to our services through council officers, ordinarily have the following need:
- Property stuck in probate, typically in deceased parent(s) name and estate has not gone through administration due to lack of funds or understanding or both;
- Refurbishment costs are beyond council’s allocated grant and high street banks will not lend due to credit risk;
- Afraid to take project on as they lack the know-how and are afraid to be victims of cowboy builders etc.
- Just don’t have time to manage, whilst council pressure builds up through increased council tax or threat of CPO.
The above is a typical case scenario.
We help by packaging a group of services that:
- Cover the cost of estate administration as part of overall loan borrowing through solicitors that work with us;
- Lend the required amount of money needed in conjunction with the council grant;
- Appoint contractors from our panel, overseen by project manager to completion;
- Give finished property to council for social housing
The Loan borrowed for this service gets repaid by the rental income generated from the tenancy with the council. The length of the term is determined by the loan amount, the rent level and whether or not the owner is seeking to keep some rent as his own income or dedicating 100% of the rent to repay the loan.
In accordance with the new FCA registration for CBTL, we are registered to carry on activities as: