Happy New Year! With 'peace' returning to the middle east and both sides declaring victory we can get back to normal... This note is prompted by the recent experience of someone who, chose to ignore the many advantages of at least 2 other options and proceed with a company for the next purchase - like so many. One of the issues discussed concerned the lenders' insistence on a directors' 'personal guarantee' - after careful deliberation she remarked it could not be too serious as all her contacts had them... Around 1 in 3 business owners has signed a Personal Guarantee [PG] and for property investment companies the guarantee is equal to the sum borrowed. The PG effectively converts corporate borrowing into personal liability; it collapses the boundary between the company and the individual. It links the private balance sheet directly to business debt. Corporate risk is no longer a part of the corporate structure - it sits with the individual. One of the often rolled out attractions of the company is 'limited liability' - given the property business' main debt is mortgage or a portfolio of mortgages, what price for limited liability now? What happens if/when the landlord dies? The obligation - the guarantee survives. Consider the immediate aftermath of a bereavement - family/executors working harmoniously together - while lenders consider their options. The PG can and would likely have a significant impact on the administration of the estate - influencing how quickly assets can be distributed and the degree of any real certainty beneficiaries actually have. How many landlords have raised this matter with their executors? There is a good deal more on this - we have, not surprisingly a more detailed technical briefing available to all - but the point is this; the continuing major argument in favour of using a company to invest in property - dealing with S24. The 'lower tax' story. For investors with borrowings, it might be prudent to raise the PG issue with whoever is providing estate planning advice. For investors deliberating over their options - it is equally prudent to learn how to avoid PGs and why the process of 'incorporation' is now so very different and high risk.

Posted by Chris Haley at 2026-04-09 15:20:45 UTC