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LCN Legal Guide: How to Set up and Run a Property Syndicate Or Investment Club

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LCN Legal Guide: How to Set up and Run a Property Syndicate Or Investment Club LCN Legal Guide: How to set up and Run a Property Syndicate or Investment Club A guide to legal and practical issues LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club Reviews of this Guide “Extremely informative and helpful. Every property investor should read it.” Sally Wang, Author of “Buy Smart: What You Need To Know When Investing in UK Properties” “An excellent brief on what can be a complicated subject.” Simon Latham Director, Brook Investment Partners Limited “Informative and easy to read, LCN Legal has produced arguably the most comprehensive guide there is today on self-managed syndicates and one that unquestionably will give an edge to any small group of investors wishing to participate in certain strategies, without sacrificing day to day management and control of their money.” Robert Bourn Serial entrepreneur " A very comprehensive and concise guide for all property professionals, highly recommended." Mohammad Jafari-Fini Forbes international properties “I found the new LCNLegal guide to self-managed property syndicates an extremely useful and informative document. It summarise concisely the options that are open for structures and the pro and cons of each route and I am sure will prove immensely useful to a broad range of property investors and professional advisors alike. Another excellent document prepared by Paul Sutton and his team.” David Norman Director, Davon Ltd © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, i W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club A typical syndicate structure The diagram below illustrates a typical syndicate structure, using a UK private limited company as the vehicle to hold the property. © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, ii W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club Contents Reviews of this Guide i A typical syndicate structure ii 1. Introduction: Who this guide is for 01 2. What is a syndicate 02 3. What you can expect from this guide… and why we wrote it 03 4. Important notice 04 5. LCN Legal: our story 05 6. Terminology 06 7. What are the advantages of syndicate structures? 08 8. When is a syndicate structure suitable? 09 9. Regulatory risks and issues 10 10. The four most common structures for UK property syndicates 11 11. The role of the property manager 13 12. Profit sharing within a syndicate 14 13. Practicalities of drawing down funds from investors 15 14. What to include in a business plan for a property syndicate 16 15. Decision-making within syndicates 17 16. Tax considerations 18 17. How to get your syndicate up and running 20 Testimonials for LCN Legal training events 21 10 facts about LCN Legal you may not know 22 © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, iii W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club 1. Introduction: Who this guide is for Welcome to LCN Legal’s guide to establishing and operating self-managed property syndicates or ‘investment clubs’. This guide is for anyone who wants to set up a self-managed syndicate, who may become involved in one or who just wants to understand how they work. It focuses on syndicates which have been established for the purposes of holding or investing in UK property and which are governed by the laws of England & Wales. However, many of the principles involved will also apply to syndicates in other jurisdictions. Different people have different reasons for choosing to become involved in a syndicate-type structure. • Spreading risk and accessing larger projects: Some people may want to invest alongside other like-minded people, and thereby spread risk, take advantage of larger investment opportunities and achieve economies of scale. They may not expect to have any business benefit from the arrangement, other than the ability to participate in the underlying property or project. • Access to capital: Some people, such as property developers, may want to help others to establish a syndicate, so that the syndicate can in turn, help fund that developer’s projects. • Property services: Property agents, asset managers and other professional advisers, may have no direct commercial interest in the underlying project. Instead, their primary motivation is to use their skills to encourage the success of syndicate such that they receive fees for their advice and associated services. In practice, these motivations may often be combined. Whatever the motivation, the aim is usually to provide a transparent and legally compliant structure, which is easy to operate and which does not expose the participants to unnecessary risk. © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, 1 W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club 2. What is a syndicate The word ‘syndicate’ is not defined under English law. The Oxford Dictionaries’ definition of ‘syndicate’ is as follows: “A group of individuals or organisations combined to promote a common interest.” In the context of investment structures, the word ‘syndicate’ suggests that the number of participants is the structure is small and that each participant is actively involved in the management of the venture. This contrasts with a fund or other types of “investment product.” Irrespective of the chosen legal structure, an essential feature of a syndicate is that decisions are made by the participants themselves, and not by someone else. In other words, syndicates are “self managed”. © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, 2 W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club 3. What you can expect from this guide… and why we wrote it In our view, property investment syndicates should be simple, transparent and intuitive and these elements should be reflected both in the documentation and in the way that syndicates are operated. But it’s easy to make things complicated. It’s also easy to get things wrong. Setting a syndicate up incorrectly can mean, at best, wasted time and perhaps the loss of an investment opportunity which you have spent a long time sourcing. At worst, it can expose you to criminal and regulatory prosecution, and require that the syndicate structure be unwound or corrected. The purpose of this guide is to give practical, useful information about how to correctly set up and operate a self-managed syndicate. It is not exhaustive by any means, and individualised expert advice should be sought each time a syndicate is created, but it hopefully serves to familiarize the reader with the general “Do’s and Don’ts”. If you would like legal help with your specific project, please call +44 20 3286 8868 or email [email protected] to arrange an initial consultation with one of our specialists. © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, 3 W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club 4. Important notice This guide is provided on an “as is” basis. Readers should take their own professional advice, and this document should not be relied upon as a substitute for advice. No responsibility is accepted by LCN Legal Limited or any other contributors, or any of their respective directors, partners, employees, agents or representatives for any cost, loss or liability, however caused, incurred by any person by reliance on it. © LCN Legal Limited 2019. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number 8496679. The practice address and registered office address is at 43 Berkeley Square, Mayfair, London, 4 W1J 5AP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. LCN Legal Guide: How to Set Up and Run a Property Syndicate or Investment Club 5. LCN Legal: our story LCN Legal is a niche law firm, established in 2013 and regulated by the Solicitors Regulation Authority in England & Wales. In addition to its focus on funds and property investment structures, LCN Legal also advises large corporates, SMEs and overseas investors on corporate and commercial matters.
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