Selling to a limited company (not mine)

peterhjohnson

My buyer is:

* Cash buyer
* Cash seen by EA
* A builder
* A limited company

We haven't exchanged yet and I'm wondering if my solicitor should be doing anything different because this isn't a common sort of buyer? Should he be seeking a Personal Guarantee from the company directors? It's quite easy for a limited company to go bust compared to a private individual

SmashedAvacado

Making sure you get the full 10% Deposit on exchange - you don't need the personal guarantee as if they fail to complete you get the deposit.

davidmcn

It wouldn't be normal to be concerned about the covenant of your buyer. Anybody can pull out before exchange with no penalty, if they do so after exchange you've got their deposit anyway, would be quite rare for you to suffer losses beyond that.

Comms69

peterhjohnson wrote: »

My buyer is:

* Cash buyer
* Cash seen by EA
* A builder
* A limited company

We haven't exchanged yet and I'm wondering if my solicitor should be doing anything different because this isn't a common sort of buyer? Should he be seeking a Personal Guarantee from the company directors? It's quite easy for a limited company to go bust compared to a private individual

Where on earth did you hear that??!!

sal_III

Why would you need personal guarantee, when you have the deposit on exchange, plus potential claim for non-completion, which is all free money. It's not like you will have to give up your home, without receiving full payment first.

peterhjohnson

davidmcn wrote: »

It wouldn't be normal to be concerned about the covenant of your buyer. Anybody can pull out before exchange with no penalty, if they do so after exchange you've got their deposit anyway, would be quite rare for you to suffer losses beyond that.

If something goes wrong after exchange, my onward chain will likely collapse :-( The deposit will have been paid on to my buyer and so on along the chain? It would be a great "consolation prize" to be the one that walks away with this deposit money but am I likely to be that lucky?

SmashedAvacado

Something can always go wrong. the buyer is going to be very sure before exchanging because they wont want to lose their deposit.

davidmcn

peterhjohnson wrote: »

If something goes wrong after exchange, my onward chain will likely collapse :-( The deposit will have been paid on to my buyer and so on along the chain? It would be a great "consolation prize" to be the one that walks away with this deposit money but am I likely to be that lucky?

Ok, but like I said it wouldn't be normal to start checking how creditworthy an individual buyer was (beyond whatever the EA has done to see how proceedable they are), so I'm not sure of the logic behind your query. What advice has your solicitor offered on this point?

peterhjohnson

Comms69 wrote: »

Where on earth did you hear that??!!

From my accountant and an insolvency practitioner when I was a director a of a limited company myself. When a Ltd Co goes bust, the shareholders and Directors are not automatically liable for the debts. There is some legislation that can be used to make them liable - but looking at actual cases, you have to behave outrageously to be caught. This is precisely why Banks tend to demand Personal Guarantees from Directors wanting a company overdraft.

G_M

The most pointless thread on the forum?

I'm wondering if my solicitor should be doing anything different

No.

Mistral001

Comms69 wrote: »

Where on earth did you hear that??!!

The clue is in "Limited liability". Limited companies exist so that businesses can take risks with producing new products that might or might not be sucessful without putting their own money at risk.


However, the Ltd company system has been set up with safeguards, as a Ltd company have to make certain aspects of their financial health and addresses of directors etc. public. Sole traders do not have to do this.

I suggest the OP should do a check on this Ltd Company's financial state and check that the address of directors are not accommodation addresses if they want more comfort.