Lending to Ownership Structures That Own International Residential Real Estate

  • Switzerland:,Zurich,Financial,District,,Building,With,Big,Glass,Windors.,Bank

    Switzerland:,Zurich,Financial,District,,Building,With,Big,Glass,Windors.,Bank

International real estate is often owned within some form of legal or corporate structure. This can be a daunting or confusing area, but only if you lack an understanding of the basic building blocks. Once you master them, everything becomes clearer.

Here is a simple explanation:

  1. The vast majority of people own a property in their own name. This means that the title to the property and the deeds are held directly by them, and any borrowing will also be in their name.
  2. Sometimes, for various reasons, it’s better for the property to be owned via a structure. These reasons may be legal, tax-related, debt-related, or privacy-related.
  3. A structure, in simple terms, introduces a separate legal entity which sits between you, the ultimate beneficial owner (UBO), and the property. The legal ownership of the property lies with the legal entity. This entity would then be the borrower. For example:
  4.  You own the shares in a company, the company owns the property, and the mortgage on the property is taken out by the company. b. You are the settlor of a trust, the trust owns the property and is the borrower.
  5. You can stack these entities in many ways – a trust owns a company which owns a company which owns the property, or vice versa. You are the UBO, and all these entities own the property on your behalf. This can get complicated, but if you remember that these are just building blocks, it becomes easier to follow.
  6. There will always be individuals, trustees, or corporate service providers managing or running the company, trust, or structure. They are the directors of the company and act according to the rules under which the structure was set up. They fill the roles that you would if you owned the property in your own name.
  7. With this structure in place, lenders sometimes require someone to guarantee the loan. That is, if the loan is not repaid or the terms are not adhered to, and the company or trust doesn’t have the assets or income to do so, the lender will look to the guarantor to repay the loan or interest. The personal guarantee often comes from either the UBO or sometimes the trustees or other parties.

Once you delve into this, you will encounter a multitude of names for these building blocks, especially when dealing with international ownership structures. They can be limited companies, unlimited companies, SARS, SaSs, LLCs, foundations, PLCs, LLPs, and so on.

To introduce lending into the structure, you need to understand:

  1. What the structure is – what the blocks are and how they fit together.
  2. Which entity legally owns the property?
  3. Why this structure was put in place – what are the reasons and rationale?
  4. What assets are in the structure?
  5. Who are the directors – who runs the structure (this will usually be individuals employed by some kind of corporate service provider)?
  6. Who is the UBO – what are their assets, income, liabilities, and profile? How do they make their money, and so forth.

Still confused? Well, thanks for reading this far.

To simplify matters for you, Tenn is an expert in this type of lending. We can introduce finance into any structure that owns international residential real estate. Our team has all the necessary experience to work this out and collaborate with you to find a lending solution. We are comfortable with structures domiciled anywhere – UK, Channel Islands, Luxembourg, Monaco, BVI, Cayman Islands, Dubai, and further afield.

If you manage a structure which owns real estate and you are looking for finance, whether to purchase, refinance or release equity OR if you are representing a client who owns a property in a structuring like this and you would like us to help you work out how to approach it: Drop us a line