Objective
Our introducers’ client, an experienced developer, was looking to source funds for a project that involved demolishing a bungalow property and building three new homes in its place.
Obstacle
The owner of the bungalow/land and the developer had agreed that one of the new properties would be owned by the bungalow owner and the profits made from selling the other two properties would be shared. This meant that the developer wasn’t providing a deposit, or any cashflow towards funding the project, since the site was already owned and would not be transferred into ownership of the developer.
The agreement was that one of the new properties would be owned by the bungalow owner and profits from selling the other two new properties would be shared between them and the developer. The developer wouldn’t provide a deposit or any cashflow towards funding the project, since the site was already owned and would not be transferred into ownership of the developer.
The case presented to us originally would’ve been classed as a regulated transaction and offered little legal protection to either party. In addition, the maximum term as a regulated transaction would have been 12 months and not long enough to complete the project.
Outcome
The team at Brightstar signposted to legal advice which resulted in the bungalow/landowner becoming a shareholder of the developer’s company and the company taking a legal charge over the bungalow and land. This structure meant the transaction was deemed as non-regulated, providing protection to both parties, and covered the transfer of one of the three completed properties back into the original owner’s name as was agreed.
The funds were secured to fully fund the entire build for all three properties as a stage released drawdown development facility.
