My PropCo OpCo strategy

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My PropCo OpCo strategy

Several Property118 readers have requested details of how I manage my properties, and now, most importantly, how I protect my properties from liabilities and potential fines of up to £40,000.

My Property Company (PropCo) owns some 70 properties, purchased over the last 30 years, the shares for which shares are all owned by family members. Apart from receiving rent once a month and a few outgoing transactions such as accountants fees and paying HMRC, this company does very little.

I also have an operations and management company (OpCo) which is entirely responsible for the business of lettings, management and maintenance. It is much more than a letting agent or a managing agent.

OpCo rents all the properties from PropCo, and many more from other owners, a total approaching 100. OpCo is the landlord, because it has a monthly rolling headlease contract with permission to sublet. PropertyCo is merely a passive property ownership company.

Contracts, deposit protection, court proceedings, maintenance, adhering to the law of the land (including the RRA), possession and most importanty any fines, court judgements and civil penalties are all the responsibility of OpCo.

OpCo does not own any property, so in the event of a large fine or court judgement against the company, the maximim level of exposure is the money in the bank account. It cannot lose the property, for it does not own property.

Corporation tax is levied on both PropCo and OpCo. This is not a way to reduce tax, it is a means of separating risk associated with the business of letting, maintenance and management, away from ownership.

EDITORS NOTE

This structure can work well where the PropCo and the OpCo are both limited companies. It does not usually work when the ownership of the property is not a corporate entity, because that is generally regarded as a tax-play under the Transfer of Income Streams legislation.

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