Checklist and Heads of Terms for the Establishment of A

Checklist and Heads of Terms for the Establishment of a

Self-Managed Property Syndicate

This document reflects the parties’ good faith intentions but is not intended to be legally binding.

Criteria for Properties to be Acquired

Location / area:
Type / condition of property:
Approximate purchase price per property: / (E.g. minimum and maximum)
Legal title: / (E.g. freehold / leasehold – specify minimum unexpired term)
Planning consent status: / (E.g. not required / applied for / obtained / improvement)
Extent of any building / development / refurbishment works required: / (E.g. refurbishment / demolition / new build / change of use)
Approximate build / development / refurbishment cost per property: / (E.g. minimum and maximum)
Target period to complete build / development works from acquisition:

Strategy / financial targets

Strategy overview: / (Include whether trading or investment)
Bank / third party funding: / (If applicable: describe likely status e.g. LTV / interest cover, whether personal guarantees will be required)
Projected rental yield: / (If applicable)
Expected period to hold each property:
Disposal strategy: / (e.g. target purchaser profile, marketing strategy or channels)
Targeted Internal Rate of Return (IRR):
Key assumptions for IRR:

Indicative investor commitment and board representation

Name / Total amount
to be committed / Profit sharing percentage / Director of SPV?
(if applicable)
[Investor 1] / £[ ] / [ ]% / Yes / No
[Investor 2] / £[ ] / [ ]% / Yes / No
[Investor 3] / £[ ] / [ ]% / Yes / No
[Investor 4] / £[ ] / [ ]% / Yes / No
[Investor 5] / £[ ] / [ ]% / Yes / No
[Investor 6] / £[ ] / [ ]% / Yes / No
[etc] / £[ ] / [ ]% / Yes / No
Totals / £[ ] / 100%

Preferred legal structure (if known)

Legal entity: / E.g.:

Limited liability partnership (LLP)
Trust
Private company limited by shares (issuing shares [and loan notes] to investors)

Single / multiple entities: / [Specify whether a single entity will hold multiple properties, or whether a separate entity (SPV) will be established for each project.]
Level of investor commitment prior to exchange of contracts to acquire each Property: / E.g.:

None
Informal / non-legally binding commitment [with funds deposited in solicitors’ client account]
Legally binding commitment [with funds deposited in solicitors’ client account]

Investor protections

Conditions precedent for drawdown of funds from investors: / E.g.:
Financial appraisal
Report on title
Surveyor’s report
Completion of acquisition of property
Investor security: / E.g.:
None
First / second charge over property
Charge over shares in SPV
Guarantee from developer
Other
Reporting / access to information: / E.g.:
Monthly / quarterly reports on income and expenditure
Right to obtain valuation of project (at investor’s / developer’s / SPV’s cost)
Pre-emption rights on issue of additional capital: / [Pro rata to amount invested]
Note: Subject to approval pursuant to paragraph 8 below.

Allocation of profits etc

Allocation of profits (and losses): / [Pro rata to amount invested]
Frequency of distributions: / E.g. quarterly, 6-monthly (if applicable)

Key roles / advisers (if known)

Role / function / Name (and basis for remuneration, if applicable)
Property sourcing:
Financial appraisal:
Surveyors:
Architects:
Contractors:
Project manager of works / reporting during project:
Obtaining / improving planning consents:
Sourcing of senior debt:
Letting of property / units (if applicable):
Sale of property / units:
Tax advisers:
Corporate lawyers:
Property lawyers:
Financial administration of SPV (accounts, tax returns etc):
Other administration of SPV (calling meetings, keeping minutes etc)
Other:

Decision-making bythe syndicate

Frequency of meetings: (e.g. quarterly / 6-monthly)

Logistics of meetings: (e.g. venue of meetings in person / telephone conferences / video conferences other)

Level of approvals required:

Unanimous consent / [75%] Consent by value of amount invested / [Majority] Consent by value of amount invested
Purchase of property: / Y
Adopting / amending business plan: / Y
Matters outside the scope of the business plan: / Y
Changes to constitutional documents of syndicate / SPV: / Y
Any borrowing by the SPV: / Y
Granting any charge over the property or the SPV’s assets: / Y
Re-investment of any income or capital received by the SPV: / Y
Extension of investment period: / Y
Admission of any new member of the syndicate: / Y
Expulsion of any member of the syndicate (e.g. for breach) / Y
Non-budgeted expenditure over £[ ]: / Y
Transactions / arrangements with connected parties: / Y
Raising of additional capital: / Y
Winding up of the syndicate / SPV: / Y
Sale of property before expiry of investment period: / Y
Sale of property after expiry of investment period: / Y
Litigation other than routine collection of rent or enforcement of tenancy agreements: / Y
[Other - specify]:
All other matters: / Y

Transfers of interests in the syndicate:

Voluntary transfers by members without going through pre-emption procedure: / [Permitted transferees include e.g.:

Spouse / children
Family trust
Etc]

Other voluntary transfers: / Pre-emption applies,i.e. offered to the other members pro-rata to the amounts invested by those other members
Compulsory transfers by members: / E.g. on:

Material / repeated breach
Bankruptcy
Incapacity
Etc

Next steps

Responsibility / Target deadline to complete
Identify / propose property for investment:
Prepare circulate detailed budget / financial appraisal:
Obtain agreement in principle from senior lender:
[Propose] [instruct] surveyor to report on property:
[Propose] [instruct] tax adviser for tax due diligence on property (e.g. VAT, capital allowances) and advice on syndicate structure:
[Propose] [instruct] corporate lawyer regarding preparation of syndicate documents and establishment of SPV:
[Propose] [instruct] property lawyer for title due diligence / planning advice:
Other:

This document reflects the parties’ good faith intentions but is not intended to be legally binding.

Signed:

Full name:______/ Full name:______
Signature:______/ Signature:______
Date:______/ Date:______

etc