Buying an HMO portfolio: share purchase of a property company alongside a conventional property purchase

At a glance

Our client, a property investor building an HMO portfolio, bought two licensed HMOs in Leicester from the same sellers. One was held inside a limited company, which the client bought by share purchase; the other was owned directly and was bought by ordinary conveyance. The sellers lent the buyer part of the price, which was used as the deposit on the company purchase, and the balance was funded by a mortgage lender. We acted on the share purchase and coordinated with a property solicitor on the conveyance and the property due diligence.

The client and the objective

The client wanted to add two income-producing HMOs to the portfolio in one transaction, using as little of its own cash as possible. Buying the company that owned one of the properties, rather than the property itself, was attractive for tax and transaction-cost reasons, and the sellers were willing to help with the funding.

The deal

• Share purchase of the company holding the first HMO on a cash-free, debt-free basis.
• Separate purchase of the second HMO as a property transaction, exchanged and completed alongside the share purchase.
• A loan from the sellers to the buyer, used as the deposit on the company purchase and documented with its own loan agreement.
• The remainder of the price funded by a mortgage lender, with security over the properties.

Key legal issues and how we solved them

A share purchase handled by property solicitors on the other side

The sellers instructed a property firm for both transactions. Conveyancers are expert at property but a share purchase agreement is a different document with different mechanics, and the unfamiliarity showed: points that are standard in a company sale were queried, redrafted and queried again, and the share purchase agreement went through more than twenty versions before it was agreed. Our approach was to keep explaining the reasons for each provision, concede nothing that protected the buyer, and keep the conveyance moving in parallel so that the delays on one did not stall the other.

Seller-funded deposit

The sellers' loan was the deposit for the company purchase, so the loan agreement, the share purchase agreement and the mortgage had to fit together. The lender needed to be comfortable that the seller loan ranked behind its own security, and the repayment terms had to work with the rental income of the properties.

HMO licensing

Both properties were licensed HMOs. A licence is personal to the licence holder, so on the directly purchased property the buyer needed its own licence, and on the company purchase we confirmed that the licence was held by the company and would continue after the change of ownership, with warranties on compliance with licence conditions.

Property due diligence inside a company purchase

Buying a company that owns a property means doing both corporate and property due diligence. The property solicitor investigated title, planning and the HMO licence while we dealt with the company's records, tax and the share purchase agreement, and the results of both fed into one set of warranties and indemnities.

Outcome

Both purchases completed in the summer of 2026 on the same day, with the mortgage in place and the seller loan documented. The client now holds both HMOs, one directly and one through the acquired company.

What this deal shows

• Buying a property company is not a conveyancing job; the other side needs a solicitor who understands share purchases or the deal will drag.
• Sellers can fund part of a purchase, but the loan has to sit correctly alongside the mortgage.
• HMO licences are personal and need to be dealt with expressly, whichever way the property is bought.