Yesterday, I completed a property transaction for a client who sold her home. She now wishes to instruct us to invest in a student property. That got me thinking on what other buy-to-let properties people can invest in. Having grown up in Scotland, a castle springs to my mind. Castles were built from the 12th century until the 16th century. During the wars between Scotland and England during the 13th to 14th century, many castles were deliberately destroyed and damaged. Since the 20th century, restoration work has been carried out for a few castles and some have been turned into hotels. We are therefore presented with a buy-to-let opportunity and it therefore becomes a type of investment in our commercial world. Some hotels have been converted into a self-catering hotel, i.e. you cook your own meals there. Typically, these self-catering castles charge £2,000 to £5,000 for 7 nights with about 10 people capacity.
As a lawyer, I cannot advise on what type of investments people should invest in nor am I advising that castles are good investments. There are qualified financial advisors to advise on specific investments. But I can advise on the legal procedure and the returns that developers offer.
For prices starting at about £30,000, developers can offer a share in the hotel’s title ownership. An example of the returns on offer are:
- 7% guaranteed for 2 years.
- After 2 years, 50% profit share.
- The developers will buy back your hotel share at a certain price.
One point I note where castles differ from student accommodation is the possibility to stay in the castle! A lot of student accommodations only permit students to live in there but with castle investments, you can stay in the castle for your own personal use if you want.
With a lot of these property investments, the construction is not yet actually complete. There is therefore the risk of the construction not being completed and therefore the developer cannot satisfy their contractual terms. To reduce the risk, solicitors can conduct some of the following tasks:
- Does the developer actually hold the legal title to the castle? Title deeds need to be checked.
- Conduct due diligence on the developer and raise enquiries with them. For example, how long their company has traded, how many projects they have completed, how many remain unfinished, whether they are being sued.
- Check whether the developer has any outstanding court judgments against them.
- Whether insurance can be purchased for the buyer’s deposit and completion monies.
- Whether the builder is registered with the National House Building Council. If they are, the property will come with a 10 year insurance and construction warranty.
- What terms are on offer if the developer does not finish practical completion on time? This term is to be added into the contract.
- Who will manage the hotel and ensure there is adequate staff and services? This term is to be added into the contract.
As with any investment, the offer can look attractive but there are both commercial and legal risks. The legal risks of buying a share in a castle can be reduced a bit using the above procedures.