Overview

Forward funding transactions are a way to create new investment opportunities and are a tax-efficient method of structuring development transactions.

Typically, the transaction will involve the sale to you of a bare site on day one, with a pre-let agreement in place with an occupational tenant which is conditional on the construction of a building. The seller will enter into a separate development/funding agreement with you, in which the seller agrees to construct the building and in which you agree to provide finance to the seller for that construction (with an ability to charge interest). Structuring the transaction in this way means that the SDLT at day one is charged only on the value of the bare site, rather than on the value of the land plus the building which is to be constructed. Once the construction has completed, you agree to pay to the seller a final balancing payment based on the developed value of the property, but deducting the advances you have already made to the seller during construction under the development/funding agreement.

In this briefing, Trowers & Hamlins presents ten key pieces of advice relating to forward funding of a site with one occupational tenant of the whole of the building, which can also be applied to mixed use scenarios.

To read more, click 'View Briefing'.