Does SPV borrowing require personal guarantees?

Most lenders require directors or shareholders to provide personal guarantees when borrowing through a property SPV. While an SPV can offer tax and structuring advantages for landlords and investors, the company itself is usually a newly formed entity with limited trading history and few assets beyond the property being acquired.

That distinction matters. The SPV is a separate legal entity registered at Companies House, usually a limited company. The company owns the property and takes on the borrowing, while the investors own shares in the company itself. Because the SPV is often effectively ringfenced from the investors personally, lenders commonly require additional protection before releasing funds.

In practice, that usually means personal guarantees.

For investors, guarantees can create significant exposure if the company defaults on the borrowing. Understanding how guarantees operate, what liability they create, and how lenders structure SPV finance is important before documents are signed.

Investors should also understand the wider legal issues that arise when borrowing through a property SPV, including shareholder arrangements, lender security and refinancing considerations.

Why SPV borrowing typically require personal guarantees

Lenders view many SPVs as higher-risk borrowers than individuals purchasing property in their own names.

An SPV may:

• Have no trading history.
• Own only one property.
• Hold limited assets.
• Be newly incorporated.
• Involve multiple shareholders.
• Be undertaking refurbishment or development works.
• Rely heavily on projected rental income.

A personal guarantee gives the lender the right to pursue the guarantor personally if the SPV cannot repay the borrowing.

Without guarantees, lenders may have limited recovery options if the company fails and the property's value does not fully cover the debt.

What is joint and several liability?

Where multiple directors or shareholders provide guarantees, liability is often “joint and several”. This is an important point many investors overlook.

Joint and several liability means the lender can pursue any individual guarantor for the full outstanding debt, regardless of that person’s ownership percentage within the SPV.

For example, an investor holding 25% of the shares could potentially still be pursued for 100% of the liability if the other guarantors are unable to contribute.

This can become particularly important where:

• Friends invest together.
• Family members are involved.
• Passive investors participate in the transaction.
• One shareholder has significantly greater assets than the others.
• Relationships between investors later deteriorate.

The wider shareholder structure and any shareholder agreement should therefore be considered carefully alongside the finance documentation.

What does a personal guarantee usually cover?

The scope of the guarantee depends on the lender’s documentation and the structure of the borrowing.

A guarantee may include liability for:

• Mortgage repayments.
• Interest and default interest.
• Legal and enforcement costs.
• Refinancing liabilities.
• Company breaches under the finance documents.
• Additional borrowing obligations.
• Costs arising from enforcement action.

Some guarantees are drafted broadly enough to expose guarantors to liabilities well beyond the original borrowing figure.

Are guarantees always unlimited?

Not usually, personal guarantees are often limited, although care should be taken to review the terms before signing the agreement. The limit of the guarantee is often the amount of borrowing, plus any additional costs, expenses, interest and other fees which the lender may add onto the debt.

A guarantee can expose the guarantor to:

• The full outstanding debt.
• Accrued interest.
• Default interest.
• Legal fees.
• Enforcement costs.

Investors should understand exactly what level of liability they are accepting before signing the finance documents.

What other security might lenders require?

Personal guarantees are commonly used alongside additional lender protections.

This may include:

• Legal charges over the property.
• Debentures over company assets.
• Fixed and floating charges.
• Restrictions on further borrowing.
• Additional security over other assets.

These arrangements can become increasingly complex where refinancing, multiple properties, or several investors are involved.

Do guarantors need independent legal advice?

Usually, yes. Most lenders require guarantors to obtain independent legal advice before personal guarantees are signed.

Real estate finance solicitors provide expertise by reviewing mortgage or guarantee documents, ensuring the borrower understands the full financial and legal risks. The solicitor will normally outline:

• The scope of the guarantee.
• The extent of the liability.
• The lender’s enforcement rights.
• The risks of default.
• Whether liability is joint and several.
• How the guarantee interacts with the wider transaction.

Lenders will often insist the advice comes from a solicitor who is independent from the lender itself.

What risks do investors sometimes overlook?

Many investors focus heavily on securing funding and completing the acquisition without fully considering the longer-term impact of personal guarantees.

Common issues include:

• Personal exposure exceeding the original investment.
• Refinancing complications.
• Guarantees remaining in place after restructuring.
• Shareholder disputes.
• Cross-collateralisation between properties.
• Problems exiting investment structures.
• Personal liability following company default.
• Future borrowing being affected by existing guarantees.

Guarantees can continue creating financial exposure long after the original acquisition has completed.

Can personal guarantees be removed later?

Sometimes, although much will depend on the lender’s requirements and the financial position of the SPV.

A lender may agree to release or amend guarantees following:

• Refinancing.
• Reduction in loan-to-value ratios.
• Portfolio growth.
• Introduction of replacement security.
• Changes to shareholder structures.
• Strong company performance.

There is no automatic right to remove a guarantee and lender consent will usually be required.

Once the mortgage has been fully repaid, the personal guarantors will often have to contact the lender to be specifically released from their personal liability.

How can solicitors help with SPV borrowing transactions?

SPV finance transactions often involve corporate, property, and lender-related considerations running alongside each other.

We advise investors, landlords, developers, and company directors on:

• Personal guarantees.
• Debentures and lender security.
• SPV acquisitions.
• Shareholder agreements.
• Refinancing investment property.
• Joint venture structures.
• Corporate restructuring.
• Property finance transactions.

These transactions frequently involve coordination with lenders, brokers, accountants, and financial advisers, particularly where multiple investors or refinancing arrangements are involved.

Advice on SPV borrowing and personal guarantees

Personal guarantees are often one of the most significant legal and financial commitments investors make when borrowing through an SPV. Understanding the scope of the liability, the lender’s rights, and how the wider structure operates is important before finance documents are signed.

Dylan Leet, partner and head of real estate finance, says: 

“We regularly see investors focus heavily on the commercial advantages of SPV structures without fully considering the legal implications of the borrowing itself. Personal guarantees, debentures, shareholder arrangements, and refinancing restrictions can all create significant exposure if they are not properly reviewed at the outset. The legal structure behind the transaction is often just as important as the funding.”

Our team advises landlords, developers, and investors on SPV borrowing, lender security, refinancing, shareholder structures, and investment property.

Get in touch to discuss your transaction with our real estate finance solicitors.