Increasing numbers of landlords are exploring the transfer of personally held buy-to-let property portfolios into a general partnership or a limited liability partnership (LLP). This trend has accelerated in recent years due to Section 24 finance cost restrictions, the desire for more flexible profit allocation, succession planning benefits and, in many cases, the longer-term goal of eventually incorporating the property business into a limited company in a tax-efficient manner.

Moving Buy-to-Let Properties Into a Partnership or LLP: Key Structuring Considerations and Essential Agreement Clauses

Jonathan Lea January 8, 2026

Increasing numbers of landlords are exploring the transfer of personally held buy-to-let property portfolios into a general partnership or a limited liability partnership (LLP). This trend has accelerated in recent years due to Section 24 finance cost restrictions, the desire for more flexible profit allocation, succession planning benefits and, in many cases, the longer-term goal of eventually incorporating the property business into a limited company in a tax-efficient manner.

Where two or more individuals own property jointly, formalising their activities through a partnership or LLP can provide significant commercial and tax benefits. However, the structure must be set up properly, operated as a genuine business and supported by a well-drafted partnership or LLP agreement. This article sets out the main considerations landlords should be aware of, as well as the key drafting points that such agreements must include.

Why Landlords Use Partnerships or LLPs

For many landlords, the primary motivation for forming a partnership or LLP is to create a more efficient and flexible framework for managing and profiting from their property portfolio. Unlike simple joint ownership, a partnership enables the parties to share profits in ways that differ from their underlying capital contributions, which can be extremely useful where one partner is a lower-rate taxpayer or where a family intends to involve adult children in the business.

In addition, a partnership or LLP structure can help landlords mitigate the impact of mortgage interest relief restrictions, as the business can allocate profits strategically and demonstrate operational activity more clearly. A partnership is also the required precursor to claiming Incorporation Relief under s.162 TCGA 1992 if the landlords later wish to transfer the business into a limited company. This relief is only available where the activity qualifies as a business rather than simply passive investment.

A further advantage is that the partnership can create a clear framework for operations, decision-making and risk-sharing. Where co-owners disagree or have differing levels of involvement, the partnership agreement becomes a vital tool for maintaining harmony and ensuring the business continues smoothly.

Structuring the Transfer of Properties Into a Partnership or LLP

When transferring personally owned properties into a partnership or LLP, landlords must take careful advice on Stamp Duty Land Tax (SDLT), CGT, mortgage lender consent and the practicalities of holding legal title.

In many cases, the economic value of the properties is introduced into the partnership through a capital account mechanism without legally transferring the title at the Land Registry. This avoids unsettling existing mortgage arrangements and prevents unnecessary SDLT charges. Legal title can remain in the names of the individual owners as nominees for the partnership, while the beneficial ownership is restructured through the partnership agreement.

While this approach is common, it requires that the agreement clearly sets out who holds legal title, how liabilities are allocated, and how the beneficial interests are owned within the partnership. Careful planning also ensures that lenders are satisfied, HMRC understands the commercial rationale and the partners themselves have certainty over their long-term rights and obligations.

The Key Clauses Every Property-Based Partnership or LLP Agreement Should Contain

A well-drafted partnership or LLP agreement is essential for evidencing ownership, distributing profits, managing the business and ensuring that the arrangement is treated as a partnership for tax purposes rather than simple co-ownership. The following are the most important elements.

Capital Contributions and Profit-Sharing

The agreement should establish each partner’s initial capital account, usually reflecting the market value or agreed transfer value of properties introduced. It is important to distinguish clearly between capital entitlements and income entitlements. Many landlords choose deliberately not to equalise capital accounts, while agreeing a profit-sharing ratio that reflects differing levels of involvement or strategic tax planning.
Setting this out in detail reduces the risk of future disputes and provides HMRC with a clear commercial basis for the allocation of profits.

Property Ownership, Liabilities and Mortgage Arrangements

The agreement must specify how each property is held, who owns legal title and who is responsible for mortgage payments and liabilities. If lenders are unwilling to transfer the legal title to an LLP, the agreement can provide that the individuals hold title as nominees while the business retains full beneficial ownership.
These provisions are vital for ensuring the partnership can operate effectively without breaching mortgage terms and for demonstrating the true economic ownership position.

Decision-Making and Business Governance

The parties should set out how day-to-day management decisions will be made, who is responsible for certain tasks and how major decisions — such as refinancing, acquisitions, disposals or structural changes — must be approved.
Where multiple owners are involved, a tiered decision-making process helps prevent deadlock while maintaining fairness and oversight. Written procedures also demonstrate commercial organisation and will be relevant if the partners later apply for incorporation relief.

Drawings, Distributions and Cash Management

A property business frequently needs to retain capital for repairs, tax liabilities and unexpected expenditure. The agreement should specify how drawings are taken, how much working capital must be retained and how and when surplus cash is distributed.
Setting clear rules on extraction protects the business, ensures partner equity and evidences a professional approach to financial management.

Admission, Removal and Transfer of Interests

Partnerships benefit from having defined rules on admitting new partners — particularly family members — and handling partner exits, transfers or succession. The agreement must set out valuation methods, buy-out mechanisms and processes to avoid forced property sales or conflict.
Without these provisions, the stability of the entire portfolio can be jeopardised in the event of disagreement, death or a change in circumstances.

Duties and Responsibilities of Partners

Each partner’s expected level of involvement should be expressly stated. Some may be actively involved in property management, refurbishment and tenant relationships, while others may play a passive investment role.
Clarifying responsibilities ensures fairness and reduces disagreements, while also supporting the case that the activity amounts to an organised business for tax purposes.

Dispute Resolution and Deadlock

To preserve the viability of the partnership, the agreement should include structured processes for resolving disputes. Mediation, arbitration and, in two-partner structures, deadlock provisions help avoid costly litigation and protect the partnership’s long-term interests.
Such mechanisms also show that the partners are committed to running the venture professionally and sustainably.

Additional Clauses Required to Evidence That the Partnership Is a Genuine Business

HMRC will only allow incorporation relief if a landlord partnership is genuinely carrying on a business. Many property owners mistakenly assume that simply forming an LLP is enough; however, HMRC examines the facts, including the partnership agreement, to determine whether a business exists in substance.

The following types of clauses are essential for demonstrating that the partnership is professionally run and actively managed.

Active Property Management Obligations

The agreement should impose clear obligations on the partners to carry out operational tasks such as tenant management, property inspections, repairs, marketing and overseeing refurbishments.
By embedding these duties contractually, the partners show that they are engaged in the day-to-day running of a business rather than simply collecting rent.

Formal Accounting and Financial Controls

A genuine property business must keep structured accounts and financial records. The agreement should therefore require the preparation of annual accounts, cash-flow statements, budgets and other financial documents.
These provisions support both regulatory compliance and the argument that the partnership is an organised commercial enterprise.

Regular Meetings and Reporting Processes

Clauses requiring periodic meetings — monthly, quarterly or annually — help demonstrate continuity and strategic oversight. The agreement can also require reviews of performance, business plans, tenant issues and investment decisions.
This demonstrates organisation and coordinated management, which is relevant for tax purposes and also helps the partners operate more effectively.

Marketing, Tenant Acquisition and Portfolio Growth Strategy

To qualify as a business, the partnership’s activities must be more than passive. Including clauses that require marketing, the engagement of letting agents, exploring refurbishment opportunities and assessing new acquisitions helps demonstrate that the partnership has commercial objectives and is run proactively.

Use of External Agents and Contractors

A professionally run property business often relies on external service providers such as managing agents, accountants, surveyors and contractors. Provisions dealing with how such providers are appointed and managed strengthen the business case and ensure the partnership runs efficiently.

Business Plans, Budgets and Future Strategy

The agreement should require the creation of annual business plans, maintenance schedules and long-term strategy documents.
HMRC places significant weight on evidence of forward planning when determining whether an activity constitutes a business.

Reinvestment Policies and Expansion Opportunities

A business typically reinvests its profits to improve or expand operations. Including clauses about how profits may be reinvested — such as refurbishing properties, acquiring new stock or creating maintenance reserves — provides further evidence of commercial purpose.

Time Commitment Expectations

Finally, the agreement can include provisions stating that the partners must devote a reasonable amount of time to managing the business. While this can be flexible, it reinforces the fact that the partners are engaged in active, organised business activity.

Conclusion

Moving buy-to-let properties into a partnership or LLP can deliver significant advantages in terms of tax planning, succession and long-term business structuring. However, the arrangement must be properly planned, clearly documented and run as a genuine business to unlock the full range of benefits — particularly if the landlords may wish in future to incorporate the partnership into a limited company.

A well-drafted partnership or LLP agreement sits at the heart of this process. It provides clarity for the partners, security for lenders, evidence for HMRC and a strong foundation for building and expanding a professionally managed property business.

If you would like assistance drafting a bespoke partnership or LLP agreement, reviewing your proposed structure or preparing for eventual incorporation, our specialist team at The Jonathan Lea Network can help.

We usually offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT depending on the complexity of the issues and seniority of the fee earner).

Please email wewillhelp@jonathanlea.net providing us with any relevant information or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.