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Related Party Query

Related Party Query

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A client is a director of a building company and has bought a piece of land from his own resources. His company is in the advanced stages of building a property on the land for his own use and for which he will pay his company. My initial advice was to get a couple of independent valuations of the property once completed. He has commented that these valuations will in all likelihood exceed the actual cost of the build plus the cost of the land (a rather obvious result for a profit-making company).

Is the director obliged to pay his company the market value of the property (less the cost of the land) or merely the actual cost of the build? If it is the former it would seem that he would have benefitted from using a third party builder (subject to competitive quotes).

Thanks for any help.


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