Rent-to-buy Sales

[martinb2010]

Hi there,

I was wondering if any of you could give your opinion of rent-to-buy property sales. We are selling our flat and have met a would-be buyer who is offering to pay our mortgage and bills for a two-three years before buying the property. He seems genuine, and cites his reasoning that he cannot currently afford a full deposit for a mortgage, but has no cash-flow problems.

He is willing to enter a "sale" contract, i.e. where he cannot pull out of buying after the rental period, and will support this with a 10k deposit, non-refundable if he does not purchase. From our point-of-view, we do not need the equity as we are not looking to buy again just now.

Should we be worried about anything esle here though?

Any thoughts would be appreciated, thanks,

Martin

[brian]

Rent to buy are the buyers of last resort - they are primarily driven on buying a property for around 20% current market value.

If you cannot sell, then certainly they can be a viable option to move things fast - but really your flat should be on the open market, looking for a clean sale, rather than a sale which comes with a lot of strings and uncertain promises.

[daisy_luckas]

A sell and rent back service provider must be licensed to offer such services in your area. You should check if they are authentic or not. Also, talk to a lawyer and get all the contract papers reviewed properly.

[Robin Ferrier]

Hi there,

I offer these types of deals in Scotland and have some experience of how they work but in truth don't feel I have enough info to give a firm comment.

In general however the other posters are right in that in a perfect world a clean sale is what you want. I use what are called as lease options to help people who are in certain unique situations. For these situations the LO is perfect and is slowly becoming more popular. The offer of a 10k deposit for me is utterly unusual as legally you only need to offer a pound as 'consideration'. Please make sure that the deposit is tied into the lease option agreement and is non refundable.

Please also make sure the lease option agreement is set up by a lawyer who understands the complexities of lease options. Most solicitors rarely deal with these and are therefore reticent to get involved. You'll get a glib 'wouldnt do it if I were you'. Its not their fault. Its just that they will rarely if ever, come across theses things.

Make sure YOUR lawyer is LO savvy. Most aren't. PM me and I can maybe put you in touch. You say he cannot withdraw from the sale after the rental period is over. This is unusual but not unheard of. I bet he can withdraw before the rental period is over. Check cancellation criteria.

You cannot rent the place baack from him as the other poster mentioned.

For me the real danger arises when the new landlord takes on a rent to own tenant using what is called a sandwich option. I feel this is where the real trouble may lie and I don't do them. I just rent out on a normal AST lease. The real danger there is less to you and more to the rent to buy tenant. Lots of people do them but I have decided not to.

Get the deal absolutely crystal clear in your mind as to what is being offered and then get youself a good LO savvy legal eagle. As I say PM me if you need more.

Robin

[canadarates@hotmail.com]

If you get the non-refundable deposit up front, you have little to nothing to worry about. No one in their right mind is going to do anything to a home they put 10k down on.

[Sonya]

I would look into all of the legal issues here. Ok he is putting down a deposit of £10K, but make sure that all your contracts are watertight and he can't just walk away. After all three years is a long time and the property market may well be very different to what it is currently.

[Adam Long]

Be very careful of rent to buy or as they are otherwise called lease options, they commit the buyer to very little. If you understand how share options work, they are very similar. Admittedly £10k down is a lot for this type of product but if all goes wrong there is very little comeback or tie in with the buyer.

There is a new product out called a delayed completion or instalment contract where the buyer exchanges contracts and pays any stamp duty so they are more secure. However there are very few people who offer these at the moment so if you want to talk to someone who offers these private message me your area as I know people who offer this is various places in the UK