Sale and Rent Back Saga

_Bob__2

Hi

I am aware of the huge fallout from the whole Sale and Rent Back industry. We have sold our house (completed last month) and moved into rented. We have now found our dream house. The vendors are going through a divorce and need to buy two houses (one each) from their sale proceeds.

I am not overly keen on being at the bottom of two chains and both myself and the vendor agree that it makes sense if we complete on the purchase of their house and rent it back to them at 125% of the market rent (on the basis that they can give notice to quit at anytime, and on my side they wont be renting long term as it is above market rent).

Does the FSA report into Sale and Lease Back render this arrangement illegal?

To clarify this isn't a commercial entity nor a longterm arrangement just one that (i) secures the purchase of the property and (ii) allows each vendor to realise funds and purchase their next property interdependently of each other.

Any thoughts?

dimbo61

So you are paying cash for the property ? NO ?
Taking out a normal mortgage to buy this property and then commiting mortgage fraud by renting out the house without insurance ( landlords insurance) gas safety checks, smoke alarms etc
rental income and paying TAX
Meanwhile you rent somewhere else !! madness
Only my views

_Bob__2

Yes - paying cash. No mortgage.

Renting in the short term to secure our preferred long term home doesn't seem like madness to me :question:

My question is whether the Sale and Rent Back fallout now renders this type of arrangement illegal (for an unregulated purchaser come landlord)

Emmzi

you aren't regulated by the FSA and aren't claiming to be.

BUT what do you do if a) they stop paying rent and b) won't move and c) trash and strip the house before forced eviction?

When they see what they'll get for half the money each, you are in trouble.

Annisele

I'm not an expert - you'll want to get your own paid-for legal advice on this.

In my non-expert opinion, I don't think what you're proposing is illegal. I think it's stupid (sorry), but not illegal.

MCOB 5.9.5 G says:

A person may enter into a regulated sale and rent back agreement as agreement provider without being regulated by the FSA (or an exempt person) if the person does not do so by way of business.

On the face of it it doesn't sound like you're doing this "by way of business". However, as others have said - what will you do if they just don't pay? Or don't move?

ruggedtoast

The responsibilities of being a landlord are not worth it for such a short time imo. Why not exchange and choose a long completion date?

*Robin*

So why don't the divorcing couple sell you the house with vacant possession in the usual way, then they both take their share of the proceeds and rent somewhere [separately] until they find properties to suit each of them?

Don't make their problems yours, OP - there are plenty of other houses available at the moment, especially for a cash buyer.

Notmyrealname

Whilst there is nothing to stop you doing what you want to do, the minimum tenancy agreement you can have is 6 months. That means that from the date they sign the agreement, they have a full 6 months where you cannot evict them unless they don't pay the rent and you go through the long drawn out process of eviction through the courts.

You will have to have a LL gas safety check. You will pay tax on all the rent you get from them.

The fact they have 6 months alone where they can just sit there dragging their heels regardless of how annoyed you are and how much you want them out would put me off. Suggest to them that they rent their own properties.