Sell property with buyback option

oz0707

How straight forward is it to sell a property to someone I know, with an exclusive option to repurchase at a certain point, for a certain percentage more than what it was sold for?
(sorry for the long sentence!)
Basically the sale would be used as a secured loan. Is it something a conveyancer could write up?
Anyone got any prev experience?

Thanks in advance

Annisele

I'm confused - that doesn't sound at all like a secured loan to me.

If you sell your house to Mr X, then Mr X owns the house.

If Mr X lends you money secured on your house, then you still own the house.

Are you intending to live in the house after you've sold it? If so, that takes us into sale-and-rent-back territory, which makes things rather more complex.

theartfullodger

What law or tax or claim from someone else are you trying to avoid?

This smells well dodgy....

oz0707

Not trying to avoid anything, will be selling and buying back for market value plus a bit of interest. Not a house so wont be living in while sold. Just a way of borrowing money off someone yet giving them the security for them of owning the title. The security for me would be the exclusive option to purchase back, only for a limited time of course.
Say you own property A and B
Sell Property A to release funds for property B
Spend released monies on property B
Sell property B to buy back property A.
Sounds expensive when you consider conveyancing but commercial finance costs are worse.

Help4UKHomeSellers

This is an interesting post. For what you are doing it is best you speak to commercial Law Society Approved Solicitor who has experience in commercial transactions, which I believe this is. I think as an overview, there would not be an issue as such. Once sold, you could have an option agreement between you and the seller, that gives you the option to buy your home back. Moreover, you could place a Claim/Title on the property so that in the even the seller tries to do something behind your back, the property cannot be sold unless you are informed and agree to it.

oz0707

I though something should be able to be drawn up by a conveyancer.

It doesn't sound the most straightforward of deals but small commercial loans for what i'm thinking are currently at bridging rates. .75% pcm. plus 1% comm. 2% setup/exit and all the rest of it. Stacks up to quite a lot.

You can afford to pay someone 6% pa upon re purchase (try that in a bank), take care of conveyancing fees and give them strong security. And offer to re purchase in 18months ish. Also the percentage should not push person over capital gain allowance in this case. (10k pa?)
...that was my thinking anyway

moneyistooshorttomention

Sounds a bit convoluted to me. I'd be inclined to think that the other person in this transaction wouldn't go for it - if only because who would want to be restricted as to who they could sell their house to?

Suppose they decided to sell their house and you refused to pay a fair price for it or something had happened to your own finances which meant you couldnt afford to buy your old house? Then this person would be left up the Swanee without a paddle.

I can't help thinking there must be an angle in it for you and it could well be at the other persons expense - or at the expense of all of us (ie taxpayers).

Richard_Webster

So why don't they just lend you the money and take a private mortgage on the property as security. If you don't repay in accordance with whatever agreement you have then they can get a court order, repossess the property, and sell it.

oz0707

Money is too short- It's a family member, they'd probably lend on a written guarantee but I expect no favours from anyone so thought I could offer good security and decent interest. The angle in it for me is a simple transaction as I have to split the titles regardless, so can do this by selling. To put a charge on the property by way of a normal loan would incur similar conveyancing fee's and i'd still have to split to title as It's all on one title at the minute. The amount they would lend would be well under market value so should I not honour the agreement they would be in a good position. PS - The price I would have to re buy at would be agreed at a certain percentage P.A over what they paid. Non negotiable.

Richard - Good suggestion, I never knew there was such an option as a private mortgage. However, with what I've said about about conveyancing fee's for splitting the title then applying the charge would it not just be easier to do as I have said? As eventually The title will need to be split to sell property A separately anyway.

Thanks for input, good to have a sounding board!

Also these properties are not houses - for clarity.

Richard_Webster

Richard - Good suggestion, I never knew there was such an option as a private mortgage. However, with what I've said about about conveyancing fee's for splitting the title then applying the charge would it not just be easier to do as I have said? As eventually The title will need to be split to sell property A separately anyway.

If you want to charge (mortgage) part of a title then I think you will find that the Land Registry will issue a new title number for the part that has been charged.

Land_Registry

Richard Webster is quite correct re issuing a new title for the part that has been charged.

There are circumstances where we would not do this although in the case of a single property the only likely barrier would be if the new charge was a second charge i.e. you have a registered charge already against the whole title.

If splitting the title caused considerable inconvenience and additional work then it could also be refused. A decision would not be made until the application was submitted of course.