Any implications allowing owner to become tenant on sale?

Counting_Pennies_2

I wonder if you can help. We have been asked by our vendor if they can become our tenant when we purchase their house.

We had always intended to rent the property out, purchasing it as an investment and it would save us finding a tenant.

My question is, does anyone know if there are any legal or practical implications involved if we do allow them to become our tenants upon sale?

Many thanks

BitterAndTwisted

If you're buying the place with cash or a BTL morgtage, then no.

Some friends of mine did the same thing and had the vendors renting from them for nearly two years. You still need to draw up a tenancy agreement and lodge their damage deposit in the usual way.

lighting_up_the_chalice

Worth remembering that they will be unable to claim housing benefits for 5 years on a property they formerly owned. Just a consideration.

G_M

Treat this the same way you would an application from any other potential tenant:

* check references
* run credit checks
* check salary/affordability
* take deposit and rent in advance
* Use proper tenancy agreement

The fact that they were former owners is irrelevant (axcept as far their Benefits claim is concerned)

New Landlords (information for new or prospective landlords)

Yorkie1

I could well be mis-remembering, but I thought ' sale and rent back' was now not permitted?

G_M

Yorkie1 wrote: »

I could well be mis-remembering, but I thought ' sale and rent back' was now not permitted?

You're right.

but whether that is just where it is part of a business, or also applies here I'm not sure.

Surely they can't stop A from selling a property to B.

And then B from renting a property from A...

edit:

Rules brought in by the FSA in 2010 laid down that any new deals had to offer a tenancy lasting at least five years.
Only 22 firms stayed in the market, but the FSA said that one way or another they had now all stopped doing business.

Rules sale and rent back firms must follow

There are strict rules that sale and rent back firms have to follow. These are designed to give you better protection and mean that firms:

• aren't allowed to drop promotional leaflets through your letter box
• must check you can afford to enter into an agreement with them and how that might affect your entitlement to benefits
• must give you a fixed term tenancy of at least five years
• will arrange for an independent valuation of your home if you haven’t already got one
• must give you a cooling-off period of 14 days to give you more time to decide what to do.

And Citizens Advice:

Sale and rent back schemes are regulated by the government financial watchdog, the Financial Conduct Authority (FCA). This means that the FCA checks whether firms stick to all the rules and makes sure that they meet certain standards. It also means that there is a complaints procedure you can go through if things go wrong.
If you are thinking about signing a sale and rent back agreement with a particular firm, you should check that the firm is listed on the Financial Services Register. You can check the register on the FCA’s website at: www.fca.org.uk.

I'm sytill not clear if this would apply to aprivate arrangement as opposed to a 'firm', offeroing these schemes...

Annisele

I think Yorkie is right, but I'm not certain how (or if) the rules apply to individual landlords.

FCA Handbook (if you go through all the definitions that should tell you who the rules apply to, but I haven't looked at it all).

BBC article

Citizens Advice (from a T's perspective)

Edit: crossposted with GM

G_M

Annisele wrote: »

I think Yorkie is right, but I'm not certain how (or if) the rules apply to individual landlords.

FCA Handbook (if you go through all the definitions that should tell you who the rules apply to, but I haven't looked at it all).

BBC article

Citizens Advice (from a T's perspective)

Edit: crossposted with GM

Interesting to see Google threw up the same results for you & for me. My understanding was that Google logs all individuals' browsing habits, and then presents search results which it 'thinks' will interest you.

So no two individuals running the same search will get the same results.

But that's for discussion elsewhere....

franklee

Yorkie1 wrote: »

I could well be mis-remembering, but I thought ' sale and rent back' was now not permitted?

I thought that too.

I do not know if the regulations apply to just sale and rent back firms or individual landlords too but am unclear if or why an individual landlord should be allowed to do something that a bigger one cannot. If the property is sold below market value the vendor now tenant could have a claim that there was some underhand tactics or that they were promised more than a short term tenancy. The problem is in a static market how do you ascertain market value?

I'd be asking over on property tribes they know a lot about sale and rent back over there.
http://www.propertytribes.com/

Either way the vendor/tenant should have adequate legal advice or else the sale could be suspect. I should think also that the property should be marketed openly e.g. with an EA and on rightmove etc. rather than being a behind the counter deal.

OP suggest you ask on property tribes

franklee

Annisele wrote: »

I
Citizens Advice (from a T's perspective)

Ah that page says:

"A sale and rent back scheme run by a private firm allows you to sell your home to that firm and then rent it back from them as a tenant. You would normally sell your home to the firm at a reduced price. A private firm can mean a company, a broker or a private individual."

G_M

franklee wrote: »

Ah that page says:

"A sale and rent back scheme run by a private firm allows you to sell your home to that firm and then rent it back from them as a tenant. You would normally sell your home to the firm at a reduced price. A private firm can mean a company, a broker or a private individual."

Well spotted!