Renting to previous owners questions.

jacand

Looking for a bit of advice. We are first time buyers. We have found a house, put an offer in and it has been accepted. We are in no rush to move into it and we've suggested to the current owners that they can rent it from us until they find a house themselves.
The are very keen to do this as this puts them in a position of a first time buyer too, once the sale goes through. The house is in perfect condition and I know they will continue to care for it and I'm glad it's not just going to sit there empty until we are ready to move in.

Obviously when the sale is complete the house becomes ours and they become our tenants. All appliances are been left so these rightfully become ours. My question is while they are renting if any of these appliances break down would be have to fix or replace as the landlord?
Also what kind of tenancy agreement would we need, and would it be best to ask for a bond?
They have offered to pay upto six months rent in advance.

Any advice would be helpful.
Thanks

Ms_Chocaholic

I don't know an awful lot about this but I think this is a bad idea. A few things spring to mind, will your mortgage allow tenants, what happens if they don't move out (find a house they want to buy) before you want to move in.

If you are not selling, why can you just not delay the sale until they find a place to buy.

jacand

Our mortgage is a BTL mortgage so that's not a problem.

If we had a tenancy contract drawn up then surely they would move out when that was up OR continue to rent from us. They have found somewhere it just needs renovating to move in.

Werdnal

Have you bought on a BTL mortgage? I doubt it, as FTB you will be wanting to live there yourself, so your mortgage won't allow tenants.

Do you want to become landlords, with all the hassle, stress and legal requirements of that? Declaring your tax on rental income? LL insurance? Gas Safety certificate? Deposit protection? Tenants who may not pay, damage the property and no way to evict them other than applying to court for a possession order - and that won't be granted until at least 6 months after they first take the tenancy.

Please don't do this! The vendors problems of not having anywhere to move to are not your concern. Complete with vacant possession and enjoy your new home.

Edit as cross posted with above - As FTB, how have you gone for a BTL mortgage? Are you intending to let the property? If so, this puts a slightly different slant on the situation, BUT there is no obligation for the tenants to move out at the end of their tenancy. You have a lot to learn if you are intending to become LLs. Read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

to understand all the things you need to comply with to let a property.

jacand

Yes, we have a mortgage with the option to let it out if we need to as my Husband is in the forces. We are in no rush to live in it as we currently have forces accommodation.

I am self employed so I am used to tax returns etc. The LL insurance and gas safety won't be an issue and should be fairly straightforward. They are offering to pay six months rent upfront too.
They have lived in the property for sometime and have put a lot of work into it, I cannot see them purposely damaging it.

Werdnal

That puts a very different picture on the situation. Double check with your lender as whilst they often say that there is an option to let, you still need to verify that you will not be living there and check whether there are any other clauses or costs. You normal insurance will also be void if you are not living there.

Read the link I posted as if full of useful info. Remember if you are joint owners, the tax liability is 50/50, so hubby will have to complete a tax return too, and the extra income will have to be declared for any benefits, tax credits etc that you claim.

jacand

We have told the lender that we are renting it out and there is no extra fees. (I have checked the small print) We only have contents insurance for our forces property at the moment, so we'll just take out separate LL insurance for the new property.

I've had a look at the link, thanks very much. For the EPC can we use the one the Estate Agent provided two weeks ago when the property was valued?
I will be able to do his tax returns too and luckily we don't claim any form of benefits or tax credits.

G_M

jacand wrote: »

If we had a tenancy contract drawn up then surely they would move out when that was up OR continue to rent from us. They have found somewhere it just needs renovating to move in.

Tenants have specific rights. They would not have to move out when the tenancy 'was up'.

This idea may well work for you, butyou MUSTfully understand what is involved with being a landlord, and what rights your 'tenants' will have.

Please do aLOT of reading before you decide (my post linked above is a starting point.)

Yes, you can use the same EPC-it is valid for 10 years.

HappyMJ

jacand wrote: »

Looking for a bit of advice. We are first time buyers. We have found a house, put an offer in and it has been accepted. We are in no rush to move into it and we've suggested to the current owners that they can rent it from us until they find a house themselves.
The are very keen to do this as this puts them in a position of a first time buyer too, once the sale goes through. The house is in perfect condition and I know they will continue to care for it and I'm glad it's not just going to sit there empty until we are ready to move in.

Obviously when the sale is complete the house becomes ours and they become our tenants. All appliances are been left so these rightfully become ours. My question is while they are renting if any of these appliances break down would be have to fix or replace as the landlord?
Also what kind of tenancy agreement would we need, and would it be best to ask for a bond?
They have offered to pay upto six months rent in advance.

Any advice would be helpful.
Thanks

As they have previously owned a house they will not be first time buyers ever again. They can never get that status back.

My opinion...don't do it. You've asked far too many questions. Do not take their white goods off them. If you do it's your responsibility to fix. Assured short hold tenancy agreement. Ask for and lodge a deposit with TDS. Don't take the 6 months rent up front. Monthly is fine.

Just complete the purchase when they move. There is no need to confuse the issue by buying and renting back.

Annisele

Are you sure your lender is happy for you to let the property to the people who used to own it?

A BTL mortgage doesn't usually allow that. It certainly allows you to let to tenants - that's of course the point - but not usually to the previous owners.

It sounds as though you're getting into sale-and-rent-back territory, which is highly regulated and makes lenders very nervous.

G_M

HappyMJ wrote: »

As they have previously owned a house they will not be first time buyers ever again. They can never get that status back.
The definition varies. Back when HMRC gave 'FTBs' SDLT exemption, the definition was as you say above.

But many mortgage lenders offer 'FTB' deals and define 'FTB' eligibility as anyone who does not currently own a property. Or even as anyone who does not currently have a mortgage(ie they may own anotherproperty outright).

My opinion...don't do it. You've asked far too many questions. Do not take their white goods off them. If you do it's your responsibility to fix.
Not if the Tenancy agreement specifies otherwise. See LL & Tenant Act 1985
Assured short hold tenancy agreement. Ask for and lodge a deposit with TDS. Don't take the 6 months rent up front. Monthly is fine.... providedyou have credit checked them. Just cos they sold the house does not mean......!

Just complete the purchase when they move. There is no need to confuse the issue by buying and renting back.

I tend to agree with the general advice not to rent back, but as I said,in this case, provided blah blah,it might work.