Seller delaying exchange till April - offering us to rent in the interim

princeofpounds

If you decided to do this, the legal stuff could be very straightforward... you just buy an 'option to purchase' from the developer.

Agreed that options to purchase are not uncommon. But they have dangers - the expiry of a mortgage offer being one.

PasturesNew

Some people shouldn't be allowed out without a responsible adult.... and the fact they are doing up houses worries me.

Ulfar

If the OP was to buy an option, surely the tax man would work out that the vendor is a developer which is what they seem to want to avoid.

Also the contract would be signed and exchanged now.

ValHaller

Ulfar wrote: »

If the OP was to buy an option, surely the tax man would work out that the vendor is a developer which is what they seem to want to avoid.

Also the contract would be signed and exchanged now.

I don't think the issue is the taxman working out they are a developer, they just want to manage their exposure to CGT.

As I see it, an option contract is different from a 'straight' contract. With the normal purchase contract, the taxable event is the effective certainty of a sale, which occurs on exchange on contract. With an option contract, the effective certainty of a sale is the point at which the option is exercised.

To me it looks like the developers are trying to square the circle. They are trying to make an effectively certain sale now for their own security, but have the date of effective certainty next year. It is having their cake and eating it AFAICS.

xylophone

They've only just realised that there is a CGT liability?

"Non-professional" developer?

They think that you like the house too much and have spent too much to walk away and so will accede to their "request"? Tactics rather similar to those who gazunder?

Their tax liability is not your problem. Think very carefully about whether you wish to proceed?

pjread

If you want to go along with this, I wouldn't pay 10k for the option, maybe £10. And the option price to be whatever you agreed less any rental or other payments made to the vendor.

They want this arrangement, they want you on the hook so to speak and you'll be the ones potentially having to move twice (perhaps even not on your own timescales the second time)

I also quite like the annual rent equivalent to 0.5% of the option price.

But get any rental agreement in writing - I suppose ideally as minimal as possible, stating the rental amount and perhaps a 'safe' term (12 months?) in the event you don't proceed with the purchase for whatever reason.

If you stack it in your favour you may do well out of this. Perhaps even save enough to lower your LTV by time for "real" exchange when you buy (this property or another)

anselld

If they are developers there is no CGT liability.
There is an income tax liability and that applies whenever it is sold.
You should not entertain any involvement with there attempted tax evasion.

I_have_spoken

They are non-professional developers and had already sold a property this year and therefore couldn't claim CGT relief on this property if they sold it now.

There's something more to it that this, maybe they are 'flipping' houses MP-stylee to exploit Private Residence Relief?

Depends how much you want the house to put up with this palaver.

Possible outcome, the HMRC catches up with seller and tax demand bankrupts them, in which case their assets will be sold to pay tax which would include the house you were renting. So you'd be requested to vacate the property at end of AST with an S.21 notice.

ihatemyhouse

I thought you had to live in a property for 2/3 years to not have to pay CGT

sj239

Thanks for all your responses. Good to know I can get some decent advice from someone out there!

They are asking for a rent of £1000 a month which they claim is fair given the market rent would be ~£1400. Obviously I've gone back with the argument that i should just be paying a nominal or token rent since its all been their fault and quite frankly I should be compensated in some way for their negligence in missing this glaring fact. Net net they are not going to sell before April, my mortgage offer runs out mid April so it will be tight but doable to exchange and complete then. Their alternative is to rent it out short term until April to someone else and then put it back on the market. They think prices have gone up substantially, which is probably fair, but with me they have a fully ready and waiting offer ready to exchange plus some nominal rent until then so hopefully that will be enough for them. Regarding the £10k security or 'bond' - not sure how that contract will be drawn up so will let you know when I hear from seller's solicitor.