Residential Lease Agreement with Option to Purchase (England and Wales)

pampam

Does anyone have any experience or advice regarding
"Residential Lease Agreement with Option to Purchase (England and Wales)?"
We are selling a house and we have been asked to consider this option by a potential buyer.
Any constructive comments or views would be appreciated.
Thanks

mrginge

What are the terms of this agreement.

More details required...

pampam

He has offered a deposit and then monthly payments plus a lump sum each year over 5 years.

Some thing like this:-
QUOTE
This Residential Lease Agreement with Option to Purchase contains the following provisions:
Leased Premises and Term of Lease: Sets forth the property address and dates of the lease term;
Lease Payments and Late Fees: States the amount of monthly rent, the date due and penalties for late payments or insufficient funds;
Security Deposit: States the amount of the security deposit and conditions for its return;
Option to Purchase: Sets forth that landlord grants tenant the exclusive right to purchase the property for a predetermined price and when this purchase option will expire. Tenant must notify landlord in writing of any intention to exercise this option and give the landlord an additional deposit toward the purchase of the property. It also sets forth who will pay the closing costs and that landlord will convey the premises by warranty deed to tenant;
Default: Sets out what constitutes a default and any available remedies;
Use of Premises: States that the premises may only be used as a residence unless landlord gives written consent to use the premises as a business;
Possession of Property, Utilities and Pets: Describes when Tenant may take possession of the property, who is responsible for utilities and the policy regarding pets;
Insurance: Both parties are required to maintain appropriate insurance on the property;
Additional Terms and Conditions: Sets out any terms and conditions not expressly set out in this agreement;
Signatures: Landlord and tenant must both sign this agreement.

jjlandlord

These are not the terms, but a summary of what the agreement allegedly contains.
If you are considering this, you should get the full agreement and show it to a solicitor for advice.

If you have a mortgage you would also need consent to let or to move to a BTL product.

davidmcn

So you're tied into a contract for five years, during which you can't sell the house to anyone else (other than, possibly, with the option still in force), and at the end of it he might walk away leaving you a house which you still haven't sold? Or are these deposits going to give you suitable compensation if he doesn't exercise his option?

Do you have a mortgage? Because I can't see any mainstream lender being happy with such an arrangement - they'll want a normal tenancy with the ability to kick out the tenant earlier than five years.

pampam

No we don't have a mortgage.
It is a house that we have been renting out and we have decided to sell.
He is offering a 20% deposit

jjlandlord

If this is a BTL property that you have decided to sell, then sell. Why are you considering taking on a new tenant on a deal you are not clear about and need legal advice on?

mrginge

Some initial points to consider -
You will become a landlord and need to fulfil obligations re gas certificate, tax, insurance.
You need an appropriate mortgage product.
If you are selling to purchase, can you still do so if your equity is still tied up in your current house?
If you expect house prices to rise during this period, does the price reflect this?

All this adds cost to you, so one would expect that the buyer would have to pay more under this agreement than if they purchased outright.
Personally i wouldn't consider this for a second, but if you do then do as jj suggests and get any agreement thoroughly checked by a solicitor before going any further.

davidmcn

pampam wrote: »

He is offering a 20% deposit

20% of what? Are you fixing a price now which will apply at any time during the next five years, or is it being determined in some other way?

What happens to that deposit if he doesn't buy?

It's all pretty unusual, and unless he's offering way over the odds (and why would he?) then I wouldn't waste time on it.

mrginge

Yes, given you're already letting the property i don't see what the benefit is for you.
Sell it or let it. Don't try mixing the two together.

Annisele

So the tenant puts all the risk of house price inflation/deflation on you.

House prices double in the next five years? Great for him; he'll exercise his option and buy at the price he agreed five years ago.

House prices halve in the next five years? Great for him; he doesn't have to exercise his option and he'll just go buy somewhere else that's cheaper.