renting with option to purhcase included in lease agreement

tkwad

Our position is this....
we have the funds to buy the property but these are not available until december/january (unsure of exact date)
We have found a property we want and the seller is offering to rent it to us with an agreement that offers us the option to purchase for the agreed amount...
I dont understand how this will work though? If we sign the agreement and take posession of the keys we will be renting. So how do we then begin the necessary steps to purchase the property? The agreement gives us the right to notify the landlord in writing of our intention to purchase th eproperty at any time during the 6 month lease, but we must specify a valid date to complete. This will take time? during whoch we will still be paying rent...im confused please advise

G_M

I have no idea what it means, but at first glance, it appears to mean..... nothing.

You will be tenants with a 6 month tenancy.

Additionally, like anyone else, you can write to the owner and offer to buy. The only difference seems to be you've agreed a price, though this is by no means legally binding, so, like anyone else, you will have to re-confirm the price, and, like anyone else, agree a Completion date.

i think it is nothing more than an informal 'heads up' that the owner may be open to selling in the future.

DandelionPatrol

G_M wrote: »

I have no idea what it means, but at first glance, it appears to mean..... nothing.

You will be tenants with a 6 month tenancy.

Additionally, like anyone else, you can write to the owner and offer to buy. The only difference seems to be you've agreed a price, though this is by no means legally binding, so, like anyone else, you will have to re-confirm the price, and, like anyone else, agree a Completion date.

i think it is nothing more than an informal 'heads up' that the owner may be open to selling in the future.

Beg to differ here. If the price is in the tenancy and the tenancy gives a valid option on the property, as far as I can see, it is an option contract, enforceable at the option price. As ever, we cannot see the contract from here...

davidmcn

DandelionPatrol wrote: »

Beg to differ here. If the price is in the tenancy and the tenancy gives a valid option on the property, as far as I can see, it is an option contract, enforceable at the option price. As ever, we cannot see the contract from here...

Yes, no reason why it couldn't be a binding option agreement.

In answer to "how do we then begin the necessary steps to purchase the property?", you do it in much the same way as you would if you didn't live in the property, in terms of getting searches, examining title, etc.

tkwad

Thank you for the replies

mrginge

DandelionPatrol wrote: »

Beg to differ here. If the price is in the tenancy and the tenancy gives a valid option on the property, as far as I can see, it is an option contract, enforceable at the option price. As ever, we cannot see the contract from here...

Well i beg to differ that you beg to differ.

Just because the price is written in the contract, does not mean the OP can't attempt to renegotiate it. The landlord is free to decline, accept or negotiate further. Just like they would be with anyone else who didn't have the option price.

The potential benefit for the OP is if the offer price is below the market rate at the point of purchase and they are then on the end of a bargain.

franklee

The option could be binding on the vendor at the agreed price but even if not it may be a great deal for the OP provided he is happy with the purchase price and the rent. The OP gets a low risk try before you buy and can complete at his own pace within the six months. Of course rent has to be paid, no difference to mortgage interest, or savings/investments interest/income albeit these are a bit low compared to rent ATM.

I suppose if there wasn't a binding option the vendor could pull out but then what does he do with a sitting tenant as that would hamper a sale to anyone else? Besides as it was for sale presumably the vendor does really want to sell now and would do so if the OP's finances were ready. OP was the property let before, is the vendor usually a landlord? Does he have a mortgage and does the lender agree to the let? Is the vendor going to be your landlord directly or has he made a deal with a middleman?

What I would avoid at all costs are these "brokers" that do options as their normal business as they rip off both vendor and tenant/buyer. They ask the tenant for a large deposit and charge above market rent and skim off a profit. Often the tenant is trapped renting as they cannot afford to buy, If it's one of those avoid as they are con men like this:

http://www.propertytribes.com/ben-rogers-is-simon-zutshi-correct-t-13842.html

davidmcn

mrginge wrote: »

Just because the price is written in the contract, does not mean the OP can't attempt to renegotiate it. The landlord is free to decline, accept or negotiate further.

But still obliged to proceed at the contractual price, if that's what the purchaser wants to do.

His_Dudeness

If you are sure that this this the property you want to buy and that you will have the funds to complete, you could simply exchange contracts now to complete in January.

Quite separately you could rent the property from the seller until then.

G_M

A bit of reading (very sketchy I'll be the first to admit) suggests to me that yes, a property option may well be binding (depending on the wording of course) as Dandelion says, but that there must be a price paid for the option. Ie the tenant/prospective buyer must hand over £X in exchange for the option to buy.

That would make it a contract.

My guess (again I'm not sure) is that the rent would not constitute payment for the option (unless perhaps the agreement specifically stated the rent included an element towards the option)

G_M

His_Dudeness wrote: »

If you are sure that this this the property you want to buy and that you will have the funds to complete, you could simply exchange contracts now to complete in January.

Quite separately you could rent the property from the seller until then.

Would the buyer's mortgage lender permit the purchase to Complete with a 'sitting tenant'?

:rotfl: