Lease option agreement (any advice?!)

diamond_123

Hi there!

As you can see I'm very new to the forum but my husband and I are currently in a very difficult position with the house we wish to purchase and therefore we could do with any advice right now.

We started looking for a property to purchase as FTBs in June. We came across a home which was previously rented by the homeowners to council tenants who basically wrecked the place. There's a lot of work which needs to be done to make the property livable in terms of unboarding doors, cleaning and overall fixing up the house.
The homeowner took this into consideration and put the property by selling at a relatively low price, which is one of the reasons we decided we wanted to put in an offer.

Our offer was accepted by the vendor, we had our survey done which stated everything was OK with the property structurally and we steadily progressed with our solicitors in terms of the searches and the other pieces leading to exchange.

As we had progressed very quickly from the offer, offer accepted, survey and other pieces the vendor had expressed that they were happy for us to move in as early as possible. We agreed that if all went well we would move in before the end of July 2016.

We reached the end of July and unfortunately we were unable as we were not able to exchange because the solicitor had confirmed one of the searches had brought up that the house was currently under a restriction which prevented the property from being purchased from any buyer. It turns out the property was bought under the right-to-buy scheme, which stipulates the property cannot be sold on until after 10 years of purchase. This period of 10 years finishes in March 2017.
This was very disappointing for us as my husband and I had only just gotten married and we had hoped to move into the property once all was done. My husband lives a fair 40 miles from the property and I live about 50 miles away therefore we were newlyweds with nowhere to live with as we didn't have a budget for temporary accommodation (as we were going on the hope that the house would be finished by the end of July).

We spoke with the estate agent as we were unsure why they had advertised a house which cannot technically be sold, essentially they washed they hands off on their part and stated that they had done all their checks from their sides and that there is nothing further that they could have done which would have shown the property could not be sold.

We also spoke to the vendor and tried to understand why they were selling a house which they could not. Turns out the vendor is a bit of an elderly lady who, to put in a nice way, isn't someone who i would expect to know this information. Her son had been dealing with the house and said he was not aware that the house was under restriction.

Long story short: we met with both the mother and the son whereby they had communicated their intentions to quote 'get rid' of the house as they had moved on, purchased a new home for the family and are paying the mortgage on this house currently with nobody living in the property (as the council tenants have long left).
They made a suggestion for us to rent the property from them, paying the amount of the mortgage up until March 2017 then they would sell the property to us deducting the amount we would have paid in 'rent' to date (the amount of their mortgage that we would have paid).

Of course we wanted to ensure that we were covered and that we wouldn't be paying rent for the house for the vendor to change their mind, additionally as the house needs fixing up we will be paying a fair bit to do up the property - if the vendor changes their mind that means we would also lose this money as well.
We agreed to put in place a contract stating the intention for us to purchase the property in March 2017 and that we would cover the mortgage during this time whilst we rent the property and that this amount would be deduced from the total value of the property.

What sort of clauses should we be adding to this lease option agreement? We will have a solicitor look over it but as FTB's i'm really unsure what i should be asking for or even what to do....

eddddy

diamond_123 wrote: »

What sort of clauses should we be adding to this lease option agreement? We will have a solicitor look over it but as FTB's i'm really unsure what i should be asking for or even what to do....

I guess you need to decide what the potential risks are, then make sure you mitigate them.

A few risks that come to mind include (assuming you need a mortgage) :

- Your mortgage offer will expire. What if you can't get another mortgage offer?

- What if the value of the property drops before March 2017? Would you still want to pay the agreed price? Will you still be able to get the size of mortgage you need?

- What if the seller's buildings insurance is inadequate and the house burns down? You don't want to be committed to buying a pile of ashes.


Given all of the above, I would probably aim for an 'option to purchase' agreement.

i.e. If you decide to purchase in March 2017, the seller must sell it to you. But you can also decide not to purchase, if you wish.

D_M_E

Whatever you agree, you need to get it in writing and get your solicitor to look over it before signing.

You have agreed a price based on its current state, so why not offer to rent it from them at a third of the current market rate, live in it and do it up while living there, and have a clause in the rental agreement that they must sell it to you at the end of the 10 year period for the original agreed price.

There should also be a clause in the agreement that, if it should be sold to someone else, then the difference between the original agreed price and the new price after any improvements done by you should be paid to you, this way your investment in the property in terms of time and money should be protected.

EDIT - If you do decide to go ahead, since the current owner is elderly, you also need written agreement as to what would happen should the owner become deceased before the 10 year period expires and this should also be signed by both parties and witnessed.

Get it all in writing and get it witnessed and pay your solicitor a few quid to get it looked at and correctly signed by at least 2 witnesses.