Local occupancy clause and renting

L'aalLily

Hi, MSE newbie here! We live in an area where house prices are high and wages are low. Very little social housing in immediate area. We have to move out of our privately rented home of 9 years as landlady needs to sell. Hardly any private rental properties in our price range either. We really want to stay in this area (school, work, friends, etc). Have noticed a nearby house for sale with a local occupancy clause - great house, very cheap due to LOC. Even so, we can't afford to buy or get a mortgage at present. Would it be possible for a local friend to buy the property and rent it out to us to cover the mortgage payments?

Guest101

L'aalLily wrote: »

Hi, MSE newbie here! We live in an area where house prices are high and wages are low. Very little social housing in immediate area. We have to move out of our privately rented home of 9 years as landlady needs to sell. Hardly any private rental properties in our price range either. We really want to stay in this area (school, work, friends, etc). Have noticed a nearby house for sale with a local occupancy clause - great house, very cheap due to LOC. Even so, we can't afford to buy or get a mortgage at present. Would it be possible for a local friend to buy the property and rent it out to us to cover the mortgage payments?

Possibly, but you seem to be jumping way ahead. Does your friend want to be a LL? and can he/she afford it?

Pixie5740

Can properties purchased under LOC be let out? I would have thought the LOC would mean that the buyer would have to be local and live in it as their home.

Even if your plan was possible your friend would require a BTL mortgage. You simply paying enough to cover the mortgage payments could see your friend out of pocket.

L'aalLily

Friend had already suggested this regarding another property but that one was unsuitable. Haven't mentioned this one as have no idea if it would possible so thought I ask on here first.

sparky130a

Be very careful. Friends and money are a dangerous combination. Let alone when they're your LL!

Has your current landlady followed the correct procedure/notice period for you leaving?

L'aalLily

Thanks for your replies. We certainly wouldn't want to leave friend out of pocket. Hoping it would still be cheaper to cover all their costs than renting a similar property in our area. Just have no idea if it's possible! I guess I could ask the estate agent but I admit I'd rather find out anonymously...
LL is a lovely person (another reason why we're so sad to have to move on) - she has not given us official notice yet. In fact, she has given us a long time to find another place and I know she will be be very fair with us and give us a great reference.
I understand where you're coming from re: friends and money. It's a tricky one. Will give it a lot of consideration before doing anything

csgohan4

your friend is not a charity and they have to make money too, think carefully is the house worth your friendship?

L'aalLily

No of course not - it would never have occurred to me. It was their suggestion entirely. I would never push for it, and would never take advantage. But if it could work for all concerned, and is possible, I would certainly consider it!

saajan_12

If you do end up involving the friend, make sure
1) You agree their 'return' so they are no worse off than say a basic savings account

2) Tenancy agreement in writing so there's no misunderstanding later. Include under what circumstances either party can terminate, what happens if they need to liquidate, what happens if you can't pay / need t move.

3) Friend will be liable for higher rate stamp duty (if they already own another property or will be liable if they later purchase another). When they sell they will also be hit with Capital Gains Tax.

sparky130a

I don't think anyone is saying categorically don't do it. Simply be cautious.

A cast iron, legal agreement needs to be in place. For both parties sakes.

This sort of arrangement should NEVER be entered into casually.

And whatever you do, don't ask the EA for advice regarding this....

L'aalLily

Thanks again for all your replies. Still not sure whether it is actually possible though, under the terms of the local occupancy clause! I definitely won't ask the EA but think I might try the local council to see if they can help.