I am Buying a house, then renting it back to the seller

SDLT_Geek

terrymoneysavingexpert said:

Would I be breaking any laws if the person did not claim housing benefit?
thanks 

Yes, you would be breaking laws, see the post by edddy on the first page.  You do not have the FCA registration needed and cannot legally enter into a sale and rent back transaction.

terrymoneysavingexpert

Hi 
Thanks for all your comments before, and I have been busy talking to the FCA.
The FCA have now told me that in this case as long as the 2 transactions are completely separate then both transactions do not need FCA approval.  Therefore I can just buy the house under a normal sale.  Then after completion I can let the old owner stay in the house and I can set up a rental agreement with the old owner.  Then it is not a "sale and rent back agreement" therefore ok.
But I am very nervous and not sure who I need to speak to next.
what do you all think?
thanks Terry

davidmcn

terrymoneysavingexpert said:

The FCA have now told me that in this case as long as the 2 transactions are completely separate then both transactions do not need FCA approval.  Therefore I can just buy the house under a normal sale.  Then after completion I can let the old owner stay in the house and I can set up a rental agreement with the old owner.  Then it is not a "sale and rent back agreement" therefore ok.
But I am very nervous and not sure who I need to speak to next.
what do you all think?

I can't see anybody believing that the transactions are "completely separate".

SDLT_Geek

davidmcn said:

I can't see anybody believing that the transactions are "completely separate".

I agree with davidmcn.

terrymoneysavingexpert

But who is going to complain or investigate?

Aranyani

What is the long term plan here?  

eddddy

terrymoneysavingexpert said:

But who is going to complain or investigate?

The person that you buy the house from might decide in the future that you misled him/her in some way, and might complain to the ombudsman.

Perhaps when you eventually re-sell the property, and that person sees you making a profit, and thinks they should have had some of that profit.

Or maybe a relative of the person that has sold the house finds out about the deal, and (rightly or wrongly) the relative feels that you've 'ripped-off' the seller.

warby68

Could OP not take over the existing mortgage and be a private mortgage lender to the friend?
I don't know the various tax positions but this would protect the investment and could mean no repayments until the property is sold. I think interest could be charged/rolled up if some return is required as well.
OP seems keen to actually own the property but this way removes the landlord and benefit issues I think.
Unless of course the underlying plan does have ownership and securing extra benefit for rent as the main drivers although OP says not.

xylophone

Your friend has a mortgage.

How about lending her the money to pay off the mortgage against a first charge on the property?

You might specify the the interest on the loan would roll up and be paid  with the capital on sale - you would pay tax on the interest in the year of receipt.

You should see a solicitor to discuss the matter before taking any action.

foxy-stoat

Does your friend have any children?  They will 100% complain that she has given away their inheritance after she dies.  

Just pay her mortgage for her, give her a loan statement every month, get her to pay you £1 each time so the debt isn't statue barred.  Once she goes you can be paid when the house is sold, all above board and transparent.