Buying the rental you live in

CEB0312

Hi, I’m just wondering. In the event that a tenant has had their offer accepted to purchase the property they live in- at what stage do they stop paying rent? 

user1977

On the day of completion of their purchase. That's when they start being the owner. They're still the tenant right up to that point.

DullGreyGuy

In theory you pay rent to cover you up to the date of completion. However you're both adults and are free to come up with whatever agreement suits you both but need to consider what happens should the deal fall apart before exchange

Mr.Generous

From my perspective the problem with this is that the tenants tend to believe the property is below the market value ... and the landlord believes its above

pmlindyloo

user1977 said:

On the day of completion of their purchase. That's when they start being the owner. They're still the tenant right up to that point.

Most tenants pay their rent a month in advance.  This means that there is likely to be a refund due at completion.  And, of course, do not forget that if you had a deposit on the property then this should be returned.

When we bought our rental property our solicitor dealt with these matters. 

theartfullodger

CEB0312 said:

Hi, I’m just wondering. In the event that a tenant has had their offer accepted to purchase the property they live in- at what stage do they stop paying rent? 

Very common with councils and housing associations, though less so than in the past.  Tenant does not have to stop paying rent but would be off his head doing so after sale completion ... Personal choice really 

Sarahspangles

You also have your tenants’ deposit to consider - it used to be the case that tenants wouldn’t pay their final rent payment because the landlord could deduct it from the deposit but it’s more complicated nowadays.  Maybe ask your solicitor to refer to this when you’re into the final weeks before completion.

Bright side - no checkout inspection!

km1500

user1977 said:

On the day of completion of their purchase. That's when they start being the owner. They're still the tenant right up to that point.

Don't want to be pedantic but you don't in fact become the legal owner of a property until it is registered at the land registry.

Sarahspangles

Don’t forget you need buildings insurance as well as contents once you’ve exchanged (not completed) 

ProDave

Mr.Generous said:

From my perspective the problem with this is that the tenants tend to believe the property is below the market value ... and the landlord believes its above

Most landlords (well me certainly) would sell to a tenant below market valuation as it avoids me having to pay estate agent fees to sell to anyone else, it avoids me having to go through the process of evicting the tenant, the hassle of taking over and paying the energy bills and council tax not to mention insurance while it sits empty waiting for a seller.

Selling to a tenant for a discount to market value seems a good deal to me to save a lot of uncertainty and unknown costs.

DullGreyGuy

ProDave said:

Mr.Generous said:

From my perspective the problem with this is that the tenants tend to believe the property is below the market value ... and the landlord believes its above

Most landlords (well me certainly) would sell to a tenant below market valuation as it avoids me having to pay estate agent fees to sell to anyone else, it avoids me having to go through the process of evicting the tenant, the hassle of taking over and paying the energy bills and council tax not to mention insurance while it sits empty waiting for a seller.

Selling to a tenant for a discount to market value seems a good deal to me to save a lot of uncertainty and unknown costs.

The secondary issue is agreeing what market value is. Our last landlord said he thought the flat was worth £650,000 after an estate agents visit so offered it to us at £630,000. 

We thought it was worth under £600,000 before any discount.

We bought elsewhere, landlord put it on the market at £650,000 and eventually sold it circa 12-18 months later for a bit over £500,000