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About to Exchange - Vendor wants to "rent back" house for limited period

Hi there,

I've got a friend who's about to exchange on a house. She is not in a chain and has somewhere to live that she's selling, but that's separate and won't happen for a few months.

The vendor of the place she is buying would like to do building work on the property they're moving into, for an estimated 2 weeks and have asked to "rent back" the property they're selling from my friend until this is done.

I guess the reason they don't want to delay exchange/completion is not wanting to hold up the chain but we're unsure.

My question is how "doable" is this? what agreements need to be in place? what are the risks? what would any one of here do before they'd be willing to accept this sort of arrangement etc? what would be insurance/liability implications? would soliticors need to be involved?

The mortgage company has cleared this to happen though, I do know that at least.

Exchange is due to take place today so god knows how everything has got left to the last minute, but yeah.
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  • Countist
    Countist Posts: 41
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    edited 13 February at 8:46AM
    Agree it would need a tenancy agreement, but wouldn't all the above be the standard risks any landlord would take on? As in if it was that risky no one would ever rent anywhere out?

    If the consensus is a resounding no that's of course fine, but it would be interesting to hear what would have to change to make it a yes too.
  • SDLT_Geek
    SDLT_Geek Posts: 2,427
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    Countist said:
    Hi there,

    I've got a friend who's about to exchange on a house. She is not in a chain and has somewhere to live that she's selling, but that's separate and won't happen for a few months.

    The vendor of the place she is buying would like to do building work on the property they're moving into, for an estimated 2 weeks and have asked to "rent back" the property they're selling from my friend until this is done.

    I guess the reason they don't want to delay exchange/completion is not wanting to hold up the chain but we're unsure.

    My question is how "doable" is this? what agreements need to be in place? what are the risks? what would any one of here do before they'd be willing to accept this sort of arrangement etc? what would be insurance/liability implications? would soliticors need to be involved?

    The mortgage company has cleared this to happen though, I do know that at least.

    Exchange is due to take place today so god knows how everything has got left to the last minute, but yeah.
    Is the property your friend is buying in England and is your friend intending to live in it?

    If so, your friend might well have a problem with stamp duty land tax. It sounds like your friend is keeping her previous home and selling it later, if so she would have to pay the extra 3% SDLT. 

    Her ability to recover the extra 3% when she sells her previous home is dependent on her meeting a number of conditions. HMRC guidance indicate that renting out a property first, means that those conditions are not met. 
    So accommodating the seller could cost your friend an extra 3% of the purchase price. 
  • elsien
    elsien Posts: 32,245
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    There have been threads on here before about the same thing, and the consensus is generally no. 
    I find the search function on here too useless to try but it might be worth a search if you have the inclination. 
    All shall be well, and all shall be well, and all manner of things shall be well.

    Pedant alert - it's could have, not could of.
  • nicmyles
    nicmyles Posts: 259
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    Yes, but most landlords aren't going to want the property back two weeks after the tenancy begins. If your friend is relaxed on timings, then maybe less of an issue, but I wouldn't consider doing this. I'd rather delay exchange if it were me. It's only two weeks and if there's no chain, there's no prob with that.
  • elsien
    elsien Posts: 32,245
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    No, then no another 100 times. A friend of my brother agreed to similar some years ago, big mistake.
    It would probably help the OP if you explained why? 
    All shall be well, and all shall be well, and all manner of things shall be well.

    Pedant alert - it's could have, not could of.
  • Countist
    Countist Posts: 41
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    edited 13 February at 8:58AM
    SDLT Geek - Yes it is in England and she is planning to live in it, so that is an important point worth noting thank you.

    However while I have you I have a further question on Stamp Duty, she's under the impression that she'll be paying the middle rate (i.e non second home non first time buyer) of stamp duty. But just double checking here it sounds like she'll pay the top rate, and then have to claim back remaining amount when she sells the previous place? How does that work?

    In addition she has a 3rd property she rents out, so I'm a bit concerned she's been given bad advice by the agent and will always be liable for the top rate of stamp duty regardless of what happens. Would that be correct?

    Maisie - what happened?

    And Elsien - thanks will check it out
  • housebuyer143
    housebuyer143 Posts: 3,154
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    edited 13 February at 9:04AM
    Countist said:
    SDLT Geek - Yes it is in England and she is planning to live in it, so that is an important point worth noting thank you.

    However while I have you I have a further question on Stamp Duty, she's under the impression that she'll be paying the middle rate (i.e non second home non first time buyer) of stamp duty. But just double checking here it sounds like she'll pay the top rate, and then have to claim back remaining amount when she sells the previous place? How does that work?

    In addition she has a 3rd property she rents out, so I'm a bit concerned she's been given bad advice by the agent and will always be liable for the top rate of stamp duty regardless of what happens. Would that be correct?

    Maisie - what happened?

    And Elsien - thanks will check it out
    If you sell your main residence at the same time as you buy a new main residence you pay standard stamp duty. If you, as she is buy a new main residence before selling the old one you must pay the extra 3% stamp duty and then claim it back once the other has sold. She has 3 years to do this. It doesn't matter if she has 40 rentals in the background, as long as she sells her main residence and buys another set the same time she will not be liable for the additional stamp duty.

    If she rents it out in the interim you will likely find she has voided her ability to claim all the additional stamp duty back.
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