Sell and rent back in order to move house, break the chain

madbilly

Hi all,

I know this situation isn't unique, however we're struggling to get helpful advice from "official" sources (imagine solicitors, citizen's advice bureau). We're in a chain, we have a buyer who wants to buy before their mortgage offer expires and who doesn't need to move immediately because they're living at their parents' home. Our onward purchase probably isn't going to be ready to complete before our buyer's mortgage offer expires. Our buyer, via our estate agent, has suggested that we sell the house to them and we can continue to live here as tenants, paying rent (possible below market rate) until our house purchase completes and we can move out to our new home.

Until I read this thread https://forums.moneysavingexpert.com/discussion/6229556/selling-to-a-buy-to-let-purchaser-and-becoming-a-tenant-and-renting-the-house-after-completion I was thinking that it's odd I can't find any info for home buyers/sellers in this situation, because it can't be unique and it's actually a good way to break a chain if it can be made to work well (they do it all the time in the USA, so my colleagues over there tell me). The main info I'd found online about "sell and rent back" was about the operators of various schemes for people in financial difficulty, which thankfully doesn't apply to us.

However, after reading that thread I'm now thinking that even just an arrangement between private individuals wouldn't be permitted, because it is a practice which is regulated by the FCA and anyone buying a house to then rent back to the previous owners needs to be registered with the FCA. Is that right?

Thanks

housebuyer143

Your buyers are getting a residential mortgage? If so, they can't just let you live there as it's a breach of the offer and they definitely can't accept rent. 
The solicitor isn't likely to allow this as they also work for the lender. It also has huge risk for the buyer who will become a landlord and need to comply with all the required legislation.

theartfullodger

Sell and rent back needs to be AT LEAST 5 year tenancy, with cooling off period etc etc etc.
Don't...

See
https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems/sale-and-rent-back-schemes/

madbilly

housebuyer143 said:

Your buyers are getting a residential mortgage? If so, they can't just let you live there as it's a breach of the offer and they definitely can't accept rent. 
The solicitor isn't likely to allow this as they also work for the lender. It also has huge risk for the buyer who will become a landlord and need to comply with all the required legislation.

Yes they'll need a BTL mortgage, or at least get lender agreement, we need to make sure that's done.

theartfullodger said:

Sell and rent back needs to be AT LEAST 5 year tenancy, with cooling off period etc etc etc.
Don't...

Even for a one-off like this? I can see if it's a business based on sell and rent back that it needs to follow the rules for the regulated activity under the FCA, but does this really apply for private individuals as well?

Mr.Generous

A seller offered this to me because A) His new home was having a lot of building work and He knew I was going to let it out.

The purchase required vacant possession for the standard contract for a start. I wasn't going to pay extra solicitors fee's to get a bespoke contract.

I just didn't like the idea of it, and although they messed about with completion date it all went ahead and they vacated.

I found out pretty quickly the electric shower was intermittently going cold and needed replacing, and the oven wasn't working - not the usual element / thermostat issue either. So new oven and shower sorted straight away.

Did wonder that if I'd rented it I'd have got the "Sorry to bother you landlord, but ..." calls after a couple of weeks. Get me to fix everything they couldn't be bothered sorting.

The boiler also only gave hot water for about 2 mins, renovating I never noticed - tested, it worked. First tenant noticed when they had a bath though   New boiler was another expense.

So from a landlords perspective I'd be extremely wary of this kind of arrangement.

Nissanhut

Understanding that this is all because of a mortgage offer expiring,I would suggest that interest rates are likely to come down in the next few months so your buyer may well get a better mortgage offer if they held off.It would certainly simplify things.

madbilly

Nissanhut said:

Understanding that this is all because of a mortgage offer expiring,I would suggest that interest rates are likely to come down in the next few months so your buyer may well get a better mortgage offer if they held off.It would certainly simplify things.

Yes that's a good point!