If you were a tenant would you do this

elsien

Isthisforreal99 said:

So if the tenant apparently can't do the things the OP claims ( or lacks the common sense to do so - still think there may be some learning issue at play here) then how do they know what they are signing up for. Any decent solicitor will want to know that their client understands what they are signing up for and if they say 'no clue tbh', then what? 

This would be my question. You say he doesn’t understand what a mortgage is but this is more complicated than a mortgage for him to grasp the principles of. 

Also now that you’ve mentioned the partner and the son, wondering about any complications should they split up at any point during this arrangement - married or living together? 

poseidon1

ChirpyChicken said:

Section62 said:

ChirpyChicken said:

Section62 said:

ChirpyChicken said:

The agreement would be full payment as part payment would negate the outcome 
He is unfortunately not the sort of person to be able to do that nor would he ever likely to be
I see this as an opportunity to give him that chance of ownership

Who would pay his stamp duty (or equivalent) ?

No stamp duty would be due

If the property was transferred to him now under the current system, no.  But you are talking about a long-term arrangement in which he only gets ownership at the end.

None of us know what the property transfer taxation system might look like at the later point in time (hence the "(or equivalent)") - so the question is if he doesn't have the ability/capacity to purchase conventionally, will he be in the position to fund whatever tax liability they may be at the time?  And if not, will you/your estate underwrite that cost in addition to the benefit of the property itself?

...the agreement you need to get him to sign is getting longer and more complicated.  And I suspect a solicitor would have concerns whether he has the capacity to enter into such an agreement.  Even if the intent is to benefit him.

He doesn't lack mental capacity he is simply a person who does not have a lot of common sense 

A lot of people have no clue about stuff a lot of people on here take for granted and understand without issue

Like he didn't know to wipe the side of the bath after a shower until someone told him.....

And yes my estate would have no issue in that score.

They say where there is muck there is brass
Where there are parking tickets there is a pot of gold 😅

Your summation of his mental abilities strongly suggest he would not understand the legal advice he would need to take before entering this complex lease/option purchase agreement.

 A conscientious lawyer ( on his behalf), would quickly doubt his client's understanding of the legal obligations he would be taking on.

As others have already indicated, your best bet would be to keep things simple and merely  gift the property to him after a specific qualifying period of renting. In this scenario you may have capital gains tax to pay on any increase in value at the point of gifting as well as potential IHT consequences on your own estate.

You would also need to address what happens to the property if you died before completion of the qualifying period of renting, and whether that would involve your executors having to follow through on the arrangement after your death.  This would be a significant complication for executors since what would be the value of a property ( for IHT purposes) burdened with such an unusual obligation?

Seems to me you would need to sit down with a competent property lawyer, to work out how best for you to achieve your altruistic intentions. This is definitely not a DIY arrangement.

brianposter

This sort of arrangement used to be perfectly normal. The important thing is a legal agreement which covers everything that might go wrong and what happens if someone changes their mind. It needs a good solicitor although searching for "rent to buy agreement" on the internet provides a lot of information.

Titus_Wadd

I have a friend in a similar (sounding) position: a few bad decisions in life but now more settled.  They would struggle with home ownership.  Currently renting suits them and they are able to manage their monthly budget with not surprise repairs or maintenance expenses.  If the boiler stops working their landlord gets it fixed, for example.  There's "security" in this arrangement which suits my friend.
You have great intentions for your tenant, but maybe for your friend a stable and reliable tenancy would suit them currently. Property ownership is seen as an aspirational goal, but it isn't for everyone.  Is there an element of you not wanting to continue as a landlord?  Maybe consider leaving him the house in your will eventually but maybe don't push house-ownership on him before he's ready for it?
The paperwork needed for even a simple transfer will get more complex than you seem to appreciate.  Definitely both of you would need separate legal representation- would your tenant understand issues and queries his solicitor might raise? I can't help thinking you'd help him by staying as his landlord while he acquires some more life skills.

saajan_12

ChirpyChicken said:

Ive told him I want 80k in rent for the house plus as he is not taking out a mortgage in order to get the house an additional payment of £65 per month on top of the rent at £600 a month 

Ive said i want 80k for the house  which would allow for modest growth in house prices in this area

The £65 would be a token interest payment to further my return in lieu of them taking any form of mortgage.

On completion of the 80k payment i have said I would transfer the house title and and thus all beneficial interest to him

He would have to stay in the house for the full term in order to get the house and no payments would be refundable if he moved etc

If however I died the house would be left to him ( or his son in trust )

In addition whilst I would carry out any works within the agreement he would have to agree to pay for upkeep and works

Why does this even need an agreement? You're basically saying you want to increase the rent to £665 and then after x years you'll transfer the property to him. So just do that. You don't really need him to agree, since he's not really paying anything more than the agreed rent. If he doesn't agree to the rent increase then just extend the time by a year before you stop collecting rent.  

In the near future, the only thing that changes for him is who does the repairs.. but that' could be a problem anyway since you're still a landlord with those responsibilities. So I'd just do the repairs and extend the time / total amount. 

It doesn't really matter whether the price matches the market value, since you're counting rent money that would otherwise be yours, ie he's not really paying anything over and above rent. 

BikingBud

As the tenant would you not wish to protect this position?

If the OP changes their mind, becomes incompetent or dies who will ensure the verbal agreement is respected and the tenant gets the property transferred after the £80k + "interest" ?

Herzlos

ChirpyChicken said:

He doesn't lack mental capacity he is simply a person who does not have a lot of common sense 

A lot of people have no clue about stuff a lot of people on here take for granted and understand without issue

Like he didn't know to wipe the side of the bath after a shower until someone told him.....

Are you confident that he could maintain the upkeep of a house if he owned it?

It might be easier for him if you continue to rent it out as-is and gift it to him at some point. 
Either at a below market rent, or current rent and puting the difference into savings for him.

ChirpyChicken

BikingBud said:

As the tenant would you not wish to protect this position?

If the OP changes their mind, becomes incompetent or dies who will ensure the verbal agreement is respected and the tenant gets the property transferred after the £80k + "interest" ?

i agree that does require consideration

ChirpyChicken

Herzlos said:

ChirpyChicken said:

He doesn't lack mental capacity he is simply a person who does not have a lot of common sense 

A lot of people have no clue about stuff a lot of people on here take for granted and understand without issue

Like he didn't know to wipe the side of the bath after a shower until someone told him.....

Are you confident that he could maintain the upkeep of a house if he owned it?

It might be easier for him if you continue to rent it out as-is and gift it to him at some point. 
Either at a below market rent, or current rent and puting the difference into savings for him.

I think so with help and guidiance
ive had a lot to think about, i think the idea of saying to the tenant the offer is £600 per month and you just rent or 665 and its gifted after x number of years seems appealing

ChirpyChicken

saajan_12 said:

ChirpyChicken said:

Ive told him I want 80k in rent for the house plus as he is not taking out a mortgage in order to get the house an additional payment of £65 per month on top of the rent at £600 a month 

Ive said i want 80k for the house  which would allow for modest growth in house prices in this area

The £65 would be a token interest payment to further my return in lieu of them taking any form of mortgage.

On completion of the 80k payment i have said I would transfer the house title and and thus all beneficial interest to him

He would have to stay in the house for the full term in order to get the house and no payments would be refundable if he moved etc

If however I died the house would be left to him ( or his son in trust )

In addition whilst I would carry out any works within the agreement he would have to agree to pay for upkeep and works

Why does this even need an agreement? You're basically saying you want to increase the rent to £665 and then after x years you'll transfer the property to him. So just do that. You don't really need him to agree, since he's not really paying anything more than the agreed rent. If he doesn't agree to the rent increase then just extend the time by a year before you stop collecting rent.  

In the near future, the only thing that changes for him is who does the repairs.. but that' could be a problem anyway since you're still a landlord with those responsibilities. So I'd just do the repairs and extend the time / total amount. 

It doesn't really matter whether the price matches the market value, since you're counting rent money that would otherwise be yours, ie he's not really paying anything over and above rent. 

I like this thinking