Selling and renting back

FlorayG · 7 July at 8:49PM

https://forums.moneysavingexpert.com/discussion/comment/82061386#Comment_82061386

Did you actually read what I wrote?

Its nothing to do with me, I'm just curious. I don't know her well enough to offer advice even if I had any

elsien · 7 July at 9:12PM

No she doesn’t have to vacate - it just transfers from ownership to a tenancy,

Person buying it from her is also taking a bit of a risk if she’s in financial straits and then can’t pay her rent.

TroubledTarts · 8 July at 6:42AM

https://forums.moneysavingexpert.com/discussion/comment/82061854#Comment_82061854

It is still valid advice and this is what you get from forums.

Either chose to pass this onto your friend or not but the debt parts of this forum could potentially really help your friend out.

I don't understand why you come here for advice, even for a friend, then complain about it just because I didn't prefix every bit of advice with (for your friend)

FlorayG · 8 July at 7:24AM

https://forums.moneysavingexpert.com/discussion/comment/82062110#Comment_82062110

Because I clearly state I'm not here for advice, only information. I barely know this person

FlorayG · 8 July at 7:29AM

https://forums.moneysavingexpert.com/discussion/comment/82061888#Comment_82061888

Hmm isn't the landlord required to also implement affordability criteria? Or is that optional and in that case, if they don't do it, how does that come back on the landlord if they can't afford the rent?

Which brings up another thought, can the future rent be agreed and tenancy signed before the sale is completed? Otherwise the landlord could set a rent she can't afford

Let me state it again; I hardly know this person, I'm only interested in the mechanics of how it works. I am not going to get involved in her life. Please don't advise what she should do.

TroubledTarts · 8 July at 7:31AM

https://forums.moneysavingexpert.com/discussion/comment/82062135#Comment_82062135

Forgetting the fact no matter what people type here you barely know this person so probably won't be passing anything on?

You stated

Any particular dangers or perhaps advantages of doing this?

So yes doing this without a recommendation as I stated in my reply. Knowing someone or a company this process has worked for and can be trusted was a valid reply imo. Under the dangers part of your question.

I fail to see you taking such offence.

eddddy · 8 July at 8:03AM

FlorayG said
Any particular dangers or perhaps advantages of doing this?

The main risk is that your acquaintance sells the house, rents it back, but then gets evicted - either because she can't afford to pay the rent, or because the new landlord decides to sell the property after 12 months.

(That used to happen a lot, which is why the government decided that the FCA must regulate this type of arrangement.)

So, for example, a 'rogue' aims to make a profit by buying the house cheaply because it's tenanted - waiting 12 months, evicting your acquaintance - in order to sell at "full price" because it's vacant.

If that's the case, your acquaintance might be better off selling the vacant property now (i.e. moving out) - so that they get the "full price".

But… your acquaintance could protect herself by requiring a 5 year, 10 year or 15 year (or whatever) tenancy agreement as a condition of the sale. (Assuming the buyer would agree to that.)

Your acquaintance could still be evicted if she failed to pay the rent… But, for example, she could require a 10 year tenancy agreement with a low fixed rent for those 10 years, as a condition of the sale. (But again, the buyer would have to agree, and she'd probably have to take a massive hit on the selling price.)

But FCA rules might not allow any of this anyway.

Herzlos · 8 July at 10:48AM

https://forums.moneysavingexpert.com/discussion/comment/82061843#Comment_82061843

Then it's unregulated and unless the buyer is a good friend of hers she's likely to get completely screwed.

Legally, she'll be selling the house to the other person without vacant possession, presumably for well below market value. Then she'll sign a rental agreement. She'll have no special rights and there's unlikely to be any contractual protections about rent increases or protections.

The buyer could evict her more or less straight away to sell it on, or keep bumping up the rent to price her out.
The buyer could of course be a decent landlord doing her a favour.

I know someone who did similar, and sold their house to a friend. As I understand it the friend paid off the mortgage, so bought at something like half of market value, and hasn't been charging rent. It's going fine for them so far but it feels like a disaster waiting to happen.

martindow · 8 July at 12:28PM

I know something similar happens, or used to happen, in France. The owner sells to someone in return for a monthly payment and the right to live there until their death. The owner has no way to evict them while they are alive. The buyer is offering this arrangement and taking a bet on how much longer the seller will survive.

A woman called Jeanne Calment made an arrangement of this type at the age of 90 and then went on to live to 122. The lawyer who had 'bought' the flat died before her and his heirs had to carry on the payments until her death. By then the money paid out had greatly exceeded the value of the flat.

https://en.wikipedia.org/wiki/Jeanne_Calment

eddddy · 9 July at 7:33AM

martindow said
I know something similar happens, or used to happen, in France. The owner sells to someone in return for a monthly payment and the right to live there until their death. The owner has no way to evict them while they are alive. The buyer is offering this arrangement and taking a bet on how much longer the seller will survive.

Similar schemes exist in the UK - they're called Home Reversion Plans…