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Buying a house where the owners would like to stay on as tenants...Would you?

(50 Posts)
NaiceBiscuits Thu 09-Mar-17 10:55:57

I'm wanting to buy a house to let out, and I've seen a house in the area I'd like to buy that's in lovely condition. The owners need to free up capital due to ill health and would like to stay in the house as tenants afterwards.

I'm thinking that this could be good, because they've clearly looked after the house and are attached to it. What are the pitfalls, and would you do this if you were in my shoes?

namechangedtoday15 Thu 09-Mar-17 11:15:21

Its called "Sale and Rent Back" - it is notoriously difficult both legally and from a lender's point of view. It can be done but you need legal advice and to check the position with potential lenders.

dudsville Thu 09-Mar-17 11:20:13

Hm, I think this is done in France with elderly couples who want to free up their equity but remain in their home for as long as possible. Thing is with that is that they could stay as long as they wanted. It doesn't appeal to me. What if there were problems and you wanted the tenants to move out? Also, understandably they would feel it was their house.

wowfudge Thu 09-Mar-17 11:34:07

I think the main issue would be around having a thorough survey so that you know the place is definitely well maintained and there are no costly shocks heading your way.

Then there is the shift for the tenants from being the owners to your tenants. Will they stop doing anything about the place? Will they be very demanding if anything does need doing? Will the house need adapting to enable them to continue to live there? Can they afford market rent if they have paid off their mortgage?

Get tax advice - if they were to transfer the house to a relative then there are IHT avoidance implications if one of them dies within 7 years of the transfer of ownership. You'd want to be sure there was no exposure for you - I wouldn't have thought there was, but best to be sure.

Are they actually willing to move? Might it be better for them to actually downsize rather than stay?

How will you feel if there comes a time when you want them to leave?

Lots to think about.

NaiceBiscuits Thu 09-Mar-17 11:35:49

I'd be a cash buyer....Can't we just do the normal short-term assured tenancy thing?

Allthebestnamesareused Thu 09-Mar-17 11:39:23

You are able to do this as long as they enter into an assured shorthold tenancy in the same way that any other tenant would.

They would not be entitled to stay as long as they wanted hmm

Make sure that the conveyancing solicitor also knows about tenancies (most should) and that it is set up correctly. Take a rental deposit and put it in a proper protection scheme. Also make sure you go in and take a proper inventory of fittings etc to annex to the tenancy agreement.

I would definitely go round and go through everything item by item or where you think you have bought a house with a built in oven, certain light fixture if they do leave and take them you are stuffed if they are not on your inventory that they agree.

Also set boundaries as to what they can and can't do without permission as the tendency will be to carry on treating it as their own house. Do you want them to have permission before decorating and a say on what colour for example.

We actually bought a BTL with a a tenant in situ (albeit not the porevious owner). As long as the paperwork is done properly it shouldn't be a problem. She stayed on another 7 years.

Bluntness100 Thu 09-Mar-17 11:43:27

You need to speak to your solicitor, there is some weird rules round this, for example they have to formally move out at completion I think then move back in as tenants otherwise there is an issue in terms of how long them have lived there if you wanted them out. Seek legal advice.

NaiceBiscuits Thu 09-Mar-17 11:56:56

They apparently would like to stay there, put a drive in (at their expense) and do other improvements. The ones they've done so far are to a high spec and they have better decor taste than me grin

Yes to doing a detailed inventory....With photos?

They've only lived in the property for just over a year, does that make a difference?

JoJoSM2 Thu 09-Mar-17 14:31:23

Sounds bizzare. How can they afford a new drive if they need to sell as they need money??? Why would they carry on with other improvements if the house isn't theirs and they pay rent on it? It doesn't add up to me.

NaiceBiscuits Thu 09-Mar-17 15:12:11

Good point. I'm passing on what the EA has said, but I'll hopefully get to speak to them myself tomorrow to find out more. What questions do I need to ask?

JoJoSM2 Thu 09-Mar-17 16:00:33

I'd ask their motivation for this move and double check that they are happy with AST. Is it perhaps the case that they look to downsize in the near future but whilst they are looking for the right home, they want to rent the home that hey have just sold? Or do they expect to live in the property for the rest of their life? Generally, Is be very suspicious of the situation and seek advice from a lawyer before committing to anything.

NaiceBiscuits Thu 09-Mar-17 16:07:37

I'm thinking I should ask for 6 months rent in advance, if I decide to go through with it? And get credit checks.

I don't mind if they want to downsize to somewhere else later on, or whatever. I'm always a bit suspicious of EAs though, so it'll be interesting to see what the owners say.

SantasLittleMonkeyButler Thu 09-Mar-17 16:14:08

I wouldn't do it TBH.

Can you imagine what would happen if your own circumstances changed and you needed to sell the house? Or if they became unable to pay the rent at some point?

Could you really evict tenants in ill health who have this attachment to the house?

It just seems to add that added level of complication for me. I'd much rather buy a different house & start again with new tenants.

HelenDenver Thu 09-Mar-17 16:16:47

I wouldn't do this eirher. If you don't think it's rentable to others, don't buy it

HelenDenver Thu 09-Mar-17 16:17:43

And the new drive idea is insane.

They should look into equity release. Strange they've only had it a year and now can't afford if.

SantasLittleMonkeyButler Thu 09-Mar-17 16:19:12

Sorry - x-posts, I see they've only owned the house for a short time.

Actually, I'm not sure if that makes the situation better or a bit more odd!

specialsubject Thu 09-Mar-17 16:52:34

something smells very fishy with these circumstances. Only a year?

NaiceBiscuits Thu 09-Mar-17 18:23:19

Helen I think it's very rentable to others, seems in great condition.

special and Santas Yes, I want to find out what's going on and why they could afford to rent but not keep their house?

wowfudge Thu 09-Mar-17 18:28:57

I wasn't for one moment suggesting you would be giving them anything other than an AST. I was thinking more along the lines of if they had been there a long time, would they accept the reality of their changed circumstances. Sounds really odd that they have only been there a year and want to spend money on a new drive though. What's really going on?

wowfudge Thu 09-Mar-17 18:29:52

Are they trying to offload an asset for some reason?

expatinscotland Thu 09-Mar-17 18:39:44

I wouldn't touch this with a 10-foot barge pole.

UpLighter Thu 09-Mar-17 18:42:52

You can only do sale and rent back if you are authorised and licensed to do so. Think there are about 7 companies that are licensed in the UK.
It was heavily abused by some nasty gits so it was clamped down on.

Whileweareonthesubject Thu 09-Mar-17 18:56:18

Could it be a way for them to potentially avoid care home fees? If they own the house, they'd probably have to pay if they ever needed to go into a care home, whereas as tenants they might not and I suspect it's easier to hide away so e cash than it is to hide a whole house.

NaiceBiscuits Thu 09-Mar-17 19:05:13

It's on the market generally, and there are quite a few interested first time buyers, so they know they're likely to have to move, but the EA says they'd love to stay if they can, because if they move they'll be renting.

NaiceBiscuits Thu 09-Mar-17 19:10:58

In the last year or so they've rewired (I'll ask to see certificates if we get that far), installed double glazing, replastered, put a new boiler in and a one storey extension on the front.

None of the other houses in the street have sold since 2009, which seems like a good sign?

This is a three bed. My other top option is a two bed built in 2000. Both would offer similar rental income.

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