| Lease Options Applied to UK Residential Property | | | | way out of the deal on a technicality and may even |
| Purchase | | | | attempt to have the potential purchaser evicted. |
| The current, uncertain state of the UK property is | | | | Therefore, it is essential that sound legal advice is |
| making many potential purchasers of residential | | | | obtained by the buyer and the lease purchase |
| property contemplate alternative ways of funding their | | | | contract is scrutinised in great detail in order to ensure |
| property purchase. One type of transaction that some | | | | that no potentially serious loopholes exist in the |
| buyers are considering is a 'rent to buy house' | | | | agreement contract. |
| purchase. | | | | Rent to Buy House Purchase Details |
| Rent to Buy House Purchase A 'rent to buy house | | | | Both the selling price of the property and the monthly |
| purchase' scheme (also known as a 'residential lease | | | | rent to be charged are negotiated between the |
| purchase' or a 'rent-to-own purchase') is a short term | | | | vendor and the prospective purchasers and so |
| lease on a residential property coupled with an | | | | depend on the state of the housing market at the time |
| agreement to purchase the property within a specified | | | | that the agreement is concluded. |
| time limit. | | | | In addition, the purchaser can enter into a rent to buy |
| Try Before You Buy Your Home! | | | | house purchase and obtain the right to buy the |
| The usual model for this type of rent to own lease | | | | property without having to wait for mortgage finance |
| purchase is as follows: | | | | to be obtained, before proceeding with the purchase. |
| A potential purchaser will sign a contract to buy a | | | | As a general rule, buyers prefer a longer option period |
| residential property, within a fixed period of time, usually | | | | whereas sellers are normally keen to complete a sale |
| three years or less. When the initial contract is signed, | | | | as speedily as possible. A long option period gives the |
| the prospective buyer will pay an option fee (normally | | | | purchaser more time to clear existing debts and to put |
| between one and five percent of the purchase price) | | | | mortgage funds in place. However, if the financial |
| which is credited towards the purchase of the | | | | climate becomes difficult and the buyer is unable to |
| property. | | | | raise sufficient mortgage finance to proceed with the |
| The prospective tenant-buyer will then pay the seller a | | | | purchase, then there is a serious risk of losing the |
| monthly rental and, in some cases, an additional rent | | | | option fee and any rent premium that has already |
| premium that is also credited towards the purchase of | | | | been paid. |
| the property. If the potential buyer decides, for | | | | Rent to Buy Option Fees & Rent Premiums |
| whatever reason, not to proceed with the house | | | | Vendors and purchasers have different perspectives |
| purchase, the option fee and any additional rent | | | | on option fees and rent premiums. |
| premium is forfeited to the property owner. | | | | To the seller, the payment of the option fee and rent |
| Lease to Buy House Purchase Price | | | | premium gives a strong indication that the buyer is |
| The purchase price of the property is fixed at the time | | | | serious about completing the purchase of the rent to |
| that the rent to buy house purchase agreement is | | | | buy property. Even if the purchase falls through, the |
| signed by both parties. Depending on the state of the | | | | seller will receive monetary compensation in the form |
| housing market, over time, this could favour either the | | | | of the option fee and rent premium that have already |
| vendor or the purchaser. | | | | been paid. |
| If property prices fall, this will usually favour the seller | | | | To the buyer, the option fee and rent premium are |
| as he or she will obtain a higher price than might | | | | being put towards the purchase of the property, thus |
| otherwise have been achieved. However, if the buyer | | | | ensuring that they will ultimately be able to proceed |
| thinks that a better deal can be found elsewhere, he | | | | with the purchase and could help to reduce the size of |
| could decide to forfeit the option fee and rent premium | | | | the mortgage required to conclude the purchase. |
| and walk away from the agreement. | | | | Rent to Buy House Market - The Way Forward |
| A rising property market will favour the buyer as he or | | | | Although 'try before you buy' property purchases are |
| she will be able to buy the property at below the | | | | relatively uncommon in the UK, at present, there is |
| current market value. The only risk to the | | | | every likelihood that this method of property purchase |
| tenant-purchaser is if the seller tries to wheedle his | | | | will increase in popularity. |