UK Rent to Buy House Market – The Lowdown

Lease Options Applied to UK Residential Property Purchase

The current, uncertain state of the UK property is making many potential purchasers of residential property contemplate alternative ways of funding their property purchase. One type of transaction that some buyers are considering is a ‘rent to buy house’ purchase Read more about FSBO Des Moines

Rent to Buy House Purchase A ‘rent to buy house purchase’ scheme (also known as a ‘residential lease purchase’ or a ‘rent-to-own purchase’) is a short term lease on a residential property coupled with an agreement to purchase the property within a specified time limit.

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The usual model for this type of rent to own lease purchase is as follows:

A potential purchaser will sign a contract to buy a residential property, within a fixed period of time, usually three years or less. When the initial contract is signed, the prospective buyer will pay an option fee (normally between one and five percent of the purchase price) which is credited towards the purchase of the property.

The prospective tenant-buyer will then pay the seller a monthly rental and, in some cases, an additional rent premium that is also credited towards the purchase of the property. If the potential buyer decides, for whatever reason, not to proceed with the house purchase, the option fee and any additional rent premium is forfeited to the property owner.

Lease to Buy House Purchase Price

The purchase price of the property is fixed at the time that the rent to buy house purchase agreement is signed by both parties. Depending on the state of the housing market, over time, this could favour either the vendor or the purchaser.

If property prices fall, this will usually favour the seller as he or she will obtain a higher price than might otherwise have been achieved. However, if the buyer thinks that a better deal can be found elsewhere, he could decide to forfeit the option fee and rent premium and walk away from the agreement.

A rising property market will favour the buyer as he or she will be able to buy the property at below the current market value. The only risk to the tenant-purchaser is if the seller tries to wheedle his way out of the deal on a technicality and may even attempt to have the potential purchaser evicted. Therefore, it is essential that sound legal advice is obtained by the buyer and the lease purchase contract is scrutinised in great detail in order to ensure that no potentially serious loopholes exist in the agreement contract.

Rent to Buy House Purchase Details

Both the selling price of the property and the monthly rent to be charged are negotiated between the vendor and the prospective purchasers and so depend on the state of the housing market at the time that the agreement is concluded.

In addition, the purchaser can enter into a rent to buy house purchase and obtain the right to buy the property without having to wait for mortgage finance to be obtained, before proceeding with the purchase.

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