Tenant used to own property

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    Tenant used to own property

    Hi all. We have owned a property for 16 years which we bought off the person who is and has been the tenant all this time. It has been mortgaged with TMW but now when we come to remortgage back to them as mortgage term has expired they are saying it doesn't meet their criteria as it's a sale and rent back!! But we have owned it 16 years. Anyone else come across this situation? Is this really a problem? We paid the asking price at the time and she has an AST.

    #2
    For the avoidance of doubt, I'm basing my response on my understanding of the situation now, I'm not sure it was the same 16 years ago, but I think it was.

    Originally posted by dizzymill View Post
    Anyone else come across this situation?
    Not personally, but it crops up from time to time.
    Is this really a problem?
    Yes, it's a regulated activity, which means that you're not allowed to do what you have done.
    It's likely to make borrowing impossible or at least very difficult.
    It's unlikely that anyone would do anything about it, but, in theory, the regulator could fine you (although it's quite likely that the issue is so old that they wouldn't).

    When you bought the property, your conveyancer should have told you that what you were proposing wasn't allowed.


    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Would this be known as a Home Reversion Plan these days? or is that completely different?
      My views are my own - you may not agree with them. I tend say things as I see them and I don't do "political correctness". Just because we may not agree you can still buy me a pint lol

      Comment


        #4
        Was this an interest only mortgage, then? Have you no savings to pay off the loan?
        To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

        Comment


          #5
          How do TMW know that your current tenant is the previous vendor?

          Comment


            #6
            There is a question on most mortgage applications asking if the tenant was the previous owner? In the Wild West days this type of activity was marketed by a number of firms dealing in distressed sales with the vendors remaining in situ but as the tenant . A little like shutting the stable door after the horse has bolted. So unless the applicant intends making a fraudulent declaration to the lender Thea iLife of raising a mortgage or in this case is extremely remote.
            Like most practices previously promulgated by Property experts/ Investment clubs these loopholes have been closed and I for one have no empathy for their demise.

            Comment


              #7
              Sale and rent back is regulated under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, therefore I presume this should not have happened in the first place.

              Tricky situation, though, since the incentive now may be for the LL to issue the tenant with a Section 21. In the name of their own (i.e. the tenant's) protection.
              There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

              Comment


                #8
                Herewith a link to sale & lease back points - eg 5 year fixed term minimum etc etc..
                https://england.shelter.org.uk/housi...t_back_schemes
                &
                https://www.handbook.fca.org.uk/handbook/MCOB/4/11.html

                Out of interest, appreciate you paid asking price, how did that compare to typical market prices when you bought, please??
                I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                Comment


                  #9
                  Kape65 you ask how the lender would know the tenant was the former owner, quite easily it cost the simple fee of £3 by a Land Registry Charge, possibly cheaper on a corporate level. It declared the bane of the purchaser and the previous owners.

                  Comment


                    #10
                    This was never flagged up when we bought the property all those years ago and our solicitor never mentioned it. Would never have bought it and let her remain in it if we knew it wasn't allowed. Not sure what we can do now. Seems very harsh to have to give this elderly lady her notice just so we can remortgage!!

                    Comment


                      #11
                      As I mentioned criteria was far more lax than it is today, having spent 11 years with the leading portfolio lender it was obvious that many lenders seeking. Foothold in the BtL market had little appreciation of the significance of such transactions but the FCA had an important input into the potential issues of such transactions and as a means of sanitising the market from such questionable sales marketing and the vulnerability of distressed sales.
                      For those working or linked to the Buy to Let market will recall the adverts in local/ national newspapers advertising immediate funds / investors willing to buy such property offering prices below the open market value but allowing the unfortunate vendors to remain in their homes.
                      I recall instances where after a specific period had elapsed ,the purchaser ( landlord) increased the rents beyond market norms in order to force tenants to vacate and then subsequently realise the equity which had been achieved by buying between 70%& 80% of the normal value and any subsequent capital growth. Is there any wonder why lenders ask such questions today!

                      Comment


                        #12
                        I have undertaken research into what is called “ Sale & Rent Back” there are only three lenders whose criteria might permit such an arrangement, one is a lender of last resort insofar as knowing they have a stranglehold on such cases the rate of interests is significantly higher than what you were applying to TMW. Whether a broker can get a lender to accept a former S&R given the time she has been the tenant is uncertain and because of the time taken to undertake such research the broker would definitely want to levy a Consultation Fee on the basis of the success being doubtful

                        Comment


                          #13
                          Originally posted by loanarranger View Post
                          For those working or linked to the Buy to Let market will recall the adverts in local/ national newspapers advertising immediate funds / investors willing to buy such property offering prices below the open market value but allowing the unfortunate vendors to remain in their homes.
                          I recall instances where after a specific period had elapsed ,the purchaser ( landlord) increased the rents beyond market norms in order to force tenants to vacate
                          And this is why we became landlords, to stop the possibility of this happening to a relative.

                          Comment


                            #14
                            Well obviously this isn't the situation in my case as she has been there for 16 years and paying below market rent. Looks like she will have to leave now though if the property can't be mortgaged. All because computer says no instead of being looked at as an individual.

                            Comment


                              #15
                              Originally posted by dizzymill View Post
                              All because computer says no instead of being looked at as an individual.
                              Well, not really.
                              You did something that's not legal and were lucky not to have been caught before now.

                              I have a lot of sympathy, but it's not a problem because of some stupid technicality.
                              The contract for the sale/purchase of the property can be challenged because the conditions almost certainly weren't complied with.
                              For example, the seller would have had to agree to provide vacant possession, and they didn't.
                              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                              Comment

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