Buying and then renting back to original owners?

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  • Russj
    started a topic Buying and then renting back to original owners?

    Buying and then renting back to original owners?

    We are buying an investment house using savings and a small buy-to-let mortgage.
    The current owners are divorcing and one partner has asked if they can rent the house for a few months while their new property is being renovated.
    This arrangement would be fine by us but I am concerned that we would not have got vacant possession (as required by our lender) as it would seem pointless for the owners to move themselves and chattels out only to move it all back in a few days later.
    Also, I read somewhere that under these circumstances, the original owners have the right to remain for a minimum of 5 years?
    Can we avoid these issues by having a genuine break of say, a month, between us buying the property, them moving out and the rental starting with a proper short term agreement?
    As I'm sure you can tell, we are new to this so your advice would be very useful.


  • jpkeates
    replied
    Originally posted by Russj View Post
    So, in simple terms, we can't rent back to one of the original owners under any circumstances without invoking the 5 year minimum tenancy?
    It's simple enough.
    Don't do it, it's adding risk for no benefit to you.
    I suspect it might actually be illegal (or at least not legal).
    If you were a business you would have to be regulated to carry out this type of transaction.

    And if you want to know how risky it is, there are currently only two business who are registered to carry our sale and leaseback transactions and neither is taking on any new business.
    And why would vacant possession not have been created if they moved everything out on completion and didn't return for a month?
    Because moving out, knowing that it's for a month and then there's an agreement that the seller will move back in, is a sham designed to breach your lenders terms and conditions.

    Look at this way, why do you think you've not heard of lots of people doing this?

    Leave a comment:


  • leaseholder64
    replied
    Because it would be a clear sham.

    Leave a comment:


  • Russj
    replied
    So, in simple terms, we can't rent back to one of the original owners under any circumstances without invoking the 5 year minimum tenancy?
    And why would vacant possession not have been created if they moved everything out on completion and didn't return for a month?

    Leave a comment:


  • jpkeates
    replied
    Originally posted by Russj View Post
    Can we avoid these issues by having a genuine break of say, a month, between us buying the property, them moving out and the rental starting with a proper short term agreement?
    That wouldn't be a `'genuine" break, it would be a premedited attempt to knowingly defraud your mortgage lender and evade the sale and leaseback regulations.
    You need (genuine) vacant possession.

    Either defer completion until the sellers new place is ready or they need to rent somewhere else for a while.

    Leave a comment:


  • theartfullodger
    replied
    That would be a sale and lease back deal , governed by rules including cooling off period and tenancy of at least 5 years.

    I'd only deal with full vacant possession

    Leave a comment:

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