Buying a rental property; current owner's house not yet finished. Suggest renting?

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    Buying a rental property; current owner's house not yet finished. Suggest renting?

    Hi, I have exchanged contracts on a house which I will buy with a buy-to-let mortgage.
    The current owner has bought a new house of David Wilson's homes and they have taken his old house in exchange, which I now bought via them.
    His new house is not yet finished, so he has to move somewhere temporarily before he can move into the new house. As the completion date is going to be in my holiday, I know that the house is going to be empty for a while, I thought I could suggest to the previous owner, he could stay on as a Tennant until his house is finished, giving me an immediate income and time to find a Tennant.

    But in another thread on here, I found this:
    'You don’t say if you are purchasing with a mortgage. In case you are, residential mortgages require vacant completion at completion.'

    Is this the case with a buy to let mortgage too? Are there any legal reasons that stop me from doing this?

    Looking forward to any replies,

    #2
    Why exchange contracts? House prices are likely to stagnate ,even fall during the second half of the year..I recommend you seek advice before a commitment.

    Comment


      #3
      Sale and rent back agreements are regulated by the FSA. Basically, you can't do it.
      (It may be possible to arrange an unconnected tenancy after the sale, but it's probably best not to get into that)

      Comment


        #4
        Originally posted by Ted.E.Bear View Post
        Sale and rent back agreements are regulated by the FSA. Basically, you can't do it.
        (It may be possible to arrange an unconnected tenancy after the sale, but it's probably best not to get into that)
        Hi Ted, thanks for answering my question, I hadn't realized this would be classed as such.
        Good job I asked before going ahead!

        Kind regards, Dan

        Comment


          #5
          Originally posted by junglerower View Post
          .... they have taken his old house in exchange, which I now bought via them.
          His new house is not yet finished, so he has to move somewhere temporarily before he can move into the new house.
          Something doesn't seem right there.

          Surely any such agreement should not give them the right to sell his property until he was able to take possession of the new one?

          I certainly wouldn't sign/agree to anything that allowed it, what if the builders go bust and the new build is never completed?

          Comment


            #6
            I am confused. If you are buying as a Buy-to-let. I don't see any problem in renting the house to them. However, if you would need to make sure the home complies with the various housing regulation.

            Another option may be AirBnb, however, that only works as a short term rental. if you need to extend, it may be a problem.

            If they have a mortgage offer, it is possible it may expire, and they struggle to find another home. You may have them as longer tenants.

            Comment


              #7
              Originally posted by Flashback1966 View Post
              I am confused. If you are buying as a Buy-to-let. I don't see any problem in renting the house to them
              Buying a property and leasing it back to the seller is a regulated activity and you have to be licensed to do it.

              The regulations aren't designed for situations like this and I can't imagine anyone worrying about doing anything about it, but a competent conveyance should stop the purchaser proceeding on this basis.
              And I'd guess the mortgage lender might have an issue if they spot it.

              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


                #8
                Sale and rent back agreements also require an initial 5 year fixed term agreement I believe.

                Comment


                  #9
                  Originally posted by nukecad View Post
                  Something doesn't seem right there.

                  Surely any such agreement should not give them the right to sell his property until he was able to take possession of the new one?

                  I certainly wouldn't sign/agree to anything that allowed it, what if the builders go bust and the new build is never completed?
                  I was a bit surprised by this, myself, and that these people agree to go into temporary accommodation, but this has only recently surfaced. DW won't give a finish date but are very keen to sell. I thought I can help out the current owner, but by the looks of things, I cannot do this.

                  Comment


                    #10
                    Originally posted by junglerower View Post
                    DW won't give a finish date but are very keen to sell.
                    Definite alarm bells there.

                    It suggests that they have a major cashflow problem.

                    ie. Do they need the money from the sale to buy building materials to finish the new build?

                    Comment


                      #11
                      In this instance the mortgage company are not going to mind these people staying on (provided the paperwork is in order) as they do not expect you to take up possession anyway as they are moving.

                      The problem you have is that if you charge them anything more than £100 a year their occupation will probably be deemed to be an AST in which case you couldnt force them out for 6 months minimum. If you want the house before they move out your best option is to let it to them for £0 until their new house is ready but that defeats the object of you completing.

                      Presumably your exchanged contract doesnt have a set completion date does it? As the selelr is buying a new build i would have expected completion to be on notice given by them to you so i woudnt think you could force them to complete anyway. If the completion date is fixed and it has passed you could charge them default interest under the contract if you are ready willing and able to complete and they are not.

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