Buying then renting back

[emjay99]

We are buying (not yet exchanged) and then renting back to the ex-vendors. We are charging £25 per month for 6 months and then increasing the rent by £100 per month every month. The vendors are having difficulty getting a suitable property where they want it. We are not in a great hurry to move as we need to decide / specify / design / get planning and BR approvals to major alterations and an extension to the property.

The tenants-to-be have agreed to maintain and insure the building and pay all taxes etc. However we will have a repairing obligation under Section 11 of the Landlord and Tenant Act 1985. How do we avoid this conflict of obligations ?

[Snorkerz]

I can't see that morally you can - from the date you complete the purchase, the property is yours and so are the obligations.

I am not sure the tenants would be able to insure it, as they have minimal liability for the property.

Utility bills are, obviusly theirs, but build the cost of insurance and any other obligations you wanted to impose on the tenants into a revised rent.

Obviously, you will have the full landlord obliations, not just the Act you mention.

What if they don't pay rent - how do you intend to evict them?

What if they don't leave? Same question but also, do you think a rent that could potentially rise to an unlimited amount would stand up in court under UTCCR?

[justaboutsane]

Be careful. We sold our old house to an Investor and asked if we could not find anywhere else if we could rent temporarily. We were advised that Buyers who do this need to e regulated by the Financial services authority.... not sure of the full ins and outs.. lots has happened since April and I have forgotten lol!

[havensRus]

We are buying (not yet exchanged) and then renting back to the ex-vendors.

You must be authorised by the FSA to do a SRB deal. See this document for full details and this page for more information. If you go ahead with this arrangement, without authorisation and it comes to the FSA attention, you leave yourself open to some serious consequences.

[jeffrey]

However we will have a repairing obligation under Section 11 of the Landlord and Tenant Act 1985. How do we avoid this conflict of obligations ?

You could obtain a County Court order, under s.12, to authorise inclusion in the Letting Agreement of a clause contracting-out of your s.11 obligations as L. The Court has power to do this if satisfied that it's reasonable in the circumstances.

[emjay99]

Sale and rent back

havensRuss,

Thanks for that warning. I have spoken with the FSA and expect them to send a written confirmation that the SRB scheme does not apply to private, one-off arrangements between private individuals. I will post up the result when it arrives.

[emjay99]

Buy and rentback FSA Authorisation

havensRus

The FSA advise me that as I would fail their "By Way of Business" test, because this is a one-off for me, they would not consider that I need to be authorised by the FSA.

The FSA handbook, PERG section 14 (at ht tp: //fsahandbook.info/FSA/html/handbook/PERG/14). refers.

emjay99