Is this a tenancy?

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    We’ve just had a couple of PTEN claims in which have got the old grey cells working overtime.

    This is an extract from the landlord’s website.

    The way it works

    Houses are found in two ways. The first is when we purchase a property which passes the survey and we then add the property to our property register. The second and by far the most popular is when someone who would like to enter the Homebuyer Programme chooses their own house. The property would then be purchased and placed into the Programme.

    The Tenant Buyer would move in as soon as the purchase has been completed. A Tenant Buyer will be in full time employment or Self employment or receiving payments from DSS or Housing Benefit. They will have sufficient funds to pay one month in advance and the option fee £1,170. They must be able to pay the monthly payment on time. The Tenant Buyers credit status or income multiple is not important at this time. If you would like a wider choice of property and a lower monthly payment it helps to put down some deposit money which would then go towards the purchase price.

    Because we do not have to allow for void periods (when properties are empty) and we do not need Letting Agents our costs are substantially less. This then allows us to achieve our goal of creating income.

    The Tenant Buyer

    The Tenant buyer would complete the Lease and take the option to buy the property at a price fixed for between 2 and 8 years. This is the option most people are happiest with because the price is fixed, usually for 5, 6 or 7 years. We also offer the option on some properties of simply applying a credit each month towards the actual value of the property at the end of the lease. It is possible in some cases to have 100% of the monthly payment credited towards the purchase price. This is dependant on the price we have had to pay for the property and the option price. After paying the first month’s payment and the Option fee the Tenant Buyer would then move in and enjoy the house. As a Tenant Buyer you feel the house is yours from day one and you can get all the benefits of home ownership with a lot less money initially and a lot less hassle.

    When house prices rise,
    YOU benefit from the equity !

    Frequently Asked Questions


    What happens if my circumstances changed and I wanted to move out?
    No problem. After 12 months payments you can simply write to us and give 3 months notice.

    What if I have a poor credit rating?
    No problem. The important thing with any credit issue is to speak to a qualified broker who can work with you to ensure you can get a mortgage at the time you need it.

    Do I have to buy the property?
    No. By giving 3 months notice at any time after you have been in the property for 12 months you can leave and that will be the end of any arrangement

    What happens if I default on the monthly payments?
    If you are having difficulty with the payments then it will be important to speak to us to see if we can help. We may be able to reschedule the arrears. If you are unable to pay then you may have to leave the property and would lose the right to buy.

    Are my payments fixed for the period of the rental?
    We try to take a fixed deal with a lender where possible so that there is a fixed period when you move in. If the bank rate to us increases however we will pass the increase to you. If the rate is reduced we will reduce your payment. This would be the same if you were the homeowner.

    Where can I get a mortgage from at the end of the Lease?
    Anywhere. We do work with brokers who are fully authorised and regulated by the Financial Services Authority and used to dealing with this type of mortgage and can recommend someone to you.

    I don’t have a fixed income can I still do this?
    Yes. The important thing is how much you expect to be earning in between 3 and 8 years time.

    What happens if house prices go down.
    As a Tenant Buyer if prices go down you don’t loose any money, because you do not have to buy at the low price. If they go up you make money when you complete the purchase.

    Anyone care to stick their head above the parapet on this one?




    I think, in general terms, your landlord is letting the property for an amount, [i:0183cbd629]x[/i:0183cbd629] which can be divided into two parts – [i:0183cbd629]y[/i:0183cbd629], the amount charged for use and occupation (rent) and [i:0183cbd629]z[/i:0183cbd629], which goes towards the ultimate purchase price.

    If this is the case then I think that [i:0183cbd629]y[/i:0183cbd629] will attract HB but [i:0183cbd629]z [/i:0183cbd629]will not.

    If I am correct here you have a further problem – what is z treated as? It may be capital, but if the tenant does not have the right to have the money back at the end of the agreement if no purchase is made then it is arguable it is not. I expect that there will not be a right of refund – this may explain the claim that 100% of the payments could be credited towards the purchase price.

    It may also be the case that the agreement will fall to be considered as a conditional sale agreement but I suspect not.

    You really need to see the agreement between the LL and the tenant.
    You should also consider whether or not the LL would have grounds for possession for rent arrears if a tenant were to default on [i:0183cbd629]z[/i:0183cbd629] only.

    Still, time to duck back before I get my head shot off!

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