UK Landlord Forum / Life

good afternoon all

First day on the site !
just after some advice.
I am looking to purchase a property in Liverpool. The seller has lived there 15 years and has decided to sell. Initially she didn't want to sell to an investor however now she does and she wishes to sell and remain in the house as a tenant. Her reasons for wanting to stay as a tenant are ;

1. she has close bond to the house and memories
2. she wants to clear her debts

she can afford the rent and has an income plus 2 pensions and has a guarantor. (hopefully getting rent insurance will not be an issue). T be fair she has kept the house in excellent condition very well maintained

Anyone see any alarm bells ringing with this ?

any help would be much appreciated

Actually I don't think there are, as long as the Conveyancing is done correctly and the Tenancy is created correctly you might end up with a fine long-term Tenant. Should make for a nice and easy Check-In... mine usually take 45 minutes... "here's the stop tap"... etc..

Sale and rent back is highly regulated by the FCA. I would suggest legal advice from your solicitor before even considering it.

Thanks all . I spoke to my solicitor and they said no way . Would never recommend in a million years as it's just pure trouble.  Apparently even if seller left the house for a month and then I took her plans a tenant that's still dodgy ground as she has rights due to the fact she resided there for several years. 
Not worth the risk I been advised
Still will go ahead however she needs to leave.  When she did the viewing she did say she prefers to stay as a tenant however understands of she has to move out

Thanks so much for your guidance and help

https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems/how-to-sort-out-your-mortgage-problems/sale-and-rent-back-schemes/

PLEASE TAKE A LOOK AT THE ABOVE

Serious question here... because if Vendor (V) and Buyer (B) also respectively become Tenant (T) and Landlord (L)... why does it matter that V and T are different (or the same?) if it's not formally a sale and rent back 'scheme'? Is it not possible for the two transactions to be separate and completely unrelated - so that V sells to B, and then T lets from L without it just being V selling to B and T2 letting from L?

What are the rights that V / T has if, indeed, V becomes T?

Just from my reading, there's no implication that this is such a formalised thing as a 'scheme'... nor that the transaction is below market rate. Advice from the Solicitor may be of the cautionary type... as in, the advice can't be wrong if they say "stay away from it"... but what are the real risks if Transaction 1 is V selling to B, and Transaction 2 is T letting from L? I am well aware, from my own experiences, that a legal advisor will tend to be cagey and risk averse - nothing wrong with that at all. I had one hold up a transaction for a few months because of a missing document (that everyone knew existed and could be obtained *)... it nearly broke the chain involved and, in the end, the Vendor and I signed a little memo of understanding between ourselves to agree we'd do what we could to resolve the matter afterwards if it became problematic... kinda risky, and against the legal advice, for us it worked-out... obviously it could've gone the other way, but my Conveyancer was not very happy with me going against his advice. I like to know what the real risks are in a situation... so is anyone able to highlight what the extra rights T might have in a case where V becomes T, as opposed to the rights T (or T2) normally has?

I would be very grateful to understand this a little more.

* - just for clarity here, it was held by another Solicitor (not employed by either V or B) who was understood to be very uncommunicative (had proven to be).

Hippogriff 
Personally speaking I did not see any issue with this myself. However when I found out that's when I started making enquiries and so for every single person I've spoken to you I said that is not a good scenario to be in. If the tenant or should I say the owner is happy to move out then it is fine to proceed

Apparently according to my solicitor they are all sorts of issues associated with owners who want to become tenants in their own property. Even if I said to this owner can she move out for a month and then I will take her on as a tenant this will still cause issues. Apparently she will still have a right over this property as she has owned it for several years. Again I do not understand how this could be however if there is any sort of risk or any sort of doubt I would rather keep away

Understood... but I'm still not clear what this "right" or rights might be.

P.S. - and I do not disagree with staying away from any risk, real or perceived... it's just that the advice received here seemed to be very against the idea, but it's remaining unclear to me what the real risk actually is.

Is there still such a thing as a "sitting tenant"? It is hard to see how those rights would be applicable in this situation though.This practice of selling and remaining as a tenant is very popular in France, friends over there tell me.It seems to work very well.

The French have an arrangement called viager, whereby a person with no heirs may sign over his or her property to a third party, in return for a monthly income for life, whilst retaining the right to live in the property. The most famous case of this arrangement was Jeanne Calment, who entered into such an agreement aged 90, and died aged 122, by which time the third party had also died, after paying her more than twice what the property was worth.

See also "My Old Lady", starring Kristin Scott Thomas and Maggie Smith (obviously!) It won't blow your socks off but it's a pleasant watch, if you like that sort of thing.

Good for Jeanne,I wonder if the guaranteed income gave the old dear an extra zest for life?

"why does it matter that V and T are different (or the same?) if it's not formally a sale and rent back 'scheme'"? Is it not possible for the two transactions to be separate and completely unrelated"

In the original law in 2009 technically speaking it was possible as a one off private non company to do a rent back agreement (i.e. not be a 'scheme').  However in 2011 this loophole was specifically targeted and closed and law now states "Any person...". So it is no longer possible for this to be ".... not formally a sale and rent back 'scheme'" even for a one-off opportunity. [ A sale and rent back agreement is defined in the legislation and doesnt refer to pricing so you cant claim to have paid fair market value].

I know this cos in 2012 I came up with a 'genius' plan to break a house chain, the vendor was dragging his heels looking for a place to move to and so I suggested to the estate agent to that I would buy the place and let him stay on as a tenant.  Fortunately for me the tenant refused and I bought something else but I happened to mention to my solicitor at the time what I had missed out on and he had a mild heart attack.  Not only would the mortgage company not have dealt with me - apparently I was close to breaking the law by even proposing the idea and my friendly solicitor would not have had anything to do with me had I tried to go down this road (given all solicitors are after my money I guess that was proof enough for me).

Now a bit older and wiser/more educated I can also say...

Even before the Sale and Rent Back regulation.  As to the rights someone in occupation might have the starting point is Land Registration Act 2002 Sch 3 Para 2 (for registered land) [or LRA 1925 s70(1)g for unregistered land] where a person in actual occupation at the time of disposition has an Overridding Interest - which means the purchaser would be bound by the rights of the occupier. Such rights could be to reside in the premises or have a right to purchase the property at a fixed price later etc. 

This Overridding Interest also binds a subsequent legal charge - mortgage, which is why you only get a mortgage for vacant possession (although these days the BTL mortgagee/bank can ask get a waiver from an AST tenant (not an owner) confirming they have no proprietary rights beyond their AST - at least that was the case in 2010 when I did it - havent checked recently).

I can guess why the rj316's  solicitor is recommending against a move out and you can rent afterwards...Firstly if the offer is made at the time of the purchase then it becomes linked and falls under a Sale and Rent Back.  Secondly other equitable rights potentially arise for the benefit of the seller -  a Constructive Trust or Proprietary Estoppel which may make it difficult to get your property back - certainly a s21 would be easily defended.

Basically a minefield best avoided.

Good input, thanks.