Lease Options Applied to UK Residential Property Purchase
The current, uncertain state of the UK property is making many potential purchasers of residential property contemplate alternative ways of funding their property purchase. One type of transaction that some buyers are considering is a ‘rent to buy house’ purchase.
Rent to Buy House Purchase
A ‘rent to buy house purchase’ scheme (also known as a ‘residential lease purchase’ or a ‘rent-to-own purchase’) is a short term lease on a residential property coupled with an agreement to purchase the property within a specified time limit.
Try Before You Buy Your Home!
The usual model for this type of rent to own lease purchase is as follows:
A potential purchaser will sign a contract to buy a residential property, within a fixed period of time, usually three years or less. When the initial contract is signed, the prospective buyer will pay an option fee (normally between one and five percent of the purchase price) which is credited towards the purchase of the property.
The prospective tenant-buyer will then pay the seller a monthly rental and, in some cases, an additional rent premium that is also credited towards the purchase of the property. If the potential buyer decides, for whatever reason, not to proceed with the house purchase, the option fee and any additional rent premium is forfeited to the property owner.
Lease to Buy House Purchase Price
The purchase price of the property is fixed at the time that the rent to buy house purchase agreement is signed by both parties. Depending on the state of the housing market, over time, this could favour either the vendor or the purchaser.
If property prices fall, this will usually favour the seller as he or she will obtain a higher price than might otherwise have been achieved. However, if the buyer thinks that a better deal can be found elsewhere, he could decide to forfeit the option fee and rent premium and walk away from the agreement.
Although ‘try before you buy’ property purchases are relatively uncommon in the UK, at present, there is every likelihood that this method of property purchase will increase in popularity.
For more information:
http://www.ukpropertyladder.com/tenant-buyers
www.firstrungnow.com/lease-option-rent-buy/
www.timeout.com/london/property/features/3381/Rent-to-buy_contracts.html
news.bbc.co.uk/1/hi/business/7508350.stm
Author Resource:-
Sudeshna Choudhury is a key contributor of UKpropertyladder.com
www.ukpropertyladder.com/tenant-buyers
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