Vendor wanting to rent house from purchaser?

mosi

A relative is buying a house that the OH and I are going to rent off him. The contracts are signed and all that needs to be done now is to complete.
The vendors' new house is not ready yet, but they are happy to close the sale if they can stay on and rent the house for a couple of months.
The solicitor on our side isn't too keen on this apparently...I don't know why yet.
The OH and I both see it as a fairly reasonable proposition - they have a young family and pets, and don't want to be trying to find short term accommodation. It would also give the security of having the sale closed, rather than waiting to close when their moving date comes and hoping nothing goes wrong in that time.
What do other boardsies think of this? Is it commonly done and what would be the potential pitfalls of it?

ted1

If they remain as tenants they will have rights and it may be a hard task to move them out

antoinolachtnai

What is the point in giving the other party the money for the house if they haven't vacated it?

Essentially they will be paying the rent out of your relatives' own money.

It would make more sense to put a later closing date, and discount the price accordingly.

not even wrong

ted1 wrote: »

If they remain as tenants they will have rights and it may be a hard task to move them out

Also:

• mortgage interest relief -- you are not entitled to this if you are renting out the house
• your bank may not be happy with you renting out a house you bought using an owner-occupier mortgage
• capital gains tax may apply when you sell as the property was not at all times your main residence
• registration with the PRTB
• NPPR charge

This is lots more trouble than it's worth.

djimi

ted1 wrote: »

If they remain as tenants they will have rights and it may be a hard task to move them out

Theyll have rights okay but it wont be hard to move them out to be honest. Provided no fixed term lease is signed then the tenants can be asked to leave with 28 days notice for any reason at all in the first 6 months, and then with 35 days notice between the first 6-12 months. One of the clauses of a part 4 tenancy (which is aquired after 6 months) states that the landlord can ask a tenant to vacate the property if it is needed for themselves or an immediate family member. Okay, the tenant might dig their heels in and make things awkward, but I suspect that there is no reason for this to happen in this instance.

There are a few other things to bear in mind with an arrangement like this, such as possible impact on mortgage and insurance as the property is a rental and not a private dwelling. Also the added cost involved of registering the property and tenant with the PRTB, and also the fact that the landlord becomes responsible for the upkeep of the property. Im sure someone more knowledgeable than me will elaborate on that, but its not just a simple as buying a house and allowing its previous owners to remain living there as tenants.

Edit: what Not Even Wrong said!

Actually, from reading the OP properly again, you say that you will be renting this house anyway? That being the case then maybe a lot of those issues are not going to be a problem, as the house is being bought with the intention of being a rental property in the first place.

Milk & Honey

It could be potentially be a disaster. The best thing is to delay the closing until they can give vacant possession. If anything goes wrong with the new house you would be stuck in limbo, potentially for years.
I presume the reason they want an early close is to get their hands on the purchase money. Suppose the take the money and waste it and can't pay for the new house. What if they stop paying rent?

Doom

ted1 wrote: »

If they remain as tenants they will have rights and it may be a hard task to move them out

Just give them a 3 month lease, after that just extend it by a month at a time.

Milk & Honey

Doom wrote: »

Just give them a 3 month lease, after that just extend it by a month at a time.

What if they refuse to move at the end of the lease?

ted1

Doom wrote: »

ted1 wrote: »

If they remain as tenants they will have rights and it may be a hard task to move them out

Just give them a 3 month lease, after that just extend it by a month at a time.

What if they give themselves one before they sell it. Could even give themselves a.long term fixed lease.

Victor

mosi, could you go through your post and check - it does read the easiest.

Is this a house that your relative is buying, that they will stay in for a few months and that you will then rent from them?

ted1 wrote: »

What if they give themselves one before they sell it. Could even give themselves a.long term fixed lease.

This would have to be declared beofre the sale went through.

mosi

Thanks for all the replies. I'm useless at multiquote so I'll try to address some of the issues that you have all mentioned.
Firstly, the house is being bought by my relative with the intention of it being rented anyway. Were the vendors not wishing to stay and rent for a couple of months, it would be rented to me straight away. Were I not in the picture, it would be rented on the open market.
Therefore, the issues of PRTB, NPPR etc would apply anyway. It is also a cash sale which negates the matter of mortgage issues etc.
A few of you have mentioned the possibility of it being difficult to get them to vacate when the time comes/if they waste the money if their new house falls through etc. They have already stated a date to move out. I would imagine that, were my relative to go ahead with their proposal, that a lease valid to that date be signed at the time of completion. I don't see how they could just give themselves a lease...surely that would be as invalid as if I chose to write my own lease on a property I am renting.
The way I'm looking at it, the risks involved do not seem much different to a regular property rental. Obviously, we are looking forward to getting in and renting it ourselves. Everyone is concerned though, that until the sale is closed, anything can go wrong (have seen and heard of that happening before). My relative is going to speak to his solicitor again tomorrow and try and get some further clarification on the best way forward.

Milk & Honey

ted1 wrote: »

What if they give themselves one before they sell it. Could even give themselves a.long term fixed lease.

A person cannot enter a contract with themselves. The cannot give themselves a lease before they sell it.
Just because they have given a date when they will go, what if they don't or can't?

Victor

mosi wrote: »

It would also give the security of having the sale closed, rather than waiting to close when their moving date comes and hoping nothing goes wrong in that time.

They are moving all the risk to you. Don't do it for free.