Rent now, buy later – what are the risks with your property?

Posted on: March 19th, 2019

Adrian McClinton comments on the potential issues surrounding private ‘rent to buy’ agreements, whereby tenants can rent their property, with the intention of purchasing it at a later date.

The practice of ‘rent to buy’, when it comes to private arrangements between private tenants and private sector landlords at least, appears to be unregulated. Like many developments in any industry, it takes a while before the effects on society are apparent, and legislation with regulation is implemented to minimise ill-effects. As such, there are numerous issues for prospective tenants and would-be buyers to beware of.

The most obvious is ensuring that any amount which is paid over and above their normal rent to go towards any purchase, is sufficiently protected. What is to stop an unscrupulous landlord disappearing with their money or going into insolvency, taking with it the additional funds put aside?

Secondly, how is a tenant’s actual ‘interest’ in the property protected? Conveying any interest in land, in order to be enforceable against others, needs to meet various minimum standards. If they have a right to be able to buy the property at a certain time, how can they exercise that right? If the landlord decides they wish to terminate the tenancy, what happens then?

Finally, because the Financial Conduct Authority (FCA) is not regulating the entities putting these ‘rent to buy’ offers forward, there is no standard approach to the agreements. This means tenants are not protected, which rings alarm bells because not all providers operate on a fair and equitable basis.

These issues do not mean private ‘rent to buy’ agreements are a bad idea on the whole. But until the government decides to regulate in this sector, I advise anybody considering entering into such an agreement to take specialist legal advice before committing themselves.

For more information on rent to buy agreements, or property litigation, please contact a member of the team.