Common Questions
General Questions
Q. What is a Lease Option?
Q. Are Lease Options legal?
Q. Who is the Tenant/buyer?
Q. Who is the Landlord/seller?
Q. Why should I use you?
Tenant/buyer
Q. How do I build up a deposit towards the purchase price?
Q. Apart from the initial Option Sum and monthly Option Premium, what other costs will I have to pay before I move in?
Q. How much money will I be expected to put down as an initial Option Sum?
Q. Will the rent go up during the rental period?
Q. What are the benefits for me as a Tenant/buyer?
Q. My credit rating is poor, will I still be able to apply?
Q. What happens if my circumstances change or I change my mind and don’t want to buy the property?
Q. If, when I am ready to buy my property I find it has increased in value, do I get to keep the increase?
Q. May I decorate or carry out improvement works to the property?
Q. What happens if I can’t pay the rent or have missed some rent payments?
Q. How long does it take to buy a rent to own home?
Q. How quickly can I move in?
Landlord/Seller
Q. What benefits are there for me as a Landlord/seller if I sell my property on a Lease Option?
Q. Once I have agreed in writing to sell my property for a fixed price, can, I change my mind and pull out of the sale?
Q. What if the Tenant/buyer stops paying the rent?
Q. What is a Lease Option?
A. ‘Lease Options’ are used a lot in commercial property matters and are now rapidly becoming a new approach for residential property owners to sell and for individuals to purchase a property in a flexible way, without having to immediately qualify for a conventional mortgage and put down a large deposit.
A Lease Option is a written LEGAL agreement, whereby a property owner can grant an Option to a buyer which is an exclusive and irrevocable right to lease and purchase the property within a certain period of time, known as the Option Period, at a price fixed from the outset.
A Lease Option combines the benefits of both a normal rental lease (known as an Assured Shorthold Tenancy Agreement) and an Option to Purchase (known as the Option Agreement). Therefore, in reality, the Lease Option is actually two concepts, using two separate written agreements that combine together as a Lease Option.
We buy properties using a Lease Option from a Landlord/seller and during that time, we either rent the property out and exercise the Option to buy it ourselves at a later date, or sell the Option to someone else, who is typically a first time buyer so they get the chance to buy the property.
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Q. Are Lease Options legal?
A. Yes, Lease Options are perfectly legal and solicitors will still be involved for both sides, just like a traditional property purchase. If you don’t have a solicitor who is experienced in Lease Options, then we will be able to suggest one for you.
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Q. Who is the Tenant/buyer?
A. The Tenant/buyer is/are the person/persons who will live in the property under the Tenancy Agreement and who has/have the right to purchase the property under the Option Agreement.
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Q. Who is the Landlord/seller?
A. The property owner and person granting the Lease Option.
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Q. Why should I use you?
A. We have legally qualified staff with 25 years of legal experience behind them.
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Q. How do I build up a deposit towards the purchase price?
A. The initial Option Sum you pay to us at the beginning of the Option Agreement together with the Option Premium paid every month, are both non-refundable and these monies are credited towards your purchase deposit meaning, they are deducted from the final purchase price of the property at completion, so less money will be due when the property is bought.
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Q. Apart from the initial Option Sum and monthly Option Premium, what other costs will I have to pay you before I move in?
A. There will be a charge of £300.00, which is our application processing fee and legal costs of drawing up the Lease Option Agreement. You will also need to pay two months rent in advance.
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Q. How much money will I be expected to put down as an initial Option Sum?
A. You will usually be expected to put down between 3%-5% of the agreed purchase price as the initial Option Sum, at the time of signing the Lease Option Agreement and prior to moving into your new home.
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Q. Will the rent go up during the rental period?
A. No
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Q. What are the benefits for me as a Tenant/buyer?
- Move in without a mortgage
- Buy over a period of 1-3 years with a much smaller deposit than required by a bank
- Purchase price fixed from day one
- Home ownership pride
- Benefit from any increase in property value
- Enjoy the benefits of home ownership from day one
- Any decoration or renovation works can add value to the property which in turn, can increase the amount of your investment
- Buy and sell the property at any time during the term of the Option Agreement
- This is not a Shared Ownership scheme
- Move in, within a matter of weeks or earlier - not months like a traditional house purchase
- Solicitors still need to be involved, just like a traditional property purchase
- No obligation to buy if circumstances change
- Gives you the time to establish or rebuild a savings history and credit worthiness with lenders, build a bigger deposit towards your property purchase, improve the property value through approved renovations and complete the minimum residency period (if applicable) as required by most lenders.
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Q. My credit rating is poor, will I still be able to apply?
A. Yes. Having a poor credit rating or no credit at all as you are new in the UK and working, still means you are eligible to apply. This is the beauty of Lease Options. Whilst renting with the Option to buy, you also get the chance to put your financial affairs in order, so you can prove to a conventional lender – affordability, stability of residence and a good payment track record.
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Q. What happens if my circumstances change or I change my mind and don’t want to buy the property?
A. You are under no obligation to buy the property even though you have signed an Option Agreement to do so. An Option binds the sellers but not the buyer. However, you will lose the initial Option Sum you paid at the beginning of the Option Period together with the additional monthly Option Premiums paid towards your purchase deposit, as they are non-refundable.
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A. Yes
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Q. May I decorate or carry out improvement works to the property?
A. Yes. In fact, improvement works often add value to property, thereby increasing the amount of your investment.
Any improvement works requiring major structural alterations (such as extensions and removing walls) we would require you to obtain our written permission in advance of carrying out the work, as there may be legal and/or structural issues requiring clarification and consents in writing.
As you are in the process of buying the property, you will be responsible for all maintenance, repairs and damages that may occur.
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Q. What happens if I can’t pay the rent or have missed some rent payments?
A. We cannot stress enough the importance of ensuring that your monthly rent and monthly Option Premiums are paid on time, every time. Not only to comply with the terms of your Option Agreement with us, but to also show a future mortgage lender, a timely payment and savings record, in order to qualify for a competitive future mortgage with a good, clean credit file.
The Option to buy can only be exercised provided you are not in breach of your Lease Option Agreement and all payments have been paid and there are no missed rental payments or breaches thereto.
In the event you are in breach, you will be required to clear any arrears and rectify those breaches, otherwise, we will have no choice but to issue eviction proceedings together with a claim for damages and costs.
The period within which you can buy the property will also end automatically on the date the tenancy agreement is terminated.
We sincerely hope eviction will not be necessary, as we are in business to help people onto the property ladder, not off it.
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How long does it take to buy a rent 2 own home?
A. Once you are in a position to apply for a mortgage, there's no reason why it should take any longer than a few weeks, as opposed to at least three months when you are involved in a chain in a traditional sale and purchase. You will still need to instruct a solicitor or licensed conveyancer to handle your purchase.
A. You can collect the keys and move in as soon as (1) we have an up to date copy of your credit file and we have processed and approved your application (2) the Lease Option Agreement has been signed and approved by solicitors and (3) we have received all move in monies in cleared funds.
The entire process typically takes a matter of approx 4 weeks or even earlier, as opposed to taking months in a traditional house purchase. In certain circumstances, it can even take just a few days.
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Q. What benefits are there for me as a Landlord/seller if I sell my property on a Lease Option?
A. Well for a start, a Lease Option Agreement gives you certainty in situations where previously you didn’t have certainty. Such as void periods, poor quality tenants, non-payment of rent, maintenance costs etc.
Due to the flexible nature of a Lease Option, it is possible to structure it so it can completely adapt to suit your particular circumstances.
Your contract will be with us not the tenant/buyer. This means your risks will be substantially reduced as we will be looking after all aspects of the sale through to completion.
You will be able to:
- Save yourself money by being able to stop paying your mortgage, knowing someone else is paying for it (this is particularly welcome where you are paying a mortgage on an empty property) as you will be assured of getting your rent every month from us.
- Save on estate agent fees
- Save time waiting for a traditional buyer to be found
- Avoid repossession if you are in arrears thus saving your credit rating
- Secure a purchase price close to current market value at today’s prices if there’s little or no equity in the property.
- Avoid maintenance costs as they are taken care of
- Avoid void periods
- Sell your property quickly
- Have good quality tenants with a home ownership mindset occupying the property
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A. Once you have entered into a Lease Option agreement, you are under a legal obligation to proceed with the sale.
Your buyer however, is under no obligation to proceed with the purchase, so in the unlikely event the Tenant/buyer changes their mind and walks away from the deal, you will still benefit. We will either proceed with the purchase ourselves or find another Tenant/buyer, or the property will return to you where you will be free to sell it for a higher price, together with the knowledge that your mortgage has been paid and your property well looked after during the Option period.
You will also be able to keep the profits of any increase in value due to any improvement works or rise in the market generally.
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Q. What if the Tenant/buyer stops paying the rent?
A. Your contract is with us. As we hold the Option, it will be our responsibility to ensure the Tenant/buyer pays the rent and complies with all other terms of the Option Agreement
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Disclaimer
This website is purely for information purposes only and is only intended to assist people to help them understand what a Lease Option is and how they work, particularly in a residential property sale and purchase situation.
Furthermore, it does not purport to provide legal advice and is not intended to form a contract or any part thereof. No part of this website is intended to modify or take the place of any clause within an Option Agreement that you may or may not be a party to, and no liability or reliance herein should therefore be made. You are strongly advised to obtain and rely upon your own independent legal advice should you wish to proceed and enter into a Lease Option agreement.