Cazzy1

Several of our clients are offering this type of thing on their properties, everything is legal and done through a solicitor and notary.

Cash sum up front followed by monthly payments of an agreed sum. After a fixed period of time the balance is payed minus the monthly payments payed. If the buyer fails to complete on the agreed date they loose all monies paid. It works well and helps both seller and buyer in the current climate.

jdr

How does it help the renter if they decide not to buy ?

Cazzy1

The large deposit is usually in excess of 10k, there is also the monthly rent. The period of rent is usually only one or two years, so if the buyer pulls out the owner has all this money and still has his house.

stuboy

This doesn't answer JDR's question, hoe does it help the buyer if they want/need/have to pull out

fionamw

Presumably if they've paid the upfront LARGE deposit spoken of, it doesn't. If they've merely paid a more standard typical deposit, then that would (possibly?) be refundable if the deal didn't go through. If not, well it doesn't help them.
Must say if we could have found a rent-to-buy property with the lower-deposit and standard monthly rental mentioned by someone earlier in the thread, we'd probably have bitten their hands off.

Cazzy1

The buyer looses out, it protects the seller, bearing in mind they could of possibly sold the house during the period that the buyer was renting for. It is only a good idea if you know that you will have available funds when needed.

GrapeEater

Sounds like you have all the cards - not fair - as the vendor wants to liquidate his equity. Surely these rent-to-buy contracts have a end date ?? E.G. rent for 18 months and if not ready to purchase then the vendor can stop the rental, start a new rental or just sell on the open market again! SURELY ?

Cazzy1

All the contracts our clients draw up with purchasers are for a maximum of 2 years the whole idea of it is to try and sell their property, not let it indefinitely!!!! At the end of the specified period if the buyer doesn't pay the remaining monies, they have to leave the property and they loose their deposit.

GrapeEater

Yeah that makes more sense! As per usual, it's all in the contract and by mutual agreement.

Cat amongst the pigeons... What if one side suffers extreme circumstances, such as loss of income/job, terrible illness, death!

I though it was true that after 11 months rental the tenant has some form of 'squatters' rights in Spain ??

snikpoh

See post #11

lynnxa

not exactly - they still have to pay the rent!!!

and if the property is their primary/only residence then the LAU applies from day 1 - no matter what the contract says

as snikpoh said in post 11 - if a property is rented under the rules of the LAU then as long as the rent is paid the tenant has the right to first refusal if the owner wishes to sell

also, the only way to get a good tenant to move out within 5 years is to actually move back in yourself (or close family I think - children/parents)

Cazzy1

It is not classed as rent in the contract, basically the seller is letting you use the property and the buyer has no tennant rights. It states on the contract that the minute the buyer fails to pay any monies as set out in the contract theyy leave the property immediatly.

jdr

How do you get over the Spanish law of the up to five years rental if required clause ?

Whoops should of read Lynns post. lol

JLFS

I know a couple of people who have done the rent to buy, one worked out well the other didnt.

The fisrt couple paid a deposit and a monthly "rent" for 2 years, then when the agreed period was up, they then had the mortgage in place and the sale went through.
As Cazzy has pointed out only a percentage of the rent paid was deducted from the purchase price of the house, not the whole amount, as there would be no incentive for the buyer to move on with the sale in a reasonable amount of time.

The second couple came unstuck, because they also had a 2 year agreement and paid a deposit, but then the value of the property went down, so they were not prepared to pay the asking price anymore.

They broke the contract and lost the deposit, and as far as I know they have not taken things further to get the deposit returned ie through the courts or anything.
I dont know if it would be possible to go to the courts, under those circumstances.

GrapeEater

That's something else to consider in this econ' climate - by both parties.

EXAMPLE: If I'd of done a very long rent-to-buy 4 years ago and agreed purchase price of 250K then, but the post credit crunch has knocked down house prices by 20%+ I'd be miffed !!

So it's a gamble over a long period when clearly house prices can go up or down substantially! - Of course it could work the other way - i.e. you agree a low price now and in 3 years time things have improved - the seller is then miffed !!

ALL in all this thread is convincing me that RENT-TO-BUY is quite precarious for the most - but might suite a few people in special circumstances.

Personally I think I'll leave well alone! - Just pay the rent and then do a normal purchase contract when I am able to. Gosh there's lots of choice about right now - a buyers market.

It's sounds like legal hot water to me.