Buying a property with a lifetime tenancy

by Readers Question

8:18 AM, 29th January 2014
About 5 years ago

Buying a property with a lifetime tenancy

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Buying a property with a lifetime tenancy

Hi all, I have been looking at sales particulars for 3 bed house which is subject to a lifetime tenancy. It is valued at £195,000 with vacant possession and is for sale for £82,000.

I would very much appreciate your thoughts and any advice you can offer.

The details are as follows.

  • 3 bedroom detached family home in Bexhill, East Sussex, TN39.
  • The property benefits from 3 bedrooms, modern kitchen and bathroom, lounge, dining room and rear garden.
  • The house also has double glazing, gas central heating and off road parking.
  • The property has been valued independently at £195,000 and we are inviting offers in excess of £82,000.
  • The property has a current RICS valuation of £195,000
  • Your discount on this purchase will be £113,000
  • Are offering a 100% interest in this investment
  • The property will be sold with Life Tenants in residence
  • You will legally own the property which is occupied by a male aged 79 and female aged 65
  • The Life Tenants will remain in the property until they either pass away or move into full time residential care.

During the Life Tenants’ occupancy, they will maintain the property covering all associated expenditure, including:

  • Maintenance
  • Utility bills
  • Council tax
  • Any service charges or ground rent if applicable

When the Life Tenants vacate the property permanently, it is yours to do with as you wish but until then if any one purchases the property, there is no rent paid by the tenants so no rental income can be made. Also the buyer can not live in the property until its vacated by the life tenants. Buying a property with a lifetime tenancy

It is only possible to view the property only via photos.

The buyers name will be on the land register and property title under the following conditions:-

  • Will appear on both the land registry and title documentation and will hold the deeds.
  • The Home for Life lease places a restriction on your title which falls away when the lease ends which will occur when the Life Tenant passes away or goes into permanent care.
  • A RICS survey is provided but the vendo/life-tenants will not allow buyers to carry out there own survey on the property.

So it seams all you can do is either wait years for vacant possession or try to sell for a profit.

Any advice and opinions would be most welcome.

Regards

Tony



Comments

Mark Alexander

8:28 AM, 29th January 2014
About 5 years ago

Hi Tony

Perhaps the most important consideration of all is that you are highly unlikely to be able to get mortgage finance to purchase this property.

Long term this could be a very good investment but you need to bear in mind these lifetime tenants could live to be over 100 years old and even outlive you. Therefore, you could have a very long wait but if you are investing for a trust for you grandchildren it may make sense. The value will also increase as time goes by and not necessarily due to property values in general. This is due to the age of the lifetime tenants also being factored in.

You should take professional advice on the basis of the tenancy as there is no mention of succession in the details you have posted. It could well be that the children of the lifetime tenants have a right of succession to the tenancy too. This can drastically effect the value and the margin between the open market value and the discount for the lifetime tenancy.

A commonly discussed strategy on deals like this is offering a payment to the lifetime tenants in return for surrender. You can bet you house on the fact that the existing owner has already considered and tried that one though!

The other point I would make is that the sales particulars you have provided are very badly written and are highly unlikely to be compliant with the Estate Agents Act. This would ring alarm bells to me.

I hope that helps and I look forward to reading the responses from others.
.

Jamie M

8:48 AM, 29th January 2014
About 5 years ago

go and find something you will make money on today

Neil Patterson

10:01 AM, 29th January 2014
About 5 years ago

Apart from the many legal concerns I would have and potentially moral if they have family it does not stack up financially for me.

1 )Firstly take out the effect of house price increases, because the opportunity cost is that you could have bought another property that would have increased in value as well.

2) Then offers are in excess of £82k so lets assume you purchase it £100k below the RICS valuation.

3) The wife is aged 65 and could easily live in the property for another 20 years which would be a good average.

4) Now you have turned 100k into 200k in 20 years, which although I can't work out compound interest on my play school calculator, is something like 4 to 4.5% return. Not that great when you consider the gamble

Anon

10:12 AM, 29th January 2014
About 5 years ago

For those of you who are Coronation Street fans you might remember a couple of decades ago that Richard Hillman got into this and murdered the tenants in order to gain possession. This is not a strategy I would recommend. If my memory serves me right judgement was served upon him when he got hit by a tram.
.

Ray Davison

10:22 AM, 29th January 2014
About 5 years ago

Reply to the comment left by "Jamie Moodie" at "29/01/2014 - 08:48":

Totally agree, stay well clear of this and buy something that cashflows now.

Some One

11:01 AM, 29th January 2014
About 5 years ago

Really such things are only of interest to the specialist companies that buy this sort of thing (and protected tenancies and the like).

As fairly large companies they are able to wait it out, plus they will probably be able to use the asset sitting on their balance sheet to provide some security for finance, which a private individual will simply not be able to access.

Paul Eastabrook

11:44 AM, 29th January 2014
About 5 years ago

Reply to the comment left by "Anon " at "29/01/2014 - 10:12":

I recall that his strategy was a bit more pro-active though as his acquisitions were based around his own brand of equity release scheme.

15:07 PM, 29th January 2014
About 5 years ago

These investments are for people with very deep pockets and willing to take a very long term view for all the reasons given above.

I see people considering all types of very high risk and/or "creative" strategies, and I do sometimes struggle as to why people think this is a way to go.

Low risk/low hassle property investing is very simple.

You purchase a property with high tenant demand, hopefully with a bit of a discount.

Put in your 25% deposit.

Enjoy some nice cash flow and an easy life.

Hopefully enjoy some capital appreciation along the way.

Simpulz!

Renovate To let

18:14 PM, 29th January 2014
About 5 years ago

I guess this is a case where the owners were sold a "Home for Life Plan" and the current holder is trying to sell it on?

One of the companies doing these was featured in YPN.

*MODERATORS COMMENT - sorry but we have had to remove this link as it could be seen to be an endorsed promotion**
.

Tony Church

20:34 PM, 29th January 2014
About 5 years ago

Reply to the comment left by "Renovate To let" at "29/01/2014 - 18:14":

no in this case the property is occupied by life tenants the holder is a company selling other properties using the same methods thanks for all you comments anyway, by the way apparently the properties are for cash buyers only and no mortgage can be obtained on them.

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