Should I consider renting back to vendor?

by Readers Question

8:10 AM, 5th August 2016
About 5 years ago

Should I consider renting back to vendor?

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Should I consider renting back to vendor?

I am a first time buyer considering buying an ex-council flat on a buy-to-let mortgage. The seller who lives there with his family is suggesting I let it back to him while he looks for a property to buy. thinking

I am concerned he may have an agenda to try and become a sitting tenant. For example if he started to claim benefits.

Has anyone experienced such a situation?

Would it be best to either wait potentially indefinitely for the seller to find a property or terminate proceedings altogether.

Any advice gratefully accepted



Kate Mellor

23:16 PM, 8th August 2016
About 5 years ago

I've now gone straight to the source (which is what I should have done in the first place) and it is clear that an SRB refers very clearly to individuals and really couldn't be clearer on this point! Very worrying to think that Ben was given different advice from the advisor at FSA!

The definition of Regulated Sale and Rent Back agreement is VERY flimsy and doesn't give much detail. It certainly doesn't exclude anything, for example the points I made in my earlier comment.

The only window of hope I could see was that both provisions of the definition must be true AT THE TIME THE AGREEMENT IS ENTERED INTO. Here is the exact text:-

Regulated Sale And Rent Back Agreement
(in accordance with article 63J(3)(a) of the Regulated Activities Order) an arrangement comprised in one or more instruments or agreements, in relation to which the following conditions are met at the time it is entered into:
(a) the arrangement is one under which a person (an agreement provider), buys all or part of the qualifying interest in land in the United Kingdom from an individual or trustees (the "agreement seller"); and
(b) the agreement seller (if he is an individual) or an individual who is the beneficiary of the trust (if the agreement seller is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling, and intends to do so;
but excluding any arrangement that is a regulated home reversion plan.

I would therefore argue that at the time of the agreement to buy/sell the property (or potentially at the time you exchanged contracts which is a far more binding stage of the agreement) the seller was NOT entitled under the agreement to occupy the premises and therefore the sale was not a REGULATED activity.

I would like to have this in writing from a solicitor though before I relied on it!

Dave Driver

14:00 PM, 9th August 2016
About 5 years ago

Why would you take the risk of doing this? You might think there are grey areas but there are not. SARB is illegal unless you are one of the very small number of regulated companies, none of which are actually doing it.

Even providing advice to a seller on SARB is a regulated activity, the only safe advice to give is that it is something you are not allowed to do.

Don't put yourself at risk of going to prison - the deal's not worth it.

Dave Driver

14:03 PM, 9th August 2016
About 5 years ago

Lyndon, you have just admitted to committing multiple offences on a public forum. That looks like a pretty stupid thing to do from where I'm standing.

Michael Barnes

14:16 PM, 11th August 2016
About 5 years ago

Reply to the comment left by "Lyndon Whitehouse" at "06/08/2016 - 18:11":

Please explain how selling one's home and then renting makes one a first time buyer.

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