Letting to previous owners

Letting to previous owners

14:02 PM, 8th October 2014, About 10 years ago 43

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I have recently signed for a property (completing next week), and the estate agent (with whom I have had a long business relationship) indicated that the previous owners would be interested in renting it back from me. Letting to previous owners

I must point out that the property was a repossessed house and therefore sold by the bank as a mortgagee in possession.

I do not have a mortgage on the house, but I have noted from other BTL mortgages which I hold on other houses that often there is a clause prohibiting renting back to a previous owner. Is there a reason why banks do not like this? If there is this would make me cautious about doing it, but on the other hand, renting back to the previous owners might save me money as the house is currently decorated to their tastes (and a very high standard, not perhaps to everyone’s tastes!!).

The thoughts of those more knowledgeable and experienced than me would be very much appreciated.

Many thanks

William


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Comments

Rob Hogan

11:59 AM, 6th May 2021, About 3 years ago

I came across this thread as someone looking to buy a new home with cash, where the vendor has requested to stay and rent from me for a few months while they look for a new home. (The stamp duty holiday presses us to complete before they do that.)

Anyway, I spoke to the FCA on the phone and they directed me to PERG 14.5 in the FCA handbook, the "By way of business" test. https://www.handbook.fca.org.uk/handbook/PERG/14/5.html . "A person will only need to be an authorised person or exempt person if he is carrying on a regulated activity 'by way of business' (see section 22 of the Act (Regulated activities))."

Applying that test to our circumstances (one off, not-commercial, small scale etc) then it looks like we don't need to be FCA authorised. Of course, your circumstances may vary, and where lenders are involved they may well be more cautious. Just sharing what we found useful.

Rob Hogan

13:04 PM, 6th May 2021, About 3 years ago

Reply to the comment left by Rob Hogan at 06/05/2021 - 11:59
It's too late for me to edit the comment above but I might've been a bit hasty because the "by way of business" test seems to be much more strict for SARB in particular. Think I'll seek a solicitor for this one..

Mark Alexander - Founder of Property118

13:08 PM, 6th May 2021, About 3 years ago

Reply to the comment left by Rob Hogan at 06/05/2021 - 13:04
Julian Sampson is a renowned expert solicitor in SARB regulation https://www.twmsolicitors.com/our-people/julian-sampson/

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