Rent to Buy Contract

[masterob]

Apologies if this is not the right Board!

When we left Spain last November, in the absence of any hope of selling our house, we decided to rent it out. The tenants have now approached us with a proposal to buy the house on a Rent to Buy Contract. The sale price is fair were it a conventional sale. This is an arrangement I have not heard of but I am told it exists in Spain and elsewhere in Europe.

The proposal is that 20% of the agreed sale price is paid immediately and, at that stage, the ownership of the house is legally transferred. Thereafter for an agreed period (in our case, three years) monthly payments are made equating to the current monthly rent amount. At the end of that period the residual amount is paid in a lump sum. Should the purchasers default at any stage, the house reverts to us with no refund of payments made.

My initial reaction was to say no way but I am just wondering if I am being a tad too cautious probably because I'm not familiar with the scheme.

The thoughts that cross my mind are:

1. Getting "rid" of the house in the current housing market is very attractive (we have no desire to return to Spain) but,

2. Because the final payment is not until three years down the line, the initial asking price will be eroded due to both inflation and potential loss of interest on the capital sum. A revised asking price would need to reflect this.

3. It would mean having to maintain a Spanish Bank Account far beyond what we intended and there would be exchange rate costs for periodically transferring the funds backs to the UK.

4. Possible Spanish tax implications.

Our primary concern is that of transferring ownership at such an early stage and well before final payment is made. We would need to ensure that the Contract is both watertight and legally binding and that we have no risk of somehow losing the house. The more we think about it and the possibility of finally getting rid of the house, the greater the risk of not reaching a rational decision!

Just wondering if anyone here has come across this and whether it is as straightforward as it has been put to us. Any pitfalls I have not listed would be welcome.

[truebrit]

Think though, if you were lucky enough to get a buyer who would buy outright and you enter this agreement how sick would you feel. Sounds a bit like the Housing Association schemes we have in England. I am perhaps being a tad cautious but over my 15 years here have heard so many similar stories which ended up badly. Think long and hard.

[costakid]

Not sure if your doing the right thing, the housing market is on the move and 3 years is along time to wait. A lot can happen in 3 years. What if the buyer died with no will? Would your house go into a long legal wrangle in Spain. Just a thought.

[TorreDelAguila]

Don't do it. There is no way that title to the property should pass out of your hands before the full asking price has been paid. No building society or bank would allow title documents to leave their ownership in the case of an only part-redeemed mortgage, and you should afford yourselves the same level of protection.

Just don't, please, is our advice.

[katy]

I have seen some Developers advertising rent to buy. Perhaps it would be useful if you could find out their terms. I would be worried about transfering the house over legally on just the receipt of 20% deposit.perhaps some good legal advice if possible.

[Unicorn]

Personally I would not touch it with a barge pole.

Legal advice in Spain is inconsistent and if it ever gets to court can take years.

The 'buyers' can say they didn't rally understand, and if they have kids it is ever worse.

Just my opinion and to a certain extent, my experience, of the legal system.

Best of luck.

[anyroads]

Yes,

Barge pole is what came to my mind the second I had read it..

If you are tempted. Lie down in a dark room until the feeling goes away.

anyroads

[Lavanda]

I don't like the bit that the house is 'legally transferred after the buyers have only paid 20%. If the house is 'legally transferred' then it belongs to them. No? I wouldn't do it simply because I like to sleep at night.

[masterob]

Many thanks for all your responses. You have all confirmed my gut reaction when the proposal was put to us! Won't be touching it with an extra long bargepole!