Q
Our tenant has approached us asking if we would enter into a rent-to-buy agreement. Are these common and are there any fish hooks?
A
Rent-to-buy (or rent-to-own) agreements have been gaining popularity in recent years. There are some scheme providers who offer them, but private arrangements are less common. As the property owner there are several things you should watch out for. In rent-to-buy arrangements, the tenant usually pays a deposit and then pays rent which includes some proportionate amount which will be applied towards the purchase price. Some rent-to-buy agreements provide that, if the tenant is unable to complete the purchase at the end of the specified period, any money paid in rent and towards the purchase is not refundable. This is a clear benefit to the landlord but will not commonly crystallise if tenants are advised properly and they are confident they will be able to complete the purchase before entering into it.
The parties usually agree to the sale price at the agreement outset. They also agree on how long the arrangement will last, which is usually about