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  • Property Prices

    BMV pricing

    Hi Folks.

    My 1st post on PT so be gentle ;-)

    There’s a potential opportunity to purchase a property where the current owner is looking to sell and stay in it. Its on sale about 20% under vacant value.

    the property has a lot of potential (long term) as 2 building plots. Its not in fantastic condition so long term it would be a development opportunity in my view.

    The current owners are looking to stay put an pay rent a little under market value (10%). I would guess this would be built in to the sale conditions so the new landlord could not evict them.

    My query is around is the pricing i.e. what BMV value is realistic?

    The way I see it, there is a  few obvious gotcha’s need ironing out such as what if the rent was not paid and there is a no eviction clause. Can this be circumvented?

    Another would be setting a maximum term of occupancy rather than for life. i.e. 10 years. Preferred over a ‘for life’ option.

    The owners are 80 and late 60’s so the ‘for life’ option could be 20 years. Also this option leaves unexpected variables such as illness or nursing homes. The chap, in his 80’s has dementia

    Any advice would be most welcome. We are cash buyers and the repairs and maintenance does not pose any issues for me.

    thanks in advance.

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    Hi Phil and welcome.

    I am sorry to say that this is a non-starter in my view.

    Sale and Rent Back, as it is known, is a highly regulated activity and you are not FCA registered.

    Secondly, getting involved with elderly people with mental health issues is not a good idea either.  If you buy the property at a discount, the family could end up claiming that you cheated them out of their equity and could make all sorts of claims against you, including unravelling the sale.

    It could very messy.

    Sorry to be the bearer of bad news, but if you went ahead with a Sale and Rent Back transaction it would actually be illegal ... and that's before you consider all the problems with having life tenants with mental health issues.

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    Hi Vanessa

    Many thanks for the welcome and the advice.

    We had an incl-in there was a legal issue (FCA part) so thanks for the clarity.

    An estate agent and solicitors (both sides) would be involved to protect both parties however your advice is duly noted and my cautious side is on full alert.


    thanks again.

    Phil

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    Phil, just so you understand, it would be illegal for you to get involved in such a transaction.

    It doesn't matter which professionals are involved.  It is an illegal transaction, unless you are FCA regulated, which takes around 2 years to achieve.

    I doubt the vendors are aware, that if they go through with this, they will lose their right to benefits.

    You really should move on from this imho.  It will only end in tears.

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    Vanessa is right. It is a criminal offence to conduct a regulated financial activity wothout being authorised (ie licensed) to do so by the FCA.

    Let this article serve as a warning about the seriousness: "FCA fines ‘sale and rent back’ agent nearly £1m" https://www.ft.com/content/96a67f90-d8d2-...144feab7de

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    Why not get an option agreement in place and go off and get planning for the development potential, with shared profit with the owners. You need to make it a win for them too. Sounds like it has the potential for that?

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    Rachel 

    "Change is a prerequisite to longterm survival".

    The establishment is rigged so that the rich stay very rich, and the poor get poorer.

    Thanks all for the advice. I totally understand and won't be doing anything illegal or remotely dodgy.

    The seller (via an estate agent) is struggling with the mortgage. In short they maybe repossessed soon.

    So they are keen to stay in the property. I have offered a tenancy in one of our houses but the want to stay in their house and rent it back.

    Given the legal issues outlined above, I fear they will be repossessed as I can't see another option.

    Real shame as I can/want to help but it seems my hands are tied.


    thanks again for the advice



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    There is a possibility you might be able to partner with a FCA regulated company and it might be worth getting family approval in advance of any transaction too.

    best of luck



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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404