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Renting your sold property

We have recently received a few helpline enquiries about ‘rent back agreements’ between buyers and sellers of a property. These relationships do not generally require FCA approval however, this does mean that in some cases approval may be needed.

Common scenario

The common scenario that we come across is not really referred to as a rent back agreement. It is for this reason that there appears to be some confusion as to whether Financial Authority Conduct (FCA) approval is required. The scenario that we often advise on is where a seller sells his property to a buyer but does not vacate the property upon the completion of the sale. In some cases, sellers request a tenancy agreement for a few months for one reason or other prior to moving into their new property. The reason for the delayed move is often because for example the property they have purchased is having major works done to it or it is not immediately available.

In this situation if it is a private seller selling to a buyer in a one-off transaction at a market price then FCA approval is generally not required. If the buyer enters into these types of agreements on a regular basis and purchases at below market rent then FCA approval is required. The reasoning for this difference is in all honesty obvious in light of financial scandals such as Payment Protection Insurance (PPI).

Where a person is forced to sell their property at a below market price it is usually because they are in some sort of financial difficulty. In that situation prior to making any financial decisions they will require financial advice and the transaction will need to be conducted by those that are FCA regulated to ensure that are not taking advantage of those in need.

Where the transaction is between private individuals who have equal bargaining power, FCA approval is simply not required. In this situation a seller usually enters into a tenancy because it is convenient to do so until the property they are moving to becomes available. In this situation the parties usually do not have any financial constraints in buying, selling and even renting.

However, it is possible that in some scenarios the line between needing approval and not can be blurred. In that situation and possibly any situation where a party is considering renting a property they have sold, advice should be sought from your conveyancer and agreements drawn up rather than facing a potential criminal prosecution.



The contents of this blog post is not legal advice and is provided for general information purposes only. If legal advice is needed readers should contact a solicitor. No responsibility for any information contained within this post is accepted and PainSmith solicitors accepts no liability in respect of the contents or for action taken based on this post.

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