• Rent-to-buy contracts

  • By Hannah Kane

  • Jon Green, Chief Executive of The Lease Option Company, offers his advice on 'rent-to-buy' contracts

  • What’s the difference between ‘rent-to-buy’ and ‘lease options’?
    ‘A ‘lease option’ is the technical definition for a specialised tenancy agreement allowing the tenant to rent a property for a length of time with the option to buy it outright at the end of the rental period. Lease options are sometimes called ‘rent-to-buy’ schemes for this reason.’

    How does it work?
    ‘Although the jargon can sound confusing, the basic idea behind a lease option is straightforward: the lease option provider will acquire your home for you, either by buying on your behalf or working with other landlords, and allow you to move in as a rent-paying tenant. You’ll then have the option to buy the property outright after a fixed period of time, typically three to five years, at a price agreed when you first moved in. You’re under no obligation to buy at the end of the rental period.’
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    Do I pay a deposit?
    ‘The lease option provider will usually ask for an initial upfront payment for the option. This can be as low as two per cent of the property’s value so it’s much less than most mortgage lenders will require. This payment is knocked off the agreed price for the property.’

    What are the benefits of purchasing property this way?
    ‘For many first time buyers, lease options can offer a much better deal than a conventional purchase. You don’t need to take out a mortgage straight away, giving you time for your financial position to improve so you can afford to buy at the end of the rental period. While that happens, you get to live in a property you can think of as your own home. And you’re on the property ladder with the purchase price locked in from the start, giving you the opportunity to make a capital gain if prices rise sufficiently as well as the protection to avoid most of the financial loss if prices fall.’

    Are there any downsides?
    ‘Taking out a lease option is a major commitment – just like buying a property. You’ll be living in the same place for the agreed rental period, which means that you have to think carefully about your future plans before you sign up.’

    Will the rent be higher than a normal lease?
    ‘The rent you pay with a lease option will be slightly higher than if you were just a tenant. Part of this additional rent is taken as payment for the option to buy along with the amount paid upfront. This total option payment is knocked off the agreed purchase price if you buy. In effect, this means that some of the rent helps you to build a mortgage deposit for the future. If you don’t exercise the option then the cost of higher rental payments is not refundable. However, this is still better than having bought a property which has fallen substantially in value.’

    Is this scheme widely available?
    There are only a small number of lease option providers in the UK at the moment. If you’re based in the London area, contact The Lease Option Company (020 8947 8377/www.theleaseoptioncompany.co.uk).’

  • Add your comment to this feature

192 comments

  1. Posted by Hrs on 01 May 2012 17:02

    Has anyone got a 3 bedroom house available on a rent to buy option in the Essex area, or know of any companies that offer this

  2. Posted by Hrs on 01 May 2012 17:02

    Has anyone got a 3 bedroom house available on a rent to buy option in the Essex area, or know of any companies that offer this

  3. Posted by Douglas Kaine on 01 May 2012 16:43

    15% deposit paid on 1,2,and 3 bedroom flats in southeast London area. Legal fees paid, mortgage broker fee paid . Suitable for first time buyers or investors or simply just move in. Purchase now for only £5000 ( management fee) including vat. Complete within 28 days. Further information and to reserve call Douglas on 020 8166 5984 or Ronald on 020 8166 5836

  4. Posted by Manuel on 26 Apr 2012 12:23

    Hi all, I am looking for a 2/3 bedroom house/flat in harrrow or near there with rent to buy scheme, please contact me if you have any.
    cheers,
    Manuel

  5. Posted by J & J on 25 Mar 2012 22:47

    Hi, We are a family looking for a rent to buy for our 'forever' house! Has to be 3 beds with garden, terraced, pref in west london: Chiswick, Kew or Brentford. We love victorian properties and could afford up to £2000 a month. Please email us if you have anything we could look at. Looking to move asap.

  6. Posted by Joe dowling on 12 Mar 2012 22:38

    FOR KENNY WALKER have you got anything a bit more west of scotland. Ideally ayrshire or inverclyde

  7. Posted by Kenny Walker on 12 Mar 2012 19:43

    I have 2/3 bed semi detatched house avaliable for rent to buy from june/july. Falkirk in central scotland

  8. Posted by Nathan on 02 Mar 2012 13:47

    Hi there,
    I have a 2 bed stunning refurbished flat in Manor Park E12 for sale on a rent to buy. Buy it for £231 per week and some get started money need up front. Contact me for more details, Nathan 07988591609

  9. Posted by joe dowling on 29 Feb 2012 20:58

    does anyone ever buy property in scotland. i realise this is for london but i am looking for a rent to buy up in central scotland

  10. Posted by Thor Portess on 29 Feb 2012 18:22

    I have a large 3 Bed House in North London for sale (Bruce Grove) on a Rent to Buy basis. Please call me if you are interested on 07845130521.
    Thanks,
    Thor

  11. Posted by Doug on 28 Feb 2012 23:12

    Hi I'm looking for a rent to buy 3 bed Victorian house in the South East London area or Bromley. Please get in touch if you can help.
    Doug
    07983 941 324
    Looking forward to hearing from you
    Regards

  12. Posted by Thor Portess on 26 Feb 2012 13:20

    I have a 2-bed light and airy 1st floor maisonette flat for sale via rent-to-buy in Wallthamstow NE London. It has been newly refurbished and is ready to move into. No mortgage needed! View it now by calling Thor on 07845 130 521.

  13. Posted by Efe on 17 Feb 2012 13:28

    Hello, I am looking for a one or two bedroom rent to buy in barnet or north london area. Thanks.

  14. Posted by Nick - London on 15 Feb 2012 14:11

    I have a genuine RENT TO BUY for anyone looking to get on the LONDON property ladder. I have a 1 bed house SE London in zone 5 and available at £255 per week. Must be willing to move quick as this will go. For working person or couple only with some amount saved up to put down to get started.
    Call Nick 07949 823227

  15. Posted by John Hales on 20 Jan 2012 10:53

    There some dodgey dealers out there. Because there are so few they think they can charge hefty upfront deposits. E.G. I dealt with an agent who wanted to charge £150 (each for referencing) (plus £500 no refundable deposit unless the refs turned us down).
    When I went direct to the landlord it was £30 each) and no deposit until the refs had cleared.
    John Hales

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