Due to the glut in bank lending, the freeze on salaries, coupled with high national debt it is now making getting your foot on the first rung of the property ladder very difficult if not impossible for most young buyers. However, we have a new form of property purchasing agreement called a protected lease option this term must not be confused with lease option which may not offer adequate security or protection. This option may be the answer that many first-time buyers have been waiting for. This option has been around for a long time and normal practice in many countries but relatively new to this country.

Protected Lease options  what are they?

The concept of the protected lease options is well versed in the financial and lending world, and can now be applied to property as a way of securing a home purchase. Having a protected lease option in place gives the holder (lessee) the right to buy the property at an agreed price after an agreed period of time, say 3 or 6 years. The lessee pays a small premium to be granted the right to purchase, and would exchange contracts on the premium as if the transaction was a normal house purchase.

How it works? 

The Protected Lease Option agreement creates “intent to buy” from the lessor at an agreed price at the end of a predetermined rental period, say three to six years, based on a predicted purchase price on the third or sixth anniversary of the option. The price can also be calculated by a percentage rise “say 15 -20%” over the agreed period.

So how does this affect you? This is the clever part, if you were to rent as normal your payments would be dead money, and just paying your landlords mortgage. With our protected lease option you pay rent in the usual way maintain and insure the property, but as the property increases in value the equity therein becomes your deposit to use in 3 to 6 years time as per the terms in your lease option. In the event that you do not wish to purchase you simply deliver the property back to the lessor on the agreed anniversary dates, and the agreement is terminated.  

The contract  Now, the contract can be as complicated and binding as a mortgage deed so it is imperative that you instruct a solicitor that has sound knowledge of this type of transaction. The lessor may wish to take a portion of the equity gained over the growth term if this is the case the amount in cash terms or percentage will be clearly stated before you commit to the option. This is normal practice if the property is being rented below market value. However, if substantial repairs are required to bring the property up to a reasonable standard we would recommend that the equitable growth be in your favour. This can be negotiated pre-contact and we would be happy to do this for you, as well as value the property along with the anticipated growth over the term agreed.   We also recommend that a condition report is completed and affixed to the lease contract for the avoidance of doubt at survey when you decide to complete the purchase, or hand the property back to the lessor. Unfortunately, you will not invariably gain any financial benefit from this type of transaction unless you intend to buy.

For further information contact Richard or Colin or complete this form and we shall call you back.

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