Are residential lease options legal in the UK?
Lease options allow property investors to test drive before they buy.
A lease option contract resembles a no strings attached property test drive. Lease options are commonly referred to as a lease option agreements.
Lease option contracts provide an OPTION, without the OBLIGATION to buy
A lease option agreement means that the buyer subject to an upfront payment of a consideration amount which can be as low as one pound (the option fee) is given the right to purchase the property at a later point in time as specified in the contract. As the term implies, the buyer has the option to buy not an obligation to purchase.
UK Lease options can be legal if done legally and correctly
Lease option contracts are legal in the UK dependant on the wording and the individual circumstances. Buyers can register restrictions with the HM Land Registry to protect their right to purchase at a later date in terms of a Lease Option Contract.
Use a specialist lease option solicitor for your lease option
We encourage the parties to use specialist lease, option lawyers. Creative Legals has a team of specialist lease option lawyers who help lease option property investors.
The concept of option agreements is an old age legal concept that has been practised in the UK and many other countries. An option contract allows the buyer to buy at a later date contingent on specific terms stated in the agreement being met. It is from this very same concept that lease option contracts operate.
Lease option contract/Lease option agreement – potato/potato
Property investors commonly refer to these type of agreements as lease option agreements. Some refer to them as lease option contracts. Some call them Purchase lease options. Others call them just lease options. They are all residential property agreements with an option to purchase. In most circumstances, the document referred to as a lease is not even a lease. It is a common law tenancy agreement, which is referred to in the property investment circles as a management agreement.
Is a lease option legally binding?
A lease option contract is basically an option agreement merged with a lease agreement/or management agreement to form a single agreement. Both are legal and binding in the UK.
Lease options owners give landlords faced with financial difficulties paying their mortgage a chance to save their properties from repossession whilst at the same time allowing lease option investors to secure a property under more “friendly” terms than those by banks. It’s a win-win situation for both owner and buyer. Almost anyone can be a party to a lease option agreement.
Landlords avoid mundane management through lease options
In some circumstances, landlords may no longer want to deal with the hustles and responsibilities that come from managing a property. A lease option allows the landlord to retain the legal title of the lease option property, without the mundane management responsibilities.
Lease option agreement help potentially provide long term tenants
Lease options are also an ideal way of securing long term tenants. Most lease-options are for an average term of between 7 and 10 years. They could be longer or shorter. It depends on the agreement between the parties. This is where the importance of lease option heads of terms comes in.
Lease option agreement heads of terms
Heads of terms provide a bullet point list of the agreed terms. This helps the lease option property investor, the landlord and the lease option solicitor.
The lease option heads of terms do not need to be in a particular format. They just need to provide a list of the pertinent lease option points agreed to assist the solicitors in preparation of the paperwork. Heads of terms state what the deal is. That simple.
Heads of terms could include things such as the parties’ name and addresses; the property address; the agreed purchase price; the length of the lease option agreement; and agreed option fee (the consideration).
Test Drive Before You Buy – lease option
In the intro paragraph above I used the analogy of a test drive to resemble a lease option contract because the buyer has an option to buy and not an obligation to buy under the terms of the Option Lease Contract. Lease Option Contracts are ideal for home seekers or investors because they help buyers separate clunkers from keepers as you can tell a lot about a vehicle during test driving. The trial period gives the buyer a chance to discover whether or not the property is compatible with their investment
Feel free to get in touch to discuss your lease option or heads of terms with our specialist lease option lawyers. The consultation is FREE: https://creativelegals.co.uk/contact/