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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9434
Experience:  I have been practising for 30 years.
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I'm looking to purchase in a limited companies name a

Customer Question

I'm looking to purchase in a limited companies name a residential property from a private vendor on an instalment contract.
The property is mortgage free and the deeds in the vendors name (charge free)
I would be paying 10% deposit on exchange with completion on or before a 20 year term
Completion balance paid by equal annual installments over the completion term
The vendor remains in occupation until completion
Following completion a pre agreed life lease commences for the vendors
Only after possession is given can I sell the property with vacant possession
Following exchange I would take an equatable charge over the property
QUESTION
Is this a financial package regulated by the FCA
or a property transaction NOT regulated by the FCA
Is it an exchange with delayed completion
Regards
Terry
Submitted: 1 year ago.
Category: Law
Expert:  F E Smith replied 1 year ago.

This is a private arrangement between the two of you and hence, it would not be regulated if it was a plain straightforward sale.

It amazes me that the people who regulate it are the FCA and they are the ones who would prosecute when you asked for advice, as to whether something is okay or not, they will say. Bizarre.

What you have here is a Private mortgage. The seller is in effect lending you the money and taking repayments over a period of time

What would normally happen is that the property would exchange and complete and you would grant the seller a mortgage over the property in favour of the seller and there would be a mortgage deed with the repayment terms. The seller would be acting just like a mortgage lender.

If the seller is remaining in occupation however this is a sale and rent back albeit that the rent is payable by way of mortgage and hence it is regulated.

Here is some reading from citizens advice https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems/how-to-sort-out-your-mortgage-problems/sale-and-rent-back-schemes/

There is no reason why could not exchange contracts now and complete in some years time, but if I was acting for the seller, I would advise against that. It’s a very convoluted way of dealing with it.

Can I clarify anything for you?

Please rate the service positive. It’s the process by which experts get paid.

We can still exchange emails. Best wishes.

FES

Customer: replied 1 year ago.
Thank you for your reply.
To clarify, your opinion is this type of sale "exchange delayed completion" would be a private mortgage from vendor to buyer.
Therefore NOT regulated by the FCA
The vendor is mortgage free and looking to achieve a higher sale price above equity release companies.
The vendor has been offered 40% open market value with a rent free, life lease attached
I'm looking to offer 50% open market value on an instalment contract (10% deposit with balance over 20 year term)
The instalments would increase 3% year on year, therefore giving the vendor Income for LifeI don't see this as a sale and rent back as the vendor would never pay any rent, in fact receive annual instalments.
If I was to default on the instalments this would create a breach of contract and my deposit & instalments lost to the vendor, therefore making it a safe sale for the vendor as the title remains in their name until completion has taken place.I agree with you, the people to ask this question is the FCA. Seems crazy they won't/ can't answer it but would be happy to prosecute if I get it wrongTerry
Expert:  F E Smith replied 1 year ago.

You might struggle to get a solicitor to advise his client to exchange contracts and complete 20 years later. It’s problematical for a whole load of reasons including what happens on death, what happens if he wants to repay early? If you default, but what stage does it revert to the seller. If the company goes bust for any reason, the liquidator owns the house and you have paid all that money for nothing. The contract is going to be quite complicated.

If it is going to go down the delayed completion route with no rent being paid, I’m of the opinion that it is not going to be regulated. Problem is that if the FCA decide to prosecute for selling a regulated product when you are unregulated, the only person that would decide whether you were correct or not would be the court judge.

Sometimes, there is not a definitive answer and we can only give an opinion. If there was a definitive answer to every legal question, courts would close.

Can I clarify anything for you?

Please rate the service positive. It’s the process by which experts get paid.

We can still exchange emails. Best wishes.

FES