Help Needed Please!

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I need your advise - PLEASE HELP!

Discussion in 'Legal & Regulatory' started by Bebee72, Jan 16, 2019.

  1. Bebee72

    Bebee72 New Member

    Hi, I am a first time buy-to-let investor on an Assured Shortholad Tenancy (AST) residential project with fixed 2 years 7% net guarantee rental of the purchase price upon completion. The project, originally to plan to complete in June 2019,has to be extended to Feb-2021. Recently, the developer's solicitor emailed me and telling me that they have to switch the AST Agreement to Common Law Tenancy agreement with me, reason being the developer is now concerned that rental guarantees being provided by them in this fashion may mean that they need to be authorised by the Financial Services Authority which they are not.

    They also pointed out the followings:

    The tenancy cannot be an Assured Shorthold Tenancy as the tenant is a company. The agreement with the seller confirms that you will receive a set rent regardless of the actual rent received by the Seller on any sub-tenancy.

    " Please note that all rent guarantees not cast iron guarantees as the "rental guarantee" is only as good as the person who gives it."

    In this regard, does it mean under the Common Law Tenancy agreement, we will have the possibility of not receiving the 7% net guarantee rental? Is the Common Law Tenancy agreement, as compared to AST, on a large extent, not favourable to us investors? If this is the case, do you think I could cancel the contract without any liability? I am a novice on the property market and hope I could get some useful advises from you all. Many thanks.
  2. Jules1970

    Jules1970 New Member

    Hi Bebee

    I'm trying to understand this situation see if I can help you. I have only ever done AST. I sold my let properties couple years ago. Is the property you are buying totally yours and you are going to live there or are you a shared investor.

    Who are the tenants? Are they usual residents or a company tenants and the rent going to be more than 100k?

    I will have look at what % you be able to get if you can or if not tell you why.

    Hope if it turns out to be a pain you can get out if it. My advice would be to invest in something more straightforward.

    Kindest regards
  3. Bebee72

    Bebee72 New Member

    Hi Julie

    Thanks for your reply. I'm the sole owner of the property and I won't live in the house. Since the developer (seller) said that they needed to enter into a Common Law Tenancy Agreement with me and under this tenancy agreement, they will become the tenant whereas I will be the landlord for a 2 years term. The monthly rent is GBP1020 net.

  4. diyhelp

    diyhelp Active Member

    While I do not pretend to understand the legals of this, I find it strange that they are trying to change the terms at this point? I appreciate they may need to do this for legal reasons, but did they not research this at the start? This would not give me an awful lot of confidence in them to be honest.
  5. Jules1970

    Jules1970 New Member

    It's odd like DIY saying about legal side. Also usually the only time it's common Law Tenancy is when they are paying extremely high for it or are a company so I don't get why the tenancy is that. Unless I'm missing something
  6. Jules1970

    Jules1970 New Member

    At that price should be a AST, or actually even though you own the property have they still got a say or interest in the property in some way?
  7. Karen R

    Karen R New Member

    I would consult your solicitor. There are many investment companies around that are reputable and this may be one of them but there are as many that are not and essentially they seek to secure the funding they need to make the profit they want and take advantage of people with no experience in the industry, I am not suggesting this is such a company I am purely saying that unless you know what due diligence to do on such a company before investing a penny (and you need to know what the results of that due diligence tells you and how to interpret it), you should be extremely careful about parting with any money. You can achieve great returns by simply investing in a property independently without doing so through an investment company and one thing to remember is that any investment company generating investment from the general public, are making a profit themselves somewhere along the line too (otherwise they wouldn't be doing it). It is your job to protect your money and position and thus you should not rely on any investment company to protect your position. I would seek independent legal advice as soon as possible as it is far better to spend some money on obtaining legal advice now than to part with further money only to realise a loss later.
  8. While there are legal protections for investors who have received a substandard service/return, I totally agree that it is also down to the investor to do due diligence prior to investment. With no emphasis on this particular issue, I always work by the same principle; if it looks too good to be true then it probably is too good to be true.

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