David Wilson Homes has launched a scheme where prospective buyers who can muster a 2.5 per cent deposit can reserve a home, move in and pay rent for six months.
The rent then goes not to a traditional landlord but to the developer as a contribution towards turning the deposit into a total of 5.0 per cent of the purchase price of the unit.
There are various conditions to the scheme, which is currently being tried on selective plots at 10 David Wilson Homes estates around England.
You must be a first-time buyer and have never previously owned a home, and therefore be eligible for first-time buyer relief on stamp duty land tax.
The rental and subsequent purchase of your new home is subject to contract and will remain so until you have exchanged contracts. When you exchange you will be legally committed to a six month assured shorthold tenancy and to complete the purchase of your home at the end of that six months.
The terms and conditions add: “Your eligibility for Rent Then Buy will depend on strict financial criteria and you must have sufficient funds to pay the standard reservation fee, the deposit of 2.5 per cent (less the reservation fee already paid) on exchange of contracts and sufficient income to pay to us by standing order a further 2.5 per cent deposit by monthly instalments over the 6 months that you rent your home.”
Perhaps most significantly, the terms and conditions continue: “These monthly instalments will be treated as rent payable to us in respect of the tenancy of your home. If you subsequently fail to legally complete your purchase of the home on the agreed legal completion date, we will be entitled to retain these payments and the 2.5 per cent deposit you paid on exchange of contracts. If you do complete your purchase and have paid all of your rent, you will be given allowance from the price for these payments.”
Prior to exchange of contracts the prospective purchaser must obtain a mortgage offer for 95 per cent of the price of the home and ensure that this remains valid until the legal completion date for the purchase of the home - David Wilson Homes has the right to check the salary, savings and mortgage offer of the tenants.
The terms conclude: “Your tenancy of the home will end on the agreed legal completion date for your purchase of the home. Around 2 months before this date, we will send you a written notice to confirm this. If you subsequently fail to complete your purchase on the legal completion date, your right to remain in the home will have ceased and if you do not leave the home, we may take legal proceedings to evict you.”