If you temporarily do not have sufficient funds to purchase a property and do not want or are unable to take out a mortgage, a solution could be the "rent to buy" formula.
Literally translated, it means rent to buy.
This is a contract that is the result of the merger between the rental contract and the preliminary sales contract for a property.
At the moment it is a little used tool in Italy.
It consists of an agreement by which the owner delivers the property to the tenant, the future buyer, who pays the rent for a certain period of time.
After this period, you will have the right to purchase the property by deducting the amount of fees already paid from the purchase price.
How does it work
An example: let's imagine that an apartment is put up for sale with the asking price of €100,000.
The tenant, future buyer, agrees with the landlord/seller to pay a monthly rent of €1,000 per month.
A part of this price, for example €500, is given for the enjoyment of the property, as if it were a normal rental.
The other part, i.e. €500, is charged to the price (i.e. it is to be considered as a deposit on the selling price), with a consequent reduction in the final selling price.
Therefore, if after 5 years the tenant decides to proceed with the purchase of the property, he will not have to pay €100,000, but €70,000, because €30,000 has already been paid with part of the rent.
The tenant is not obliged to buy the house after the period during which he pays a monthly amount.
Advantages and risks for those who sell
The main advantage if you are willing to sell your property with the rent to buy formula is the possibility of finding a higher number of potential buyers.
This is especially true during periods when banks are less inclined to grant a mortgage.
The risk that the seller runs is that the tenant, an aspiring buyer, decides not to buy the house.
In this case, however, the owner can retain all or part of what has been paid (and it will still be a higher sum than a normal rental fee).
There is another risk and that is that of finding the property occupied by the defaulting tenant and having to appeal to the judge to free the property.
The procedure, however, is not that of eviction, but rather of release of the property: much shorter and less expensive; but the release time of the property depends on the individual courts.
In order to follow this procedure it will be necessary to include specific clauses in the rent to buy deed following the advice that the chosen notary will certainly be able to give.
It is advisable that the rent is higher than a normal rental fee
This is to protect the owner, thus guaranteeing adequate compensation in the event of failure to conclude the deal,
This also demonstrates the seriousness of the tenant's commitment to the future purchase of the property.
Protection of the tenant/future buyer
The law provides for the transcription of the rent to buy contract in the real estate registers, which will allow the tenant to purchase the property free from mortgages, foreclosures, or other detrimental effects that emerge after the transcription of the contract.
The transcription has a maximum duration of 10 years. This protection remains even in the event of bankruptcy of the seller.
Properties subject to rent to buy
The rent to buy can concern any type of property: apartments, garages, cellars, shops, offices, warehouses and shops. Even earthly.
It can also concern a property under construction.
However, if the asset is in its raw state, it will be necessary to cancel the mortgage on the asset; However, it is possible to provide for the assumption of the mortgage.
For construction companies, rent to buy could represent a valid tool for paying the mortgage installments originally contracted for the construction.
Speaking of construction companies, if the rent to buy contract concerns a property under construction, the tenant/future buyer is protected and does not lose his money.
In fact, the contract remains valid and effective even in the event of bankruptcy of the owner/builder
The sale is not subject to bankruptcy revocation, if agreed at the right price and it concerns the main residence of the tenant or his closest relatives or in-laws.
As in the case of the classic sale, the tenant/purchaser can reserve, in the preliminary contract, the appointment of a third party at the time of the deed.
It is also possible to provide for the assignment of the contract.
Taxes
During the period of enjoyment (as happens in rental), the taxes related to the possession of the property are borne by the owner.
The costs of transcribing the contract in the real estate registers are, however, borne by the buyer.
