What is a rent to buy option compared to a buy to let? 

A buy to let is where someone buys a property with the objective of renting it rather than living in it themselves and usually refers to the type of mortgage obtained on the property.

A Rent to Buy is when a person/persons rent a property with an option to buy it within a certain time.

During the agreement who pays the utility bills? 

The utility bills are paid for by the Tenant/Buyer. These includes electricity, gas, water and Wi-Fi.

Who pays the IBI (Town hall tax) and BASURA TAX (BIN TAX)?

The IBI and community fees are paid by the Landlord/Vendor as the property still belongs to them until the option to purchase is complete at Notary.

The Basura is usually paid for by the tenant however it might be included in the rental price.

Who is responsible for insurance?

As initially this is a rental agreement with option to buy, then as with all rentals agreements the Landlord/Vendor is responsible for the property insurance and the tenant/buyer is responsible obtaining their own insurance to cover their personal belongings.

Who is responsible for maintaining the property including a private pool and garden? 

like a standard rental agreement, it is advisable that the maintenance of the property is the responsibility of the Landlord/Vendor. This can change depending on the specific contract agreed but basic and ongoing maintenance and repairs such as gardening, and small works would normally be undertaken by the Tenant/Buyer.

It is advisable that wording is included in the contract that general maintenance up to a certain value is paid for by the Tenant/Buyer.

Is there tax to be paid on the rental income prior to the purchase option? 

Yes, but as all the rental payments are deducted from the purchase price, this can be claimed back when the property purchase option is realised.

The amount of tax paid depends on the personal circumstances of the Landlord including, residency and if the property is a second home or dwelling.

We always advise professional advice should be taken and can recommend our partners at Martinez Echevarria if required.

Can I evict the tenant if they stop paying the rent?

A contract should state that should the Tenant fail to pay rent on a single occasion then the Landlord has the automatic right to evict them this is usual as per a standard rental contract.

Until the purchase option has been exercised the contract will be as per a standard rental contract.

Is there a deposit/initial upfront payment? 

Yes, to show commitment to the purchase, it is standard that an agreed amount will be paid, this is usually 10% of the agreed purchase price but agreed by both buyer and seller.

The payment will be deducted from the agreed purchase price.

Are there legal fees to pay?

Yes, if you use a lawyer which is always advisable there will be legal fees, there will also be notary fees. As a contract will be prepared from the outset, the legal fees like any property purchase are paid on provision of the contract.

Additionally, like all Estate Agents, Avocado Homes also charge for their services.

At what point will I own the property? 

You will only own the property once the contract between yourself and the seller has been fulfilled, the full option to purchase price paid and the transaction authorised by a Notary.

Is the contract legally binding? 

The contract is usually a personal contract between both parties which can be created by a lawyer and if required it can be signed in front of a notary. The latter will ensure that your option to buy is listed with the Spanish property registry. Our independent partners at Martinez Echevarria will assist with all aspects of the legal process or of course you can use your own lawyer.

What happens if the tenant/buyer withdraws during the rental term? 

With a rent to buy option and providing that the Landlord / Vendor has disclosed all information on the property regarding building licences first occupation licence and such other legal entities, then each contract is bespoke and the conditions agreed between the seller and buyer, in all cases the Tenant / Buyer would forfeit both the rents paid, the initial deposit payment and any other stage payments. Furthermore, if they have made improvements to the property, they cannot claim any compensation for any refurbishments or works undertaken.

Will I qualify for a mortgage easier with a rent to but option?

It could help Yes. The criteria for lending have changed since Brexit depending on what part of the world you are from. However, if the rental payments and initial deposit for a rent to buy option can meet 30/40% then most lenders will fund up to 60/70% of the property.

If all parties can agree a reasonable rent/deposit, this will help the loan to value from a lender. Proof of income will be required to satisfy the mortgage lender that the remaining % amount is affordable and can be paid back over a given term.

Residents can attain a mortgage with an 80% loan to value and non-residents 60/70%. See our website for mortgage offers and an instant pre-approved offer.

If the property is repossessed by the landlords mortgage lender before I buy the property outright, what happens to my option to buy?

Banks must respect long term tenancy agreements giving you the right to rent the property if it is repossessed, your landlord would now be the bank to whom you would pay the future rents, however You may no longer have the option to purchase the property with the same conditions as you agreed with the original Landlord.

You may still be able to purchase the property from the bank by raising the funds at that time to pay off the outstanding mortgage. Any deposit paid you would likely lose in the event of a foreclosure. However as the tenant you would be given first refusal to purchase the property and of course bank repossessed properties are usually great value.

What happens if the tenant/buyer are not able to purchase at the end of the contract term?

If at the end of the rental term the tenant/buyer is unable to fulfil the purchase option, by default, they have relinquished their right to purchase the property. They have also forfeited any payments made by way of rental payments or initial deposit payments.

There may be other alternative routes that can be agreed by both landlord/vendor and Tenant/Buyer to ensure the deal continues, for example to extend the option term.

If the property price increases or decreases significantly before the purchase option, what happens?

Both parties are committing at the outset on a pre-agreed price that in a few years’ time will be the option to purchase price. This is set and is not negotiable once the Rent to Buy contract is signed.

What happens if the owner should die before the purchase option is completed?

Spanish laws stipulate that heirs of the deceased must accept inheritance with all conditions including those of the assets. With a rent to buy option contract, this means that the property has a contract signed by both parties giving the tenant an agreement to buy the property for a pre-agreed price within an agreed term which must be fulfilled.

Are we contracting with Avocado Homes?

No, Avocado Homes are the selling agent the Rent to Buy contract is between the owner of the property and the Tenant/Buyer.

The only contractual agreement with Avocado Homes is for our commission for the sale of a property.