Buying a home: the new scheme where the landlord helps renters to get on the property ladder
Well this landed in my inbox the other day...... An interesting read from Homenow that offers tenants the ability to buy their own home, check it out......
Halfway through the pandemic my landlord announced he was selling up,” says Richard Chapman, 47. “It was a bit of a bombshell moment.”
The office ad ops manager was renting a three-bedroom semi-detached house in Leatherhead, Surrey, with his partner and three children. “I didn’t have the funds to buy the property, so I did some research online and came across HomeNow.”
HomeNow is a start-up that looks at helping tenants, or “residents” as they prefer to call them, get on the property ladder by buying a home and renting it to them at a fixed rent for five years. If the property’s value goes up in this time, the “resident” gets a portion of the added value to use as a deposit towards the property.
“The idea is that residents feel like homeowners as they are earning equity and will hopefully eventually own the home themselves,” says Jonathan Potter, HomeNow’s co-founder. “But they will still receive the equity if they don’t decide to buy the property.”HomeNow currently has 17 properties in the scheme, with another five under offer. None of these is in London but there are several in the commuter belt of Kent, Surrey and Essex.
As required by law, the company complies with its obligations as a landlord, doing gas safety and electrical checks but a key difference to a traditional renting agreement is that, should anything go wrong, such as a broken boiler, the onus is on the tenant to get it fixed. “We can arrange to sort this, but what it would cost would come out of the final equity amount at the end,” says Potter.
Chapman acknowledges that this could be seen as a drawback, but adds that it’s not massive. “Often landlords will only pay the minimum to get things done and fixed.”
In fact, the idea is that residents treat properties as if they had bought them already, decorating them as they wish and making their own improvements.
“HomeNow insists on an inspection once a year so someone comes to check that you aren’t doing anything too mad,” says Chapman, who has added a downstairs bathroom, reconfigured the upstairs bathroom, put in a new kitchen and built a home office in his garden.
He sees this as a bonus as his previous landlord wasn’t happy with him making changes. “Granted, I have had to pay to get work done, but this is a big deal for me, and it will add value to the property.”
As well as the equity refund at the end, another advantage of the scheme is the security it gives over the five-year period itself, something not to be sniffed at with the current volatility in the rental market.
“The monthly rent went up from £1,450 to £1,950 when HomeNow bought the property and this did seem like a massive jump, but I’m locked in for five years now and that worry has been taken away from me,” says Chapman. “With the way that the cost of living has panned out, it’s worked out well for me having that day-to-day security.”
At the end of his five-year tenancy, which is in 2026, Chapman hopes he can buy the property. “I’d definitely recommend this scheme. It works especially well for people who aren’t cash-rich but are spending a lot of money on rent.”
How it works
Initially, residents find the property that they want to live in (or, as in Chapman’s case, are already living in), and approach HomeNow.
There are no limitations on the age, EPC rating, area, size or tenure of the property and, if they think the price is fair, HomeNow will negotiate with the vendor and purchase the property, paying the stamp duty, legal and conveyancing fees, and so become their landlord.
HomeNow conduct affordability assessments on prospective residents. If the resident passes these, they sign a five-year assured shorthold tenancy which fixes their rent.
At the end of the five years, if the value of the property has gone up, they’ll receive a third of this increase back, to use this as the deposit to buy the house. If the property hasn’t increased in value, the lease can be extended and there is a two-year break clause if anyone want to exit the scheme.
Residents pay a fee of £300 once an offer has been accepted and £500 on exchange. The balance on completion is the difference between a month’s rent and £800. These payments form the deposit, repaid at the end of five years.
