Buy Now Pay Later For The Property Market
An agent has begun trialling a new way of selling a property which creates the concept of a deferred purchase agreement, ‘Buy now pay later’.
Essentially, it will allow the vendor to ‘sell’ the house and achieve a sum of money while still continuing to live in the property – in the test case, for 20 years.
The buyer will finally have vacant possession of the property in around 2032, having bought it at a sizeable discount at today’s prices two decades earlier. The vendor, meanwhile, will have in effect been paid a large lump sum to stay put – almost the exact opposite of renting.
The idea is currently being tried out on just one property, but if successful it will be rolled out.
Tom Dogger, director of Winkworth Knightsbridge, Chelsea & Belgravia, has worked closely with the vendor of an apartment in Thurloe Court, South Kensington, to create a deferred purchase agreement.
The property is being sold at an asking price inviting offers in excess of £975,000, subject to contract, whereas in today’s market such an apartment would be valued in excess of £1.5m, with vacant possession.
Once the sale has completed, the vendor will be issued with a 20 year sub-lease which, assuming a sale occurs in 2012, will terminate in 2032.
This sub-lease will not qualify under the Leasehold Reforms Acts 1993 and 2002 for a statutory lease extension, and will mirror all of the obligations of the superior lease, including the placement of the responsibility for maintenance and all outgoings for the property for this 20-year duration.
Dogger said: “Thurloe Court offers a potential buyer a secure investment in a flat which, based on the historic performance of prime central London property since 1970, is expected to continue to rise in value”.
“The price of an average three-bed in the area has more than doubled over the last ten years, and this apartment is a prime example of a highly sought-after property.
“It was sold in 1998 for £375,000 on an original tenure that would have expired on December 24, 2076.
“If the concept of the deferred purchase agreement is successful we plan to introduce it on a broader scale within the office.”