Among the various types, the formula of rent to redemption is the most popular in recent years. Let’s see together the 10 most important things to know about renting a ransom.
READ ALSO: Lease contract and maintenance costs: tax jurisdiction and assessment What is the ransom rent
If you have found the house of your dreams but you are still undecided whether to rent or buy it, or more simply the bank has not granted you the loan, you can opt for the ransom rent formula. What is it specifically about? Rent-to-rent is a particular type of contract that allows the renter to rent a house to become its owner after a certain period of time. It’s like a form of leasing, even if the differences are many.
How the ransom rent works
This particular type of contract can be applied both to movable property, therefore to homes, and to real estate. In the case of a house, for example, the contract stipulates that the owner agrees with the future tenant / buyer and grants his rented property for a limited period of time, which is obviously established in advance. After this period, the property is sold with the consequent change of ownership. Then, when it is sold, the amount paid up to that point as a rent can be taken into account, either in whole or in part. There are various forms of rental contract.
Contractual formula rent to buy
In this specific case, the rental contract precedes that of sale. At the same time, however, the future sale is facilitated thanks to the payment extended over time. The seller, therefore, accepts the installment of the amount and has the advantage of actually remaining owner of the property until it reaches the final settlement. The buyer, however, has the convenience of paying the rent, an amount that is usually lower than a classic mortgage payment. This type of contract is the most widespread, or even the only solution for all those who can not afford a high rate. In this case, after the agreed term with the seller, the tenant can exercise the purchase option. For example, they can arrange for a 5-year lease and at the time of expiration the tenant can decide whether to buy the house or not. Usually, in these cases the rent payment is a bit higher than usual, as it is considered a sort of down payment on the future purchase price. Obviously, the purchase price must be indicated at the beginning of the contract and must remain until the end.
Buy to rent
On the contrary, with the buy to rent we proceed immediately with the saleof the property at an agreed price, but always extended over time. The seller, on the other hand, will have the certainty of being able to return to be the owner of the property if the buyer does not fulfill the amounts due. This is usually the most used type of contract. In this case, two different contracts are drawn up, one for rent and one “preliminary” for future sale. The preliminary contract is regularly registered in the real estate registers and lasts for a maximum of ten years. In the present contract, the parties have the right to choose whether the preliminary obligation complies with the sale or whether the lessor will decide whether to purchase the property or not.
In the case of sale of bare ownershipInstead, the owner can sell the property while retaining the right to live there all his life, thus enjoying his home in peace, but with the advantage of being able immediately to enjoy a decent capital that would help him to live without thoughts. Obviously there are also advantages for the buyer, who will buy the property at a definitely facilitated price, which is calculated based on the age of the seller. The price is certainly convenient because at the time of the appraisal a coefficient is applied that can vary according to the age of the person who uses it. These coefficients are elaborated by the Ministry of Finance and are based on statistics regarding life expectancy.
Other types of contracts
Furthermore, there are other contractual forms. One of these is the rent with automatic redemption, according to which it is mandatory to transfer ownership after the payment of a certain number of installments or a certain sum. Another formula, however, is that with reservation of ownership . In this case, the owners have more guarantees if the tenant does not pay regularly the amount due and have the right to request the termination of the contract and return to dispose of their property. In this case, however, the owner has the obligation to return a portion of the sums received. This sum can be established by a judge or can be indicated in advance on the contract.
Rent with redemption: what the law provides
The Legislative Decree 133 of 2014, better known as the Unblock Italy decree, regulates the various rental options with redemption. According to the law, therefore, it is established that contracts must be regularly transcribed on the appropriate real estate registers . Unlike the preliminary ones, whose duration is usually three years, the rents with redemption can have a duration of 10 years. In the same decree, in the second paragraph, it is specified that the contract with redemption can be resolved when the buyer / tenant does not regularly pay the agreed monthly fee. In this regard, the contract must clearly state how many missed payments or delays in the same can be accepted, before the termination of the contract.
Regarding the obligation to purchase, in this regard, the law is clear. In reality, the possibility of choosing whether to buy the house at the end of the rental period must be decided a priori and transcribed on the contract by both parties. This is to meet all those people who may not be able to fulfill the next payment.
Benefits of renting with redemption
Nowadays, unless you have a small cash aside to be paid in advance for a purchase, the banks that grant mortgages are very few. And even when they grant it, interest rates are sky-high. In order to get a mortgage, much depends on the working conditions of future buyers. In a couple, for example, it is essential that both work and have a permanent contract, preferably state or municipal. Otherwise, it is really difficult to get a mortgage. For this reason, there are fewer and fewer people who buy a house and who turn down their choice of rent with a ransom. This solution is advantageous both for those who want to buy and for those who must or want to sell. In the first case, those who want to buy can do it without the need for a mortgage, but above all with the awareness of not nullifying the rent installments. At the same time, those who want to sell have the opportunity to grant a house for rent, collecting the amount of the installment on a regular basis, and then permanently transfer the property at the time of sale in the presence of the notary.
Another advantage not to be underestimated is the fact that with this type of rent you can “try” the house before buying it. Since the contract does not oblige the purchase, you can always decide not to buy the apartment later if you were not completely satisfied with it. Furthermore, if the owners of the property are not immediately found, the payment of taxes and house taxes is not met.
The contractual conditions
Before proceeding with the ransom rent solution, it is important to look carefully at the contract and read the conditions carefully. First of all, you have to make sure that the monthly payment you pay for the rent is adequate. To realize it, just compare it with those of the normal locations. Furthermore, it is good to make sure that there is no down payment for the future purchase of the property, that there are no unjustified increases and above all a time constraint that obliges the future purchaser to purchase the property by a pre-established date.
To evaluate the effective convenience of renting with redemption, we must also consider the selling price decided by the two parties. In fact, this amount can be that of the market, or a price fixed from the beginning and then maybe reduced, taking into account the amount paid for the rent during that period of time.
Finally, the conditions governing the termination of the contract should never be underestimated. The latter, in fact, must be evaluated very carefully so as not to run into unpleasant surprises, such as interest or any indemnity on one side or the other.
Despite being a solution not to be underestimated, the rental contract with redemption, in reality, can only be considered a palliative, since if the money to buy a house do not have, certainly in 3/4 years the situation does not change . Obviously then there are the exceptions, but this being the case, we must take into account that usually these kinds of contracts provide a higher rental rate than the common ones and therefore we must evaluate well if the game is worth the candle. Moreover, if at the end of the games you decide not to proceed with the purchase, the fee paid up to that time for the rent is obviously lost. Finally, always remember to write down the contract to avoid unpleasant surprises.