Make Sure Your Rent To Own Paperwork Stacks Up

Rent To Own Vendor FinanceWhen setting up a Rent To Own most of us focus on the transaction being a bunch of paperwork designed to get our tenant/buyers into home ownership.  While this is correct it’s also important to recognise that it’s made up of two separate documents, i.e. a Residential Lease and a Call Option.

A Call Option is regulated by Federal legislation and the Option paperwork drawn up by your solicitor normally needs no further input, other than:

  1. The tenant/buyer getting independent legal advice, and
  2. The tenant/buyer authorising the Option paperwork.

However a Residential Lease is regulated by State based legislation and does need your input in at least two important areas, other than just getting the tenant/buyer to sign the Lease.  The two important areas are Rental Bonds and Condition Reports.

Rental Bonds

It’s not compulsory to charge a Rental Bond anywhere in Australia.  However we believe there are two very good reasons why you should charge a Rental Bond.  They are:

  • Quite a number of Landlord Insurance policies will not pay out under certain sections of the policy unless a rental Bond has been lodged with the State’s Rental Bond Board (different names are used for this government department in each State), and
  • If something goes wrong with your tenant/buyer and you do end up in a Tenancy Tribunal, your Lease is going to look quite ‘non-standard’ to the Tribunal if a Bond has not been paid and lodged.  A couple of very experienced vendor financed solicitors have confirmed this as a good procedure to help ensure your Lease doesn’t stand out in the crowd.

Condition Reports

In NSW and Qld it’s compulsory to undertake a Condition Report and give two copies of this Report to the tenant/buyer before they move in.  In Vic it’s only compulsory to do a Condition Report if you take a Rental Bond but, if you do a Condition Report, you have to supply two copies to your tenant/buyer.  Condition Reports aren’t compulsory in WA.

Watching The Grass Grow

We’ve found doing Condition Reports to be less than exciting ;-) so it’s worth knowing that a lot of Property Managers have what’s generally called a Leasing Fee.  This Fee covers the cost of the Property Manager setting up the Residential Tenancy Agreement, up to and including the tenant moving in, i.e. they do the Condition Report as part of this service.  Talk with your chosen Property Manager, they’ll be able to give you a quote for what you need done.

CLICK HERE for details of Vendor Finance Management’s on-going management service.

Cheers,

Paul

Vendor Finance Institute

facebooktwittergoogle_plusredditpinterestlinkedinmail

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>