Tenants increasingly getting first refusal to buy their home

Mortgage brokers are reporting ‘an enormous uptick in enquires’ from tenants who are being given first refusal to buy their rented home.

The brokers point to increasing numbers of amateur landlords who are now exiting the private rental sector with rising interest rates squeezing margins – and looking to cash in with high property prices.

Some landlords are also worried about the prospect of having to improve their property to meet an EPC rating of C by 2025.

‘Tenants who have been given first refusal to buy’

One of those brokers is Lewis Shaw, founder of Mansfield-based Shaw Financial Services and he said: “Over the past six to eight weeks, we’ve seen an enormous uptick in enquires from tenants who have been given first refusal to buy the property they’re renting from their landlord, often with an element of gifted equity.

“Off the back of that, I’ve spoken to several brokers heavily involved in the buy-to-let space and they’re seeing lots of their landlord clients looking to offload the parts of their portfolios that are either low yielding or have an EPC below C.

“We are arguably witnessing the start of the Great Landlord Sell-off as buy-to-let becomes a less attractive investment due to tax changes in interest relief, stamp duty land tax and new EPC rules due to hit in 2025.”

‘Buy-to-let is undergoing a profound transformation’

Imran Hussain, a director at Nottingham-based Harmony Financial Services, said: “The buy-to-let market is currently undergoing a profound transformation.

“Dinner party landlords are now looking at the forthcoming EPC requirements and are deciding to sell at arguably the top of the market.

“This does give an opportunity for some tenants to purchase but I have also spoken to a number of tenants for whom, due to their credit history, purchasing a property will not be on the cards for a few years yet.”

‘Less supply in the rental market will only push rents up’

He added: “Let’s also not forget that less supply in the rental market will only push rents up unless more social and council housing is built, which will stretch many tenants to breaking point.”

Ian Hewett, the founder of The Bearded Mortgage Broker, said: “I have had a few of these cases lately, as it’s an increasingly attractive option for landlords who want to exit a market where margins are shrinking and one that is becoming increasingly wrapped in red tape.

“Some tenants are now in a position to borrow with more options in the mortgage market to assist them, such as family support mortgages and the like, and they are in pole position if their landlords approach them about a sale.”

‘Easy way for landlords to offload properties’

Paul Neal, of Derbyshire-based Missing Element Mortgage Services, said: “Tenants being given first refusal is definitely becoming more and more common, as it’s an easy way for landlords to offload properties and save some cash on the transaction.

“It’s also a welcome break for a small percentage of Generation Rent who need all the help they can to get onto the ladder.

“But as more rental stock leaves the market, rents will rise further, and they are already sky high.”

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