To help her parents settle their bond, a reader wants to know what it will entail if she and her husband rent the property from them, with an option to purchase when they can afford to do so.
She says the outstanding bond is fairly substantial and her father wishes to retire soon. The bulk of his pension would be consumed in settling the outstanding bond.
The property, she adds, includes a small apartment attached to the main dwelling where her parents can continue to live.
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This will allow them to use their retirement savings for living expenses rather than for paying off bond instalments.
In a situation such as this, it would be wise to conclude a formal lease agreement.
This would set out the terms upon which they agree and record that the reader is renting the property and on what terms and conditions.
Presumably the apartment would be excluded from the lease but it should be recorded that such exclusion only applies for so long as her parents make use of the apartment as she may not want strangers renting the apartment in future.
In this way sub-letting would be excluded or only permitted in very limited circumstances.
Additionally, regardless of family being involved, aspects such as what else is included or excluded should be addressed.
For example, what portion of the garden is reserved for the apartment? Would it be necessary to erect a physical barrier separating an area, perhaps for gardening, privacy or pets?
There are other aspects as well.
Is a garage or undercover parking bay included? Is any entrance reserved for private access to the apartment? How will utility bills be split and paid? What happens if a party fails to contribute as required?
The lease contract should make reference to the option to purchase as well as setting out the particularities of the agreement.
Some thought should be given to the purchase price applicable or, if no price is recorded, how it will be determined at the appropriate time.
Consideration should also be given to the term of the lease and whether the option to purchase can only be exercised for so long as the lease is in effect.
Provisions relating to risk, liability and other standard conditions of sale of fixed property should be included.
If, for whatever reason, the option to purchase is not exercised, perhaps the reader would like to retain the right of first refusal in respect of the property.
This means that if her parents receive an offer on the property, they are obligated to offer the property to her on the same terms as per the first deal.
She is then obliged to accept or reject it within a specified period of time.
Another consideration is whether the parents will stay on in the apartment subsequent to sale and, if so, on what basis.
They could stay on as tenants, in which case the terms and conditions of such a lease should be considered up front and possibly even included in the lease or option.
The reader’s parents could also continue to reside in the apartment on the basis of servitude.
The positives and negatives of such an arrangement should be considered by the reader and her parents. Taking formal advice as to the possible implications will assist them in making the best decision.
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