New business helps get couples on the property ladder

The company is being launched by 87 year-old former businessman and property investor, Derek Royle, who lives in Shrewsbury.

The idea is simple – RPL provides an option scheme that makes it possible for couples*1 who, as yet, have been unable to save up enough money for a deposit on a property, to rent a property for a five-year*2 period with the option to buy that property at the end of the agreement at a pre-agreed valuation.*3

During the five years they will – in addition to paying rent – deposit an additional amount into a savings account, which will be administered by RPL through a ring-fenced Barclays account. This will enable the tenant to build up savings towards putting a deposit down on the property after the five years. Tenants can deposit as much as they wish in this account each month, with £100 the minimum.

Landlords and their agents benefit by securing reliable tenants for the full five-year period and thus do not have to endure the considerable financial disadvantage of having properties left unoccupied or the difficulties of managing tenants who are either unreliable payers or do not look after the property as if it were their own.

The RPL purchase option scheme also provides property-owners who came into the market during the buy-to-let boom, with a clear and simple exit strategy and one that will give them a reasonable and assured return on their investment which, given the current volatility of the market, will be a highly attractive option.

The key elements of the RPL purchase option scheme are as follows:

· Tenants agree to rent a property for a fixed, five-year period under a standard Assured Shorthold Tenancy (AST) agreement as used by letting agents. Rent increases will not exceed a change in the Retail Price Index (RPI) each year.

· Tenants will pay a monthly deposit into a ring-fenced, Barclays Clients Account.

· At the end of the five years, tenants will have the option to buy the property at a price agreed between the landlord and the tenant at the start of the agreement – RPL suggests that this is set at the current valuation of the property or a little higher.

· Tenants and landlords will enter into an AST in the normal way, as well as the RPL purchase option agreement.

· If tenants decide to relinquish the option, they will need to give proper notice to the landlord under the terms of the AST. Their option payments will be returned in full, providing there has been no material breach of the AST.

· If the landlord wishes to give notice to the tenant, they must also do this within the terms of the AST and pay the tenant 5% of the accumulated amount in the deposit account as compensation for the loss of the option.

· If the tenant is in material breach of the AST, the repayments of funds in the option account will be with the agreement of the landlord and RPL.

· Letting and selling estate agents will operate in a completely normal manner, making initial credit checks and submitting the option agreement, with an initial additional fee to the tenant of £400 being split between the agents and RPL. They will also contract with the landlord to maintain the property in their usual manner.

Derek Royle says that the RPL option scheme is a ‘win-win’ proposition for both the tenant/buyer and the landlord/seller. “The tenants are able to move into a property, which they fully intend to buy, immediately, without having to find or borrow the money for a deposit. They can then save up and, at any time within the five years, take up the option to buy the property – and, just like having a mortgage, they can feel that it is ‘their own house’.

“The landlord will get reliable tenants who will be paying a fair rental throughout the period and who will obviously have an interest in looking after the property. That is likely give the landlord a much higher yield than most savings accounts or fixed-term bonds can right now. There are unlikely to be periods of non-occupancy and at the end of the five years they will get a predetermined price for the property as well. It really is a win-win situation for everyone”

Either side can pull out of the agreement at any time during the five years, he notes, so should property prices rise of fall significantly, they can relinquish the option. Royle however, thinks this is highly unlikely.

“In general, I believe from experience that landlords and tenants will act in good faith and, in any case, I am not expecting to see a great deal of movement either way in property prices in the UK for some time to come. Given the long-term economic climate, we can’t expect building societies to start loosening their lending terms either, so young people will still find it difficult to see any prospect of getting onto the property ladder and plan their future with a degree of certainty. The RPL option scheme gives them a way to get their foot on the first rung of that ladder. It also gives the many people who have invested in buy-to-let a robust income for five years and the prospect of a solid return at the end of it.”

Explaining his motivation for setting up RPL, Derek Royle says: “I invested in the buy-to-let market for more than 20 years but got out in 2007, just before the economic situation worsened. Many people are now looking for a good way out that won’t lose them money, but they are not able to sell at the moment as they are worried about making a loss. So there are a lot of properties up for rental.

“At the same time, young couples – even those with decent jobs and incomes – are finding it increasingly difficult to meet the more stringent demands of building societies and get onto the property ladder. That must be desperately frustrating. I could see the difficulties that both property owners and young people had so I decided to do something about it.”

While RPL fully intends to be a profitable enterprise, the generation of income is not the main motive behind the business, says Derek. “I have always believed that I can make things happen, and with the economic situation economic changing completely, I could see that a new way of purchasing property had to evolve. Something needed to be done to make the property market start working again for young people. I am extremely hopeful that the Royle Property Ladders option scheme can make a real difference for many young people who are just starting out.”

Royle Property Ladders is being funded entirely by Derek Royle who first successfully used the scheme to let a Shrewsbury property under the scheme personally.

RPL is keen to encourage both prospective tenants and property owners who are interested in the scheme to get in touch.

More information is available at www.roylepropertyladders.com

Any prospective tenants or landlords interested in the RPL purchase option scheme should contact Mac Niddrie-Davies on 01939 260998 or email mnd@roylepropertyladders.com