Once you have found a property to purchase (where applicable), completed your full application, and after we have completed our due diligence checks on you, we will send you or your broker an email to confirm our acceptance of your application and provide you with an Offer Letter. Alternatively, where we are not able to enter into a BTLPP with you, we will provide you with an explanation. The Offer Pack will include the following documents:
Offer Letter
The Offer Letter sets out the basis that we are willing to enter into a BTLPP with you. This Offer Letter will contain an updated Financial Information Statement and Risk and Features document.
In order to accept the offer, you must:
- Electronically sign and return a copy of the Offer Letter within 14 days from the date of the Offer Letter;
- Provide signed copies of the Lease, the Diminishing Partnership Agreement and the Legal Charge and comply with the conditions set out in the Offer Letter within six months.
By signing the offer letter, you confirm that you accept the terms and conditions set out in the offer letter.
Once you have signed the Offer Letter you will then become responsible for your own legal costs, the valuation fees and the application fees set out in the Financial Information Statement attached to the Offer Letter. You will still be required to pay these fees even if completion does not occur.
Lease
Offa will be the legal owner of the property until you fully purchase Offa’s share of the property. As such, Offa agrees to rent out the property to you during the agreed term. This document sets out the terms under which Offa, as your landlord, will rent out the property to you, as the tenant.
The Lease sets out your responsibilities and obligations as a tenant of the property, including:
- Your obligation to pay rent (and Offa’s powers should you fail to pay rent or any other sum due under the Lease);
- A number of legally binding promises which are set out in a separate schedule. These mainly relate to how you must treat the property during the term of the lease;
- You are responsible for insuring the property in accordance with the terms of the Lease.
Note: if you fail to pay the rent, or you breach any of the legally binding promises listed in the Lease, Offa may terminate the Lease and re-take possession of the property.
Diminishing Partnership Agreement
Under the Diminishing Partnership Agreement, you agree to pay the Acquisition Payment(s) during the term or at the end of the term.
What happens if you are not able to make Acquisition Payment(s)?
If you are unable to make the Acquisition Payment(s) under the Agreement, this will be an Event of Default, which will enable Offa to terminate the lease and bring enforcement proceedings under the agreement. This could result in Offa repossessing and selling the property. Offa will deduct outstanding acquisition payments from the sale proceeds, as well as other costs and charges set out in 7.3 of the Diminishing Partnership Agreement, before providing the balance to you. You will be required to pay any shortfall.
Can you pay the Acquisition Payment(s) before the end of the term?
You may make additional acquisition payments throughout the plan. The maximum allowable additional payment is explained in the Tariff of Charges. Note that you may be required to pay an Early Buyout Charge if you make additional payments above the maximum allowable limit. You may also incur Early Buyout Charges if you redeem the BTLPP during the Fixed or Discounted periods.
When will the Bank transfer the property to you?
The Diminishing Partnership Agreement is a legal document, and by signing it Offa commits to transferring ownership of the property to you provided (i) you have paid the purchase price in full, (ii) there are no outstanding sums or outstanding breaches under any of the BTL PP documents and (iii) the conditions set out in Clause 4 of the Diminishing Partnership Agreement have been met.
Other key obligations under the agreement
You also agree in this agreement to compensate Offa against all Stamp Duty Land Tax, the Bank’s legal fees and any other fees, taxes, costs and expenses that Offa incurs in letting the property to you, charging the property under the Legal Charge (see below) and the enforcement of any of the BTL PP documents.
Legal Charge
The Legal Charge is our security for your obligation to pay the purchase price and rent payments. Under the Legal Charge, you agree to provide a legal mortgage and fixed charge over your interests in the property (including under the Lease, any insurance policy you enter into relating to the property).
The purpose of this Legal Charge is to ensure that, in the event Offa is forced to sell the property (for example, because you have failed to make the agreed payments), Offa will be paid first from the proceeds of sale.
Under the Legal Charge you will be responsible for paying on demand all reasonable costs, charges, taxes, liabilities and expenses incurred by Offa or Offa’s appointed Receiver in enforcing or preserving the security granted under this document or as a result of your breaching the Legal Charge.
This document includes a number of obligations, which you should read through carefully.