The credit crunch is causing the proliferation of new contractual arrangements whose purpose is to revive the real estate industry.
What are generally referred to as trade alternatives include rent to buy which has had a favourable reception from buyers and sellers who increasingly make use of this formula to conclude negotiations that they would otherwise would not have been able to bring to a successful conclusion.
On one hand, this takes into account sellers real prospects, which are very often not in line with the current market value of their property, and, on the other hand, buyers difficulties in raising the capital necessary to buy property.
In the rent to buy formula, which may involve both new buildings or older ones, the parties (seller and buyer) sign a rental agreement and, simultaneously determine future purchase conditions.
Essentially, the parties agree that the sale of the property will take place in a few years time and that, in the meantime, the buyer will rent the property and pay rent on it and the seller will set aside a portion (or the entire amount) of the rent received and deduct it from the property's selling price.
There are advantages in this for both parties. The former benefits from a sale price which is closer to his expectations and can freeze the price for years thus avoiding depreciation.
The latter can request a mortgage from a bank with a high credit rating in that he will be able to demonstrate that he has regularly paid the agreed rent for years and take out a loan for a lower amount.
Moreover, the signing of this rental agreement, to which the general principle of contractual autonomy of the parties applies, does not oblige the buyer to purchase the property.
In fact, a clause can be inserted by which the buyer and the seller delay the sale contract decision to a later date so that it will be independent of the rental agreement.