Vendor Terms Rent to Buy Resource for Consumers
Beware ‘rent-to-buy’ and vendor terms contracts
Vendor terms contracts and rent-to-buy arrangements are often marketed to people in financial difficulty as a way to buy a home without needing a bank loan. However they can be very risky – buyers can pay a lot of money to the seller, but may end up getting evicted because they can’t afford to keep paying or can’t get a loan from a bank.
There were changes to the law about vendor terms contracts and rent to buy arrangements in March 2020.
What is a vendor terms contract?
A vendor terms contract is a way to buy a property, where the buyer pays the purchase price by instalments to the seller rather than using a home loan to pay the full purchase price at settlement. The contract of sale to buy the land should say whether the contract is a vendor terms contract.
Under a vendor terms contract, the seller is still the owner of the property until the full purchase price is paid. The buyer usually lives in the property while they are paying off the purchase price. The buyer often pays the council rates and insurance under the vendor terms contract.
From 1 March 2020, vendor terms contracts to buy a property for less than $750 000 are banned.
What is a rent-to-buy arrangement?
A rent to buy arrangement is where contract/s provide a right to purchase a property, but the potential buyer must rent the property for at least 6 months before they can exercise the right to buy the property.
From 1 March 2020, rent-to-buy arrangements are banned, unless the seller is a government or community housing agency.
Call us for help
If you have already entered a vendor terms contract or rent-to buy arrangement, you may be able to get out of the contract and get some money back.
If you have signed up to a vendor terms contract or a rent-to-buy arrangement, or are planning to do so, please call our legal help line on 1800 466 477 between 10 am and 1 pm, Monday to Friday or click on the “chat with us” box in the corner below.