Can I use an Installment Agreement in the UK?


“Is it legal?” arises whenever anything novel or unconventional is introduced, such as a traditional real estate market shift. WE MET THIS VERY ISSUE when I began working with Rick Otton in 2007 to bring Lease Options to the mainstream housing market. Lease possibilities weren’t considered “legal” until Buy-to-Let lender Mortgage Express stopped offering same-day loans. Is it possible that 2010 will bring more of the same regarding installment contracts?

19th-century German philosopher Arthur Schopenhauer said, “Every truth passes through three stages before it is recognized.” It is mocked in the first case, opposed in the second, and accepted as evidence in the third. It’s understandable that in the United Kingdom in 2010, where the widespread belief is that a house can only be purchased by following the strict order of 1) making an offer, 2) exchanging a contract of sale, 3) obtaining the necessary mortgage funds, and 4) purchasing the house, anyone who suggests otherwise will be met with heavy ridicule.

When told that the default system permits people to make promises to buy on gentlemen’s agreements without exchanging money until the very end, the typical response from a foreigner is, “Is it legal?” In the traditional system, the sale of a home does not officially occur until the buyer and seller have signed binding contracts and presumably transferred money to one another. Still, many people falsely report that their home has sold before learning the hard way that it hasn’t.

The current property transfer method was created by lawyers who aimed to make the process uniform. Considering that most homebuyers are motivated primarily by emotion, it’s hard to imagine a situation where a single paper could cover every possible scenario. What if, in the spirit of bartering, the buyer and seller reach an agreement to partially settle the purchase price by exchanging products and services? This means of accommodating each other’s demands weren’t included in the model documents, but finding a legitimate arrangement that works for everyone involved is possible.

Why, then, is it illegal to let a buyer move into a house before the sale has been completed? Maybe it’s just not the norm. This begs the question, “What is standard, and where did it come from?” As the global economy continues to suffer, more and more individuals will turn to barter to exchange goods and services without readily available currency.

In a bartering system, the buyer and seller first develop a solution that benefits both parties. In an installment contract, the buyer and seller negotiate a schedule of payments and other terms until the buyer is ready to close on the property, typically by taking out a mortgage. Mortgage money is transferred only at closing when property ownership officially changes hands. There is no distinction between the conclusion of a regular contract of sale and an installment contract in this respect.

Although this may seem out of the ordinary in the current world, installment contracts have a long history in British case law. In truth, installment contracts are nothing new; they were prosecuted in British courts decades ago and are making a comeback in the new millennium.

For example, in Essex Plan Limited v. Broadminster Limited [1988] 2 EGLR 73. Ch.D., the lessee, initially occupied the property under a licensing agreement rather than signing a long-term lease. The licensee’s obligation to keep the property in good repair, financially and otherwise, is similar to an installment contract. The precedent for the buyer not having a tenancy agreement has been created under English law when it comes to selling property.

Problem-solving methods must adapt to the needs of the moment. The current banking crisis has only served to underscore the extent to which people have come to rely on the constancy of banks as intermediaries in the transfer of property.

The use of payments over time has been common practice for centuries. It was legal back then; it is legal now; most people living today are merely experiencing it for the first time. After being hidden away for quite some time, they have now been revealed.

David Lee has worked in finance, banking, recruitment, transportation, public utilities, and, since 2002, real estate, where he has developed business solutions to systems. David has learned from and collaborated with some of the most successful business tycoons, including global property expert Rick Otton. He has contributed to creating cash-flow property systems tailored to the UK market.

David is at the vanguard of capitalizing on his extensive knowledge in real estate investing and business systems development, two areas that may pique your interest.

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