Sale & Leaseback

What is the Sale & Leaseback?

Sale & Leaseback is a real estate formula whereby the owner of a property sells it, but without ceasing to use it, as, together with the transfer of the property, which is formalised in a Public Deed, a Rental Contract is simultaneously signed with the new buyer for the period desired by the Elderly.

At Grupo Retiro, we are specialists since 1996 in finding solutions that allow the Elderly to make their home profitable during their lifetime without renouncing its use. To this end, and as a complement to Real Estate Annuities, Sales of bare ownership and Reverse Mortgages, we manage Sale & Leaseback operations, a system of Anglo-Saxon origin.

Sale & Leaseback is a real estate formula whereby the owner of a property sells it, but without ceasing to use it, as, together with the transfer of the property, which is formalised in a Public Deed, a Rental Contract is simultaneously signed with the new buyer for the period desired by the Elderly.

In this way, the Sale & Leaseback automatically transforms the figures of seller and buyer, typical of any sale and purchase, into tenant and landlord.

Therefore, remember that by formalising a Sale & Leaseback on your property:

  • You would sell 100% of your property to the buyer, and therefore, you will receive the total price agreed for said operation: the sale and purchase of the property is a conventional sale that is usually carried out with a discount based on the market price (the one agreed between seller and buyer) and sometimes with the deferral of part of the price (for the terms and amounts agreed by the parties).
  • The buyer of your property will automatically become your landlord, and you as the tenant will only have to pay the agreed monthly rent: the amount of this rent is established based on the market conditions at any given time, for a property with a similar location and characteristics to yours.

How does a Sale & Leaseback work?

The professionals at Grupo Retiro, as expert advisors and mediators since 1996 in this system of sale, carry out an exhaustive analysis of all the parameters that influence the operation to determine the best conditions for its viability in the market:

  • Sale price: we carry out various AVM (Automated Valuation Model) of the property, a comparative analysis of the values of the area, the estimation of the future projection of the property, the review of the legal situation of the property, the calculation of the ordinary and extraordinary costs of the property (Technical Building Inspection, necessary reforms, improvements to the property), taxes (Property Tax, Municipal Capital Gains Tax and Urban Waste Tax), etc. It should be borne in mind that normally the sale price of the property usually carries a discount on the market value and in most cases, there is a part of the sale price whose collection is deferred, the payments being guaranteed in the Deed of Sale with a Resolutive Condition.
  • Rental price: this is established after carrying out an extensive study of the rents that exist on the market for a property with the same or similar characteristics.
  • Final conditions of the operation: based on the sale and rental prices of the property, the profitability of the operation for the buyer is analysed, guaranteeing that it is in line with the current market situation, where the average profitability that an investor can obtain by renting the property would range between 4% – 6%.

Types of Sale & Leaseback

Several types of sale & leaseback can be differentiated depending on the term of the rent that the seller wants to set:

Lifetime: this type consists of the sale of the property, simultaneously establishing a lifetime rent, whereby you are guaranteed to remain as a tenant of your property until your death or until you decide to terminate the lease.

Temporary: in this type of leaseback, the home is sold and the owner enters into a rental contract for a specific period (5, 10, 12, 15, etc.), after which the elderly person will no longer use the home. This option is common when a change of address is foreseen or when it is for a second, non-habitual residence.

In any case, it will always be possible for the seller to establish the economic and general conditions affecting both the sale and the rental at his/her convenience, as the parties are free to establish the agreements they deem appropriate.

Advantages and Guarantees of the Sale & Leaseback:

The Advantages of the Sale and Leaseback that you can enjoy are:

Make the sale of your property effective without giving up its use, enjoying all the advantages of obtaining a high income during your lifetime to increase your quality of life and without changing your residence, as you will remain in your usual home with all the rights you have as a tenant.

Solve all your financial problems, as the sale will allow you to cancel possible mortgages, debts, seizures or other unforeseen or necessary future expenses, and at the same time have at your disposal any surplus money left over after the liquidation of these debts.

Free yourself from important expenses generated by your home, as you will no longer have to pay the Property Tax, the Community of Owners’ fees and Insurance for the premises of the dwelling.

Guaranteed Rental Taxation: also benefit from the excellent taxation of the leaseback for the over 65s, as the transfer of your main residence is exempt from taxation in your Personal Income Tax (IRPF, in Spanish).

The guarantees that exist for an Elderly Person in the transfer of a home under a Sale & Leaseback regime are full:

The sale is formalised in a Public Deed of Purchase and Sale before a Notary Public, which is registered in the corresponding Land Registry.

The sale price is received in full at the time of signing at the Notary’s office. In cases where part of the purchase price is agreed through deferred payments, these are fully guaranteed by the inclusion in the Deed of a Resolutive Condition and, therefore, this conditional guarantee is also registered in the Land Registry.

The Rental Contract, which is drawn up simultaneously with the purchase and sale, is also registered in the Land Registry and as a public deed; it guarantees the Elderly Person, under the provisions of the Urban Lease Law (art. 13.1. LAU, in Spanish), that neither the buyer nor those who may have future rights over the property, can terminate the rental contract or modify its conditions.

The Rental Contract is drafted by Lawyers specialised in this type of operation who guarantee their fidelity to the requirements of the LAU, permanently watching over your interests. Likewise, all legal requirements are fulfilled: liquidation of the Tax on Property Transfers and deposit of the established deposit with the relevant regional bodies.

What expenses and taxes does the Elderly Person have to assume in a Sale & Leaseback?

As the seller of the property, the Elderly Person will have to pay exclusively the Municipal Capital Gains Tax. At the same time, on becoming the tenant/lessee of your home, you will have to pay the Tax on Property Transfers for the new lease that is established, although the amount of this tax is very small. As for the expenses of the property, the Elderly Person will only have to pay the bills for the house supplies (electricity, gas, water, etc.) and the Urban Waste Tax, as the rest of the expenses and taxes will be assumed by the buyer.

On the other hand, you can rest assured that you will have the professional advice and permanent support of Grupo Retiro, a pioneering company and leader in Spain since 1996 in the management of Real Estate Annuities on homes for the Elderly. We can also help you with our complementary services for the search of Nursing Homes / Care Homes for the Elderly, Assistance or Home Care companies, Residential Complexes or Apartments for the Elderly, Annuity Insurance, etc., and of course, completely free of charge.

Please contact us if you have any doubts on any of the points mentioned above or if you would like to request a FREE AND NON-BINDING STUDY on your specific case.

If you prefer to sell the bare ownership of your property in exchange for monthly rent, please consult our product Real Estate Annuity.

We provide you with all the information corresponding to this section of Sale & Leaseback in PDF format here.


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Sale of the bare ownership

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Reverse Mortgage