A mortgage lender has introduced a product which effectively encourages a landlord to sell to a sitting tenant at a discounted price.

The so-called Concessionary Mortgage, offered by TSB, works like this, according to the lender.

“If you are a landlord and sell your property to your tenant with a 10% discount or more, the tenant doesn’t need a single penny towards their deposit. 

“Using our concessionary purchase option can help tenants and often the First Time Buyers who are hardest hit due to paying higher rent costs and having little opportunity to build their deposit to buy their first home. 

“The landlord can take the capital growth and use it to re-gear other properties they own or invest elsewhere, and TSB can help by facilitating the transaction and supporting those tenants onto the housing ladder.”

TSB says the landlord need not necessarily lose out, because by using this deal the sale would not involve an estate agent – so those fees would be saved by the landlord.

TSB mortgage distribution director Roland McCormack says: “This can be a great option for the buyer as they get a discount, but also because they know the area and the property well already. For the seller, it makes the process easier and smoother. They don’t have to have a tenant move out of the property, do it all up, and then wait several months – all while not receiving rent. The seller and the buyer also avoid paying fees that would normally be involved with a house sale – such as estate agent fees.”

A study by The Guardian newspaper say that in addition to TSB, variations of this mortgage product are now offered by Halifax, Nationwide, Barclays and NatWest.

The Guardian writes: “Terms can vary. For example, TSB and Nationwide are among those that explicitly state they do not require the tenant to put down any deposit. However, both Barclays and NatWest say buyers need to contribute their own deposit on top – a minimum of 5%. Typically, this is going to be an arrangement between a private landlord and tenant, though TSB and Halifax say the landlord can also be a local authority, indicating this could be an option for a council tenant where the right to buy is not available.”

Concessionary sales, where properties change hands at below market value, are not new but until now they have effectively been restricted to family members only.