VS 2012 + Entity Framework + TFS -> "check out on edit" option > EF edmx update 'Running transformation' error

I got tired of waiting for VS to respond when I edit a file and it automatically makes a useless checkout. It only makes sense to check out a file when I locally save any change.

So I went to Options.Source Control.Environment.Editing and set it to "Do nothing".

And set "Allow checked-in files to be edited" to true (or I wouldn't be able to work at all):

Thanks to this VS performance rocketed, that was good. BUT, when I tried making an Entity Framework .edmx file update using the "Update model from Database..." option, a "Running transformation" happened

Running transformation: System.Runtime.InteropServices.COMException (0x80004005): Error HRESULT E_FAIL has been returned from a call to a COM component.

Server stack trace:

at EnvDTE.SourceControl.CheckOutItem(String ItemName)
at System.Runtime.Remoting.Messaging.StackBuilderSink._PrivateProcessMessage(IntPtr md, Object[] args, Object server, Object[]& outArgs) at System.Runtime.Remoting.Messaging.StackBuilderSink.SyncProcessMessage(IMessage msg)

Exception rethrown at [0]: 
   at System.Runtime.Remoting.Proxies.RealProxy.HandleReturnMessage(IMessage reqMsg, IMessage retMsg)
   at System.Runtime.Remoting.Proxies.RealProxy.PrivateInvoke(MessageData& msgData, Int32 type)
   at EnvDTE.SourceControl.CheckOutItem(String ItemName)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.EntityFrameworkTemplateFileManager.VsEntityFrameworkTemplateFileManager.<.ctor>b__69(String fileName)
   at System.Runtime.Remoting.Messaging.StackBuilderSink._PrivateProcessMessage(IntPtr md, Object[] args, Object server, Object[]& outArgs)
   at System.Runtime.Remoting.Messaging.StackBuilderSink.AsyncProcessMessage(IMessage msg, IMessageSink replySink)

Exception rethrown at [1]: 
   at System.Runtime.Remoting.Proxies.RealProxy.EndInvokeHelper(Message reqMsg, Boolean bProxyCase)
   at System.Runtime.Remoting.Proxies.RemotingProxy.Invoke(Object NotUsed, MessageData& msgData)
   at System.Action`1.EndInvoke(IAsyncResult result)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.EntityFrameworkTemplateFileManager.VsEntityFrameworkTemplateFileManager.CheckoutFileIfRequired(String fileName)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.EntityFrameworkTemplateFileManager.VsEntityFrameworkTemplateFileManager.CreateFile(String fileName, String content)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.EntityFrameworkTemplateFileManager.Process(Boolean split)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.EntityFrameworkTemplateFileManager.VsEntityFrameworkTemplateFileManager.Process(Boolean split)
   at Microsoft.VisualStudio.TextTemplating36AD99A530CBDD8F718F0218646DAE1B0D95433E7EC10ACC4A8578633AE0B88291B033FFFF560B19863DE21488E98D8A6EAEFD55975691EE83F0010B790971FE.GeneratedTextTransformation.TransformText()

Does anyone know how to fix this? (for now I will have to have check out on edit on, but I'd really like to have it work properly)