Can I Rent Out a Shared Ownership Property?

Can I Rent Out a Shared Ownership Property?
Photo Credit: David Anstiss

Can I Rent Out a Shared Ownership Property?

No, you cannot rent out a shared ownership property. Shared ownership is intended to provide affordable housing to those who can’t afford it. Therefore, renting out your home would require you to re-assign it as a leasehold property, and then you would lose your right to buy the remaining share.

Your property is also subject to rules regarding what you can and cannot do. If you plan to rent your home, you should check your lease agreement and speak with your landlord or housing association first. Because if the housing association finds out that you’ve rented out the property without their permission, they might try to evict you.

Therefore, here are some considerations to keep in mind as shared ownership has many dos and don’ts.

What is Shared Ownership?

Photo Credit: John Sutton

A shared ownership scheme is a government-funded program that helps first-time home buyers purchase shares of the property. You can buy as little as 10% of the property. A mortgage is paid on the share you own, and rent is paid on the remaining share to the housing association that sold the property to you.

For instance, if you buy a starting share of 10% in a shared ownership property, it will be subject to mortgage payments. After that, you’ll have to pay rent for the remaining 90%.

To apply for shared ownership, you would need to meet the following requirements:

  • You must live or work in the area you are trying to purchase a home.
  • You must have an annual household income of less than £90,000 for Londoners or £80,000 for non-Londoners.
  • You must be at least 18 years old.
  • You must be in the process of selling your home if you already have one.
  • You must demonstrate that you cannot afford to buy a house that meets your housing needs on the open market.
  • Your credit history must be good.
  • You must be able to pay the down payment and other costs associated with purchasing the shared property you want.

Consult your local council after that. The local council will be able to let you know if any properties are up for sale in your region and how much it will cost you to buy one. After that, you must submit a mortgage application through a recognised lender, who will review your financial status and determine whether or not you can afford the property. Your monthly rent payment will go toward purchasing your portion of the property, bringing you closer to 100% ownership.

Can you Make Changes to My Shared Ownership Property? The Ashton, a 4 bedroom house for sale at The Sandpipers

Yes. The decor of your shared ownership home is up to you. Just make sure you’re prepared to pay for it yourself.

If you want to renovate the kitchen and bathroom or repaint the living room, you’ll pay for that out of pocket. However, you should check the terms of your lease, as you must have the landlord’s permission in writing before you make any alterations to your property.

Can You Airbnb a Shared Ownership Property?

Airbnb isn’t allowed for shared ownership properties. In shared ownership leases, the property is only used as a private residence and cannot be utilised for business purposes until you fully own the home.

Are There Any Downsides to Shared Ownership?

Shared ownership is an affordable option if you want to buy a home but can’t afford the full price tag. In this case, you can purchase a share of the property and pay rent until you can pay off the rest.

But is it the right option for you? The following are some downsides to consider before you buy your first house using shared ownership.

  1. Maybe a bit pricey. It does not matter what share you own; even if you own 20%, you must pay monthly mortgage payments, rent, and maintenance fees. Even the caretaking and maintenance of communal areas may be subject to a general monthly service charge.
  2. It is not possible to rent or Airbnb a shared ownership property.
  3. Costs associated with staircases can be high. Other expenditures, including valuation and stamp duty, must be considered. A property valuation fee is an expense of employing an independent appraiser to establish the value of your home. The stamp duty rates vary depending on the county and the money you spend.
  4. You are restricted on what changes you can make to your home, especially structural changes. You should ask the housing provider’s permission in writing before you make any structural alterations to your home. Some leases require you to ask permission before redecorating.
  5. Selling a shared ownership home can be challenging and can stall your progress.

Can I Sell My Shared Ownership Property?

Photo Credit: Danny P Robinson

Yes, you can sell your shared ownership property, but it depends on whether you own all or part of your home.

If you do not own 100% of your home but own a percentage of your home, like 30%, and want to sell, the housing association or local authority can buy it through a process called Right of First Refusal (RFR). They also have the right to find an eligible buyer for your home.

If your housing provider fails to find a buyer, you can market your share of the property yourself or use an estate agent. But you will need to find a buyer who fulfils the housing provider’s eligibility criteria for shared ownership. If you have purchased 100% of your home through staircasing, you can sell your home on the open market.

Staircasing is used to buy more shares in your shared ownership property. You can buy an extra of over 10% shares at a time or in larger chunks as there are fees that you have to pay each time, so it can become quite expensive if you just buy 10% at a time. When you have staircases to 100%, you will no longer have to pay rent to the housing association, and you can sell your home on the open market.

How Do You Prepare for a Shared Ownership Application?

Before you apply for shared ownership, you should do the following:

  • Check your finances to make sure they are in order. You must have cash or savings to purchase a percentage of the home or property.
  • Choose a location and property type that suits your lifestyle.
  • Find out whether there are any limitations on who is eligible to apply and how much money you must make annually.

Finally, you should know what is and is not permitted in a shared ownership home. In the case of shared owners, subletting is not allowed until you own 100% of the property. The landlord can issue a Notice of Seeking Possession to end the tenancy if you try to rent or Airbnb your shared ownership property.

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