Purchasing a shared ownership property offers an accessible path to homeownership for many, allowing buyers to purchase a portion of a property while paying rent on the remaining share. However, as life circumstances change, you might find yourself wondering, “Can I rent out my shared ownership property?” Whether it’s a new job opportunity in a different city or a temporary relocation abroad, the idea of turning your shared ownership home into a rental might seem appealing. Yet, the rules surrounding this are not as straightforward as they may seem. This guide will clarify when renting out a shared ownership property is permissible and what you need to know to make an informed decision.
Understanding Shared Ownership
Before delving into the rules around subletting, it’s essential to understand the concept of shared ownership. This scheme allows you to purchase a share of a property—usually between 25% and 75%—and pay a mortgage on the share you own, while paying rent to a housing association on the remaining portion. It’s an excellent opportunity for those who might not be able to afford a home outright, making property ownership more accessible.
However, shared ownership properties come with certain restrictions designed to maintain the purpose of the scheme, which is to provide affordable housing for those in need of it. These restrictions typically include clauses against subletting. So, what does that mean for owners who might want to rent out their property?
Can You Rent Out a Shared Ownership Property? Generally, No
In most circumstances, renting out a shared ownership property is not permitted. When you purchase a shared ownership home, you enter into a lease agreement with the housing association that owns the remaining share of the property. These agreements often include strict non-subletting clauses. The primary purpose of shared ownership is to provide affordable homes for those who intend to live in the property themselves, not for those looking to use the property as a buy-to-let investment.
- The Rationale Behind the Restriction: The core objective of shared ownership is to offer housing opportunities to individuals who might otherwise struggle to enter the property market. Allowing subletting could undermine this purpose by turning the property into a source of rental income, rather than a home for the buyer.
While these restrictions may seem rigid, they ensure that the property remains accessible to those who need it most.
Exceptions to the Rule: When Renting Might Be Allowed
Although subletting is generally prohibited, there are some exceptional circumstances in which housing associations may grant permission to rent out a shared ownership property. These are evaluated on a case-by-case basis, and permission is usually granted temporarily rather than permanently. Here are a few scenarios where you might be able to rent out your shared ownership home:
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Job Relocation
If you need to relocate temporarily for work—whether within the UK or overseas—your housing association may consider allowing you to rent out your property for a limited period, such as 6 to 12 months. This is especially common if you are unable to sell your share quickly or if the move is only temporary.
- What You Need to Do: Contact your housing association to explain your situation and request permission to rent out your home. If they approve, this permission will typically need to be in writing, and there may be conditions attached, such as the requirement to return to the property after the agreed period.
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Financial Hardship
In cases where you face significant financial difficulties—such as redundancy or a sharp drop in income—the housing association may consider allowing you to rent out the property to help cover your mortgage and rental payments. This is often viewed as a last resort to prevent arrears or potential repossession.
- What You Need to Do: You will need to demonstrate your financial situation to the housing association, including providing evidence of hardship. They may grant temporary permission to sublet while you work to resolve your financial challenges.
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Military Deployment
For members of the armed forces who are deployed overseas, housing associations often provide more flexibility in terms of subletting. This is to ensure that those serving the country are not unduly penalised for circumstances beyond their control.
- What You Need to Do: Provide proof of your deployment and communicate your needs with your housing association. This can often result in a more flexible arrangement regarding subletting.
What About Staircasing? A Path to Full Ownership
If the need to rent out your property is part of a long-term plan, one option might be to pursue staircasing, a process through which you can buy additional shares of your property until you own 100%. Once you own the property outright, you are no longer bound by the rules of the shared ownership scheme, and you would be free to let out the property as you wish.
- Considerations for Staircasing: Staircasing can be a great solution, but it requires the financial capability to purchase more of the property at current market value, which may be more expensive than your original purchase price. It’s also worth considering the stamp duty implications and any legal fees involved.
Important Considerations Before Renting Out
If you are granted permission to rent out your shared ownership property, or if you have staircased to full ownership, there are a few important points to keep in mind:
- Tax Implications: Renting out a property means you will need to declare your rental income on your self-assessment tax return. Depending on your total income, this could affect the amount of income tax you owe.
- Insurance: Ensure that you have appropriate landlord insurance to cover risks associated with renting, such as damage caused by tenants or loss of rental income.
- Finding Tenants: If you are not experienced in letting properties, it may be worth using a letting agent to help find reliable tenants and manage the property. However, this will come with additional management fees.
- Leasehold Considerations: Even if you have staircased to 100% ownership, the property may still be leasehold, which means you might need to comply with certain leasehold restrictions or pay service charges.
Conclusion: Renting Out a Shared Ownership Property—Know the Rules
In summary, while the general rule is that renting out a shared ownership property is not permitted, there are a few situations where it might be possible with explicit permission from your housing association. Always consult your lease and communicate openly with the association to understand your options and any conditions that apply.
If renting out your property is a significant part of your plans, consider whether staircasing to full ownership could provide a long-term solution. Understanding the rules and seeking professional advice when necessary can help you make the best decision for your circumstances.
Navigating the complexities of shared ownership can be challenging, but with the right approach, you can find the flexibility you need to adapt to changing circumstances—without breaching your lease terms or facing potential legal issues.