Subletting a Shared Ownership Property
Subletting can be defined as the process of a leaseholder entering into a rental contract with another party to rent and live in the property owned by the leaseholder. Shared Ownership properties are aimed at first time buyers who can't afford to buy a property on the open market and so mustn't be used in the buy-to-let capacity.
With this in mind, subletting isn't usually allowed under the terms of a Shared Ownership lease, unless there are exceptional circumstances.
Subletting Shared Ownership and insurance
Shared Ownership properties should only be used as a main residence for the resident and as such are covered by appropriate insurance. All Family Mosaic properties are covered by the buildings' insurance, with home owners encouraged to take out additional contents insurance to cover their personal possessions.
The building insurance and the contents insurance are only valid for the named policy holder. This means that should anything happen, not only will your tenants not be covered, but also any loses to your own possessions also won't be covered as your contents insurance is likely to be declared void once the insurance company finds out you've been subletting your home.
What if I need to move but cannot sell - can I sublet then?
You may have seen stories in the press recently about shared owners who need to move due to personal / professional circumstances and - unable to sell their property - end up paying for an empty Shared Ownership home whilst renting elsewhere.
In practice, if you find you need to move to a different property and don't wish to continue to pay for one standing empty you have two options: staircase to 100% after which subletting restrictions don't apply, or try to sell your shared ownership property.
Option 1 - Staircase to 100%
Once you've staircased to 100% you own the property outright and can sublet it to whomever you wish. You'll still need to inform your housing association as well as you mortgage provider as this will change the terms of your mortgage. You'll also need to look into taking out appropriate insurance to provide enough cover for you and your tenants.
Option 2 - Sell your Shared Ownership home
Selling your Shared Ownership property is not half as difficult as some journalists would have you believe - especially in London where property market is particularly robust.
As a Shared Owner, you will be obliged to give the housing association you bought your home from eight weeks to try to sell your home. This is because your Shared Ownership home came from affordable housing stock and it's important that it gets passed on to somebody who is also eligible for the Shared Ownership scheme.
This is a benefit to you as a seller rather than an obstacle. We have thousands of potential Shared Ownership buyers registered with us, waiting for suitable properties to become available on the re-sale market. In fact, our success rate is exceptionally high with 98.8% of re-sales sold during the eight-week nomination period.
•Properties are marketed for an average of 16 days before a buyer is found.
•Properties we market receive, on average, 38 requests for viewings.
•Properties receive, on average, four post-viewing enquiries to buy.
(Results above are based on Family Mosaic Shared Ownership resale properties that were in marketing between February and May 2015.)
Option 3 - Ask for permission to sublet
Your last option is to apply to the housing association for special permission to sublet. To be considered, renting out the property must not result in a financial gain and there must be exceptional circumstances that force the leaseholder to follow the subletting route. All such applications would be decided on a case-by-case basis and it's not guaranteed that permission will be given.
Shared Ownership is a unique product that comes with its own set of rules. It's important to be aware of these rules before buying a new home.