Renting Out 'Homebuy Direct' Property - is this legal?

mizzame

I live in a new build estate where 75% are first time buyers on the governments Homebuy Direct shared ownership scheme...

I understand that the scheme stipulates that you cannot rent out the property or be on any other mortgage as the idea is that the scheme helps you as a first time buyer to get on the ladder...

A neighbor was yesterday boasting to me that they're about to rent out their apartment, making profit... I know they are on the same scheme and on a co ownership mortgage...

Would you alert anybody? Never classed myself as a grass but my neighbor was so smug and we're all concerned who he'll rent to as its lovely and quiet! (He has hinted at lads from his rugby club!)

What would you do?

BitterAndTwisted

Depends on quite how smug he is. If he's thinking of breaking the terms of his mortgage so recklessly he's almost certain to be thinking about breaking a few other things as well. Like not declaring the rental-income on his tax-return for a start.

kingstreet

A shared-ownership property owner is leasing the property and therefore needs consent from the Housing Association freeholder and from the mortgage lender to let the property.

Consent to let in such circumstances is very difficult to come-by, if not met with a complete refusal.

As you say, these are social housing developments designed for those who could not buy elsewhere.

mizzame

BitterAndTwisted wrote: »

Depends on quite how smug he is. If he's thinking of breaking the terms of his mortgage so recklessly he's almost certain to be thinking about breaking a few other things as well. Like not declaring the rental-income on his tax-return for a start.

My thoughts exactly... I see it unfair when everyone else is working hard to pay their mortgage but he's just looking at the shared ownership as a discount to make bigger profit...

mizzame

kingstreet wrote: »

A shared-ownership property owner is leasing the property and therefore needs consent from the Housing Association freeholder and from the mortgage lender to let the property.

Consent to let in such circumstances is very difficult to come-by, if not met with a complete refusal.

As you say, these are social housing developments designed for those who could not buy elsewhere.

Who can I alert? I am really angry about this as someone else could have benefited from the scheme... There were only so many plots available and in demand...

Its the bank and the government who own the remainder of the share...

kingstreet

Are you sure this is shared ownership? It sounds more like shared equity.

Do you pay rent on the bit you don't own, or do you own the whole property which you bought with an interest-free second charge loan on top of your mortgage and deposit?

kingstreet

I suspect this is a shared equity property, what's now known as "Firstbuy" and the issue of subletting is dealt with here;-

Q Can I sublet my FirstBuy home?
No – FirstBuy is designed to assist you to get on the housing ladder. If you wish to sublet, you will first have to repay the FirstBuy equity loan assistance. In exceptional circumstances (e.g. a serving member of the Armed Forces staff whose tour of duty requires them to serve away from the area in which they live for a fixed period, then sub-letting can be considered, in these circumstances you would also require approval from your mortgage lender).

http://www.homebuy.co.uk/pdfs/FirstBuy%20Buyers%20Guide%20040811.pdf

It got a little confusing for a while until the schemes were redefined last year;-

Firstbuy - shared equity
Homebuy - shared ownership
Newbuy - 95% mortgage with indemnity fund run by Government/builder.

As shared equity also involves the purchaser arranging his own buildings insurance, he'd also need consent from the insurer, or to change to landlord insurance.

mizzame

kingstreet wrote: »

I suspect this is a shared equity property, what's now known as "Firstbuy" and the issue of subletting is dealt with here;-



http://www.homebuy.co.uk/pdfs/FirstBuy%20Buyers%20Guide%20040811.pdf

It got a little confusing for a while until the schemes were redefined last year;-

Firstbuy - shared equity
Homebuy - shared ownership
Newbuy - 95% mortgage with indemnity fund run by Government/builder.

As shared equity also involves the purchaser arranging his own buildings insurance, he'd also need consent from the insurer, or to change to landlord insurance.

Its Homebuy... Honestly but is shred equity, I still have the paperwork. Not an expert and everyone talks about shared ownership, thanks for your help.

Knew I was right about not being able to sublet...

kingstreet

Yes. Homebuy WAS both shared equity and shared ownership until last year. That's when the terms were changed to the three I set out above.

Back to your original question. In my opinion, you should inform the local Homebuy Agent if the neighbour intends to let the property.

Following the FirstBuy sale, your details will be transferred to the Post Sales HomeBuy Agent.
The role of the Post Sales HomeBuy Agent is to provide a single point of contact to:
• administer payment of fees by buyers on the FirstBuy equity loans after five years of ownership, and
• recover the equity loans repayments as owners sell and move on or staircase.
• Provide advice and approval for exceptional cases relating to
subletting, remortgaging and requests for additional borrowing

This is from the guide I linked to in the previous post. You need to find out your local Homebuy Agent. Here in the Midlands, it's Orbit for example.

djcuts

Hi

I moved in with my now wife last year, the property I own was purchased using the homebuy direct scheme.

I have rented the property out, after getting permission from my Mortgage lender to rent the property out, and also go to an interest only mortgage. My attempts to speak to homebuy direct about this was met with indifference (they seemed to not know the answers to my questions nor felt they could pass me on to anyone who did). Therefore I leased the house out.

My wife and I now wish to move out of her house and buy a house together.

As I am considering the future and trying to get a grip on everything, the question of my renting out this property has raised it's head as I don't want any nasty surprises or fines as we are living on the edge of our means already, especially if we are considering moving house. I found this thread and was wondering what advice I can find on my situation.

many thanks

DJC.

kingstreet

You need to speak to myfirsthome, or HOP as it's known. This is the agency which has the Government contract to run shared ownership and shared equity post-sale issues.

It's website is clear on this;-

http://www.myfirsthome.org.uk/content/1/79/subletting-2nd-home.html

Subletting/2nd Home

Under the terms of the HBD loan you are not permitted to sublet your property. This is detailed in the buyer's charging document and mortgage deed. There are however some circumstances the Homes and Communities may consider. These do not include cases of financial hardship, but may include involuntary relocation with your current job or having to look after an ill relative who does not live within travelling distance. Please note that even in these cases it is at the discretion of the Homes and Communities Agency whether they will permit you to sublet and there are certain terms and conditions that must be adhered to.

As a rule, to sublet your property you must first of all repay your loan in full.

In addition the buyers’ charging document and mortgage deed prevent you from buying a second home. This also means that to purchase another property you must first of all repay your loan, either by staircasing or selling your HBD property.