Would you sell to a tenant under shared ownership?
9:58 AM, 15th December 2023, 2 years ago
16
Hello, Our tenant of nearly 2 years has asked if we’d consider selling to them under shared ownership. The AST ends in May ’24.
The split would be 51/49 in our favour and they would continue to live in the house and pay rent pro rata.
I’m aware of a Gov.uk document that gives guidance for mainly housing associations type accommodation and their shared ownership schemes – but not private landlords.
Has anyone ever done this with their private tenants?
If so, would you share your experiences, pros and cons?
Thank you,
Stephen
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Member Since May 2015 - Comments: 2198 - Articles: 2
10:50 AM, 15th December 2023, About 2 years ago
All the hassle of renting for half the reward!
Member Since July 2021 - Comments: 9
11:05 AM, 15th December 2023, About 2 years ago
Great way to sell a bit each year and minimise / manage the CGT.
Under tranditional Shared Ownership the maintaince becomes the primary responsibility of the Tenant even though they are paying Rent on a %.
Member Since August 2013 - Comments: 323 - Articles: 1
11:35 AM, 15th December 2023, About 2 years ago
Reply to the comment left by Bwel at 15/12/2023 – 11:05
Interesting. How does one value the landlords remaining 51% if and when that is to transfered or disposed of in the future?
There could be a huge difference in value depending on how much time, money and effort the tenant puts into maintaining the property. If say for illustration purposes he built an extension out of his own money or if say he neglected maintenance and let the roof fall in.
Member Since June 2019 - Comments: 781
11:50 AM, 15th December 2023, About 2 years ago
I am not sure that we can do this as an individual. The trick employed by the organizations doing this as there are essentially no landlord responsibilities as they in effect become a lender instead.
Legal minefield if they don’t pay the rent and things like insurance are problematic.
Member Since September 2014 - Comments: 166
11:54 AM, 15th December 2023, About 2 years ago
Reply to the comment left by TheMaluka at 15/12/2023 – 10:50
Under shared ownership schemes the shareholder pays all maintenance costs, so would be far less effort if your tenants if pay reliably. Shareholder also needs to pay all legal costs – expensive if there are no precedents.
The landlord has the security of a committed long-term tenant with no voids, a better Return on Capital and the CGT gain.
This could suit a couple of our tenants.
I’m interested to know how it might work, eg if a landlord has a mortgage on the BTL one lender has a second charge; also the exit plan for either party.
Member Since September 2014 - Comments: 166
12:00 PM, 15th December 2023, About 2 years ago
Reply to the comment left by Steve Masters at 15/12/2023 – 11:35
For social landlords an independent valuer estimates.
Member Since December 2023 - Comments: 1
12:30 PM, 15th December 2023, About 2 years ago
Reply to the comment left by Simon M at 15/12/2023 – 11:54
Probably would need to be done under a Tenants in Common agreement, ( NOT a joint tenancy!) using a deed of trust between two parties by a conveyancing solicitor.
Benefits: clears outstanding mortgage with a pay out, maintains a known tenant, keep ownership of half the property invested while still charging rent, day to day maintenance passes to tenant.
Still researching….
Member Since September 2023 - Comments: 173
12:52 PM, 15th December 2023, About 2 years ago
If I sold half a house to two tenants, I’d have the equivalent of one less property.
So long as the tenants were happy to pay the additional 3% SDLT to me, cover my legal fees, pay any CGT there may become due on the sale and be responsible for all repairs and other things that normally sit with the landlord then yes, I’d consider it.
Member Since April 2019 - Comments: 10
2:49 PM, 15th December 2023, About 2 years ago
Supposing the tenant or part owner stops paying the rent ?
Member Since July 2013 - Comments: 754
2:59 PM, 15th December 2023, About 2 years ago
Despite some potentially appealing features of such a proposal, translating it into a workable legal document could be a nightmare unless there was a very comprehensive and well-tested precedent. Solicitors (no disrespect intended) could argue endlessly about responsibilities, liabilities and ‘what-ifs’ trying to achieve the right balance for their respective clients.
My experience is that many a good idea has fallen over because of the legal complexities and likely the costs would be disproportionately high relative to the size of the proposed transaction.