Renting a Reduced Cost Property

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    Renting a Reduced Cost Property

    I'm hoping this is the right place to post this.

    I bought a reduced cost leasehold flat (-20%) back in September 2017. I am now looking to buy a new property and am wondering if it is possible to rent the flat out (fully appreciate that some may think this isn't right/fair) as when I bought the property, I was told this would not be possible. Having looked through the lease, I cannot find anything in there to suggest I can't. There are schedules in the lease that allude to the fact I would need to honour the reduced cost when selling but no mention about renting. There is also mention of the Section 106 Town and Country Planning Act 1990 - unsure if this plays a part too?

    I have tried various other avenues to try and get a definitive answer on this but have not received one - my neighbour who is on the same lease as me, has had their solicitor look through the lease and seems to think there would be no issue. Has anyone ever done this before or have any knowledge on this? Appreciate it may be hard to comment without seeing my lease.

    Related to all of this, I spoke with my current mortgage provider to understand if I could move to a buy-to-let mortgage, they said this was fine, however stated I needed to obtain written permission from the freeholder to do this. After ringing around nearly every number for my freeholder I am unable to speak with anyone and so this has ultimately stalled the process. Again, having spoke with my neighbour they have also spoken with their mortgage provider and they seem to suggest they do not need to obtain permission before moving their mortgage across. Is this a common request from lenders to obtain permission? I was always of the impression that you would need to seek permission from the freeholder before proceeding, unless I am mistaken?

    Any help or advice is greatly appreciated!

    #2
    What is a reduced cost leasehold flat? Is this shared ownership or help to buy?

    Comment


      #3
      Who paid the difference between what you bought it at and the "normal" price please?

      Or do you pay rent for the 20%?
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        Council right to buy ? Private freeholder .?

        Comment


          #5
          Was there a salesman claiming you were getting a special deal with 20% off? But the paperwork doesn't mention it?

          Have you carefully re-read all paperwork from purchase? What does your solicitor advise the deal was, please?
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            How can you have 100% and the council a 20% interest ? It's yours or it isnt.

            Comment


              #7
              If there is nothing in the lease preventing letting then it would be unusual to require freeholders permission , but it may just be your lender has been stung and is overly cautious. If you can't get Barrats to confirm consent then you might need to approach another BTL lender.
              Obviously as you have been told that you can't sublet then you also need to check if this weird 20% arrangement came with added restrictions.

              Comment


                #8
                Bizarre. Which council is this (if you want to divulge it)?

                Comment


                  #9
                  Im most intrigued by this. Do you mind me asking what criteria you fell under to get this 'scheme'? is it an affordable housing quota that needed to be filled?

                  Comment


                    #10
                    I am familiar with this type of agreement.
                    Are you sure you didn't sign an additional "covenant" when you purchased the flat where you agreed that it would be owner-occupied only? There was probably a Section 106 agreement between the original developer of the property and the council that outlined the requirements.
                    If you search for the planning application for your block of flats on the Council's planning portal you should find the relevant document (if one exists).

                    Comment


                      #11
                      @88xx It's called a Discounted Market Scheme. This type of deal is becoming more rare, but it's quite a good one for first-time buyers if you qualify. Normally they only apply to new-build properties so you'll be out of luck if you're after a period home.

                      Comment


                        #12
                        hbsco No-one owns the remaining 20% of your flat (or rather, the lease of it). Basically it's like buying any goods at a discount—you just got a 20% discount off the market value on the provision that you offer the same discount to the next buyer.

                        Barratt Homes will have had to absorb the "loss" as part of their deal with the Council when they applied for planning permission. They probably had to offer 20-30% of the flats at a discounted price to satisfy the local requirements for affordable housing.

                        Comment


                          #13
                          hbsco Did you sign any kind of covenant such as the one attached? If you did then it should be filed with your lease at the Land Registry, and the mortgage provider may also have been supplied with its own copy along with your title deeds etc.
                          Unfortunately I don't know what they might choose to do with that information should you breach the covenant.



                          Comment


                            #14
                            @hbco You're right—I don't see that any of these documents state that the property has to be owner-occupied.
                            And the Council has effectively given you the go-ahead by stating that Your only obligation to us is to pass on the discount you received when you sell the property.

                            Possibly the owner-occupied stipulation was meant to be in the convenant but whoever drafted it forgot to put it in, so they are relying on your good nature to uphold the intention of the scheme.

                            I don't see how you would have a problem with renting in the short-term as there is nothing in writing to say you can't. Presumably the freeholder can't withhold consent unreasonably either.

                            *Disclaimer: Please note I have no legal expertise of any kind!

                            Comment


                              #15
                              HazeltonLane Thanks for looking and glad to know it's not just me who seems to think I should be able to! I'm going to see if I get any joy with my old solicitors this week, as ideally I'd like it in writing from them before proceeding. Not sure where I'm left if they don't respond so will have to think of plan B.

                              Comment

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