After-sale shared equity procedures: guidance

9. Grant of tenancy

OMSE and NSSE Administrative Procedures set out the position on whether or not a shared equity owner is allowed to let his or her property. The position in relation to OMSE and NSSE properties applies in the same way to the HtB(S) scheme -€“ an owner may only let their property with the prior written consent of Scottish Ministers and is likely to be permitted only in exceptional circumstances. Any request by a shared equity owner to let their property will be considered individually depending on the facts and circumstances in each case. However, Annex 5(C) sets out a number of scenarios with recommended actions for each case.

Where it is agreed that a tenancy may be granted, confirmation must be received from the owner's legal adviser or letting agent that (a) the letting is on a short assured tenancy (or a private residential tenancy once the relevant provisions of the Private Housing (Tenancies) (Scotland) Act 2016 come into effect); (b) the letting has been approved by the Primary Lender; and (c) the shared equity owner is either registered as a landlord with the local authority (to ensure they are 'a fit and proper person' to let their property) or they can provide a letter from their solicitor confirming why the proposed tenancy is exempt from a requirement to register. In the event that the owner proposes to let the property without using a solicitor or letting agent, the owner must provide the RSL with satisfactory documentary evidence confirming the foregoing points.

All consents to owners letting shared equity properties are time-limited, normally to be granted for a period of 6 months, and potentially for a further 6 months extension period. Consent to this extension period will only be granted where one of the following is confirmed by the owner prior to the end of the initial 6 month period:

• That the owner is intending to move back into the property at the end of the 12 month period and will provide evidence to confirm that fact; or
• That the property will be marketed for sale and that the current tenancy or proposed tenancy will not be extended beyond the 12 month period; or
• That the owner will increase their equity stake in the property to 100% and discharge the Scottish Government's security before the end of the 12 month period; or
• That the owner will submit a request to further let the property beyond the 12 month period.

If permission is provided to let a shared equity home for a further period then refreshed confirmation or evidence in relation to (a) -€“ (c) above will not be required as long as there have been no changes from the initial confirmation or evidence provided.

If it is found that a shared equity owner is letting their property without having obtained prior written consent, the owner should be contacted by the RSL and encouraged to proceed through the above process, with consent being considered retrospectively from the point when the letting commenced. In the event that (a) consent is still not sought; (b) consent is not granted due to the owner not meeting the criteria, or (c) the owner is found to have breached their Shared Equity Agreement in some other way, the shared equity owner should be informed that they are in breach of their Shared Equity Agreement and the RSL should contact Scottish Government to recommend that Scottish Ministers' solicitors should be instructed to take enforcement action. At the same time, the RSL should confirm to the owner other options which are open to them such as selling the property or increasing the equity stake to discharge the Scottish Ministers security.

When a short assured tenancy is replaced by a private residential tenancy (" PRT") in terms of the 2016 Act mentioned above, landlords will not be able to provide for the tenancy to run for a limited period of time, since a key aspect of PRTs is that, once created, they continue without limit of time and landlords can only recover vacant possession if either (a) the tenant gives notice of their intention to leave or (b) certain grounds exist which justify an eviction order. In this situation, it will be a condition of Scottish Government giving consent to an owner letting their property that the owner must take all necessary steps to obtain an order from the First Tier Tribunal for the eviction of the tenant based upon the eviction ground that the owner intends to live in the property or to sell the property.

Copy correspondence to be sent to the owner and their agents in relation to proposed lettings is set out in Annex 5.

RSLs should note that where a grant of tenancy has been agreed, this should not be processed through HARP.