What Investors Should Know Before Purchasing Supported Housing

Buying a supported housing property involves the same legal steps as any residential purchase, but the income depends on a lease with an organisation. Thorough due diligence on both the property and that organisation is essential.

The property

• Commission an independent survey appropriate to the age and type of property.
• Check title at HM Land Registry, including any restrictions or charges.
• Confirm planning status. Supported housing is generally treated as a residential use, but the specific planning position, including any change of use or licensing requirement such as for a house in multiple occupation, should be checked with your solicitor.
• Confirm that the property meets required safety standards, including gas, electrical and fire safety.

The lease

• Read the full lease, not a summary, and have your solicitor report on it.
• Note the term, start date and any break clauses.
• Understand the rent review mechanism, including any index, cap or floor.
• Identify every obligation that remains with you as owner.
• Understand what happens if the tenant organisation defaults or becomes insolvent.
• Understand the condition in which the property must be returned at the end of the lease.

The counterparty

• Confirm the legal identity of the tenant organisation.
• Check whether it is a registered provider and read any published regulatory judgement from the Regulator of Social Housing.
• Review its latest accounts, including its reserves and the total value of its lease commitments.
• Ask whether any guarantee or other security supports the lease.

Costs

• Stamp Duty Land Tax, including the higher rates for additional dwellings. In England, the surcharge has been 5 percentage points since 31 October 2024.
• Legal fees, survey fees and any finder or arrangement fees.
• Ongoing costs retained by the owner under the lease.

Tax

• Rental profits are subject to Income Tax for individuals and must be reported to HMRC.
• Capital Gains Tax may apply on a future sale.
• Inheritance Tax may apply to the property on death.
• Take advice from a qualified tax adviser before purchase.

Exit

• Consider who might buy the property in future, and whether the lease would help or hinder a sale.
• Consider what the property could be used for at the end of the lease.
• Remember that property values can fall as well as rise.

Independent advice

Use a solicitor who is independent of the seller and experienced in this type of transaction. Consider independent financial advice before committing a significant proportion of your capital.

Sources

HM Land Registry; HM Revenue and Customs guidance on Stamp Duty Land Tax, Income Tax on property and Capital Gains Tax; Regulator of Social Housing.