Shared Ownership Schemes
If you would like to buy a home of your own but can’t quite afford to, shared ownership may be what you are looking for.
There are various shared ownership and low cost home ownership schemes available and although some schemes are aimed at key workers - nurses, teachers, firefighters and police officers - some are open to anyone with a steady job.
The most common is the New Build HomeBuy scheme (also known as shared ownership). It is government-funded, and allows buyers to buy part of a newly built property, normally a share of between 25 and 75 per cent, by taking out a fixed-rate mortgage with an ordinary lender and paying rent on the rest. The rent is linked to inflation and is reviewed annually.
Certain Housing Associations and Builders offer this or very similar schemes for brand new properties or newly refurbished properties. Another possibility is to buy the share of someone who already has a share in a property under a shared ownership scheme.
The Shared Ownership Lease
Whether you buy a house or flat under a shared ownership scheme, the landlord will grant you a lease, usually for 125 years. This will entitle you to live in the property, buy further shares (and will set out how you can do this) and confirm your responsibilities for repairs, payment of rent and service charge etc.
Shared ownership leases and the legal issues surrounding this type of ownership are complex. Not all solicitors have the experience to able to advise fully on the implications of shared ownership. It is important to choose a solicitor who is experienced in this type of work.
The Conveyancing Department at Punch Robson has been dealing with shared ownership arrangements for many years and can advise in detail on:
- The lease provisions generally and your responsibilities.
- Any re-sale restrictions (nominations rights, restrictions on the type of buyer etc).
- Your right to acquire additional shares in the future up to 100% (known as “staircasing rights”) and the procedure to do so.
- Any provisions regarding “reverse staircasing”, where the landlord may “buy back” a share.
- Your mortgage arrangements and how the shared ownership lease might affect them or cause you difficulties in obtaining secured loans in the future.
- Stamp Duty Land Tax implications. Depending on the circumstances, you might be able to opt to pay tax on your share or on the full value of the property. We can help you to weigh up your options before you make any decision.
- Non-standard shared ownership schemes and their provisions. For example, “fixed shared ownership”, where you either have no right to acquire further shares, or you may only purchase shares up to a set level below 100%.
The day-to-day costs of a Shared Ownership Scheme
When deciding if a shared ownership scheme is for you, please remember that the following will be regular expenses of owning a shared ownership property:
- Rent on the share that you do not own.
- Repair costs*
- Home Insurance - Your landlord will arrange the buildings insurance policy and you will refund the cost. You will have to arrange and pay for your own contents insurance.
- Administration Fees – your landlord may make an annual charge for administrating matters such as the insurance arrangements and collecting payments from you.
- Service Charges*
- Mortgage Repayments
- Council Tax and all other standard household bills
*If your property is a house, you will be responsible for all repairs and redecoration both internally and externally.
If your property is a flat, you will be responsible for all repairs and redecoration internally. The landlord will keep the building in which your flat is situated in good structural repair, keep the structure insured and keep any common parts, such as the staircase and corridors, decorated, clean and lit. You will have to pay a share of those costs. This is called a service charge. The housing association must tell you how the service charge is spent and you will be consulted before any major repair or maintenance work is put in hand.
Buying Additional Shares
You are able to buy further shares so that, eventually, you could own 100% of your home. Until you become the outright owner, you will still have the normal rights and responsibilities of a full owner-occupier.
When you opt to buy further shares the property will be re-valued and the price you pay for an additional share is calculated on the new valuation. In most schemes any improvements that you have made will not be taken into consideration when re-valuation takes place.
Selling a Shared Ownership Property
You may sell at any time but you must serve formal written notice on the landlord. You can either sell the part that you own or you can buy the remaining share and then sell the property outright.
Unless you own the property outright, clauses in the lease may enable the landlord to nominate prospective buyers and to restrict the sale price to an independent valuer’s valuation. The reason for this is that the landlord will want the property to remain available to the people for whom shared ownership is intended (people who are struggling to afford to buy a home, like first time buyers).
In some areas of the country the landlord may restrict your ability to buy further shares in your home or reserve the right to buy back the property (at full market value). These arrangements are generally limited to rural areas and are intended to provide a means of keeping low cost housing for rural communities.
Other Shared Ownership or Affordable Housing Schemes
Some housing associations offer non-government funded shared ownership schemes that work on the same principles (although certain details may vary). Also, private developers offer shared ownership schemes where a wide range of conditions apply. The Housing Corporation also funds a number of low cost home ownership schemes designed to make it possible for people on lower incomes to buy a home of their own.
For example:
Leasehold schemes for the Elderly. These schemes enable older people to buy a sheltered home from a housing association. Generally the maximum share that can be bought is 75%, at which level no rent is payable on the remaining share. Sales and re-sales are limited to people of 55 years or over.
Homebuy or “Shared Equity”. These schemes help people who are existing council or housing association tenants to buy a home. The purchaser needs to find 75% of the purchase price whilst the remaining 25% is covered by an interest free equity loan. This loan is repayable at 25% of the market value at the home is sold, or during occupation if the purchaser wishes to buy the remaining 25%. In some schemes there is no right to buy the remaining 25% share.
Re-sale Price Covenant or “Voluntary Purchase Grant” schemes. The buyer acquires 100% legal ownership of the property but only pays a reduced price to the seller. Generally the property is then made subject to a “covenant” that restricts the re-sale price so that the same discount is always passed on to future buyers.
Key Worker schemes. Similar to some of the schemes outlined above, but only available to “Key Workers”.
Need more advice on Shared Ownership Schemes?
The solicitors and staff in our Conveyancing Department can give you general information and advice about shared ownership matters and will be happy to discuss your queries.
Please note that the contents of this information sheet are a starting point only and are not a substitute for full professional legal advice tailored to your individual circumstances.
Contact us on one of the following numbers for further information:-
Ingleby Barwick 01642 754050
Coulby Newham 01642 233980
Middlesbrough 01642 230700
