Shared Ownership

Basics - The whole basis of shared ownership is to make home ownership more affordable for buyers who would not otherwise be able to buy their own property.

You are able to choose to buy a percentage of the property (which must be at least 25%) and you then become the owner of that percentage of the property.  The remaining percentage stays in the ownership of the Housing Association and the Housing Association charges you a rent on that retained percentage of the property.  The rent so charged is usually a generous one compared to rents in the private sector.

The Lease - Upon completion of your purchase you sign a Lease which sets out your obligations to the Housing Association in respect of your property.

Rent Review - The rent payable for the percentage of the property retained by the Housing Association is revised each year and generally rises in line with inflation.

Service Charges - All shared ownership Leases put the responsibility for repairing and maintaining the property and for insuring on the Housing Association.  The Housing Association will, however, recover their costs for carrying out their responsibilities from you by means of a service charge, which is not a fixed charge but will vary from year to year according to how much the association spends.  The payment of service charge is, of course, in addition to the payment of rent.

Approval of Mortgage - It is essential in all cases for the Housing Association to receive a copy of your mortgage offer and to confirm their approval of this offer in writing.  This is a technical requirement in all shared ownership cases.

Sale - If you want to sell a shared ownership property when you own less that 100% you can, of course, only receive that proportion of the market value that equates to the percentage that you own.  For example, if you own 50% of a property worth £200,000 you will only be able to sell your share for £100,000.

In addition you must first offer the property back to the Housing Association, who then have a period of time in which they can nominate a buyer from their waiting list.

If they nominate a buyer, the Lease usually provides that the Housing Association can charge an administration fee for finding the buyer. If the Housing Association does not nominate a buyer then you can sell your percentage on the open market with the Housing Association’s permission.

Staircasing - All shared ownership Leases allow you to buy additional shares in the property.  This is called “staircasing”. If you exercise this option, you give notice to the Housing Association who will obtain a valuation for the additional percentage you want to buy.

When you pay for your extra share, a “Memorandum of Staircasing” is attached to the Lease to prove your increased ownership.  The rent payable on the percentage retained by the Housing Association will, of course, reduce by the percentage that you have “staircased”.

You may “staircase” as many times as you wish until you own 100%, although there may be a minimum percentage that you can purchase each time you “staircase”. Very rarely some developments only allow you to staircase up to a maximum of 80% of the ownership, but this is very unusual.

100% Ownership - If you staircase up to 100% ownership then you effectively own the whole of the property and the rent payable to the Housing Association ceases.  The effect of 100% ownership differs according to whether you own a house or a flat:-

House - You are usually entitled to have the freehold transferred to you and the service charge is no longer payable, but you are responsible for repairs and insurance, etc. yourself.

Flat - The shared ownership clauses in your lease are removed but the service charge provisions remain the same.  The rent to the Housing Association comes to an end.