LifebyTori

What is Shared Ownership?

Shared Ownership allows people to purchase a share of a property as a more affordable way of owning a house. For example, you may own 30% of a property and a Housing Association may own the other 70%. Shared Ownership is a great way of getting onto the property ladder, especially in this climate, there is a chance that some generations may not ever be able to get on the property ladder without affordable housing schemes.

How can I get onto a Shared Ownership Scheme?

A lot of Shared Ownership houses are new build properties so if you are aware of any new developments being built in your area, there is a strong chance that some of them will be Shared Ownership properties. You can try having a look on well known developers websites for any in your area or use website like Share to Buy https://www.sharetobuy.com. Websites like Share to Buy are also useful for looking at re sale properties, where the houses are not necessarily new build but have been sold by shared ownership buyers and re sold. You can also take a look on your local authority website and housing associations for any shared ownership opportunities in your area.

Sometimes Housing Associations may have restrictions on who can purchase a property through the scheme, some common ones are that you have to be a first time buyer, have a local connection to the area you wish to live in for example, you work in the area or you have family in the area. Other restrictions may be that as a household you must be earning under a certain amount annually for example £80,000 a year. Each Housing Association and property has its own criteria, so it is best to check out what specific criteria is needed when you find a property you like.

New Build Homes

Sometimes with new build properties, you are not able to see the house you are purchasing before you purchase it. You may be given some information from the Housing Association on some decorative details for example, colour of the carpets and a floor plan. If the property is not built yet, then you will most likely have to exchange contracts creating a legal contract that you will be purchasing the house before you see it. There may be a show room where you can see what your house may look like but this isn’t always available. This isn’t just the case for Shared Ownership properties and is just a general condition of a New build as there can be a lot of delays with developers building the houses and there is no guarantee of build dates. If you are purchasing a new build, you need to be prepared for experiencing delays with the completion date of when the house is built and ready to move into.

Usually a completion date of when you get your keys is agreed on exchange and you must complete on that day, however if your property is not built yet, you can still exchange contracts but your solicitor will usually exchange ‘on notice of a completion date’ which means that you are tied into the contract and must complete when the developer or Housing Association gives their notice of a completion date. This could be as little as 5 days notice.

Staircasing

You may originally purchase say a 25% share of the property but you are able to purchase additional shares in the property from the Housing Association up to 100%. This is usually done in increments of a certain amount above 5%, however, the Government website states that you can also gradually staircase 1% each time up to 15 years. Staircasing procedures are usually set out in your Lease for how you can purchase additional shares. You will usually need to contact the Housing Association with your notice to purchase additional shares and get a RICS Valuation done to determine the Market Value of the property at that time but this may not be necessary for purchasing a 1% share. If you are in a house and you purchase 100% of the property, the freehold of the property will be transferred to you and the Housing Association no longer having a share in the property. If you are in a flat and you purchase 100%, the flat will remain Leasehold but you have full ownership of the property. Service charges and Ground Rent will still be payable for a Leasehold property to a management company, this could still be the Housing Association or another management company, this is the same with every leasehold property.

Selling the property

When selling a Shared Ownership property, you will need to give notice to the Housing Association. Usually under your Lease, they are allowed a set time to try and find a buyer themselves before you can put the property on the open market with an estate agent for instance. The period of time that you must allow the Housing Association to find a buyer will be covered in your lease, however usually this is between 8 – 12 weeks. There might also be some extra costs that you need to pay for including paying administrative fees for the Housing Associations solicitors in the conveyancing process.

Application

During the application process, most Housing Associations will have a referred mortgage advisor. A mortgage advisor will asking for financial information such as bank statements and income details and will obtain a mortgage offer for you. They will look at your finances and decide upon the percentage that you should purchase depending on your financial situation and in line with the Homes England guidelines.

One of the reasons why Shared Ownership is so attractive is because of the lower deposit which means you do not need to be saving 10% of a property price which on average is about £30,000. It differs depending on the percentage you are purchasing and the property market price but the deposit is usually 5% of the percentage you are purchasing. For example, if you are purchasing a 25% share in a property for the full market value of £310,000, your 25% share would be worth £77,500, your deposit would be 5% of this.

Stamp Duty

For First Time Buyers, you can get Stamp duty relief for properties worth up to £300,000 which means that you only pay Stamp Duty on the value over this amount. For example, if you buy a property for £350,000, you will only pay Stamp duty based off of the £50,000 over the threshold. With Shared Ownership, you have two options of paying Stamp Duty. You can either pay Stamp Duty on the full market place of the property or based off of the share that you are purchasing. Generally, if you are paying Stamp Duty on the full market price you would be paying more Stamp Duty on completion, but you would not have to pay Stamp Duty if you staircase. If you pay Stamp Duty on the share price, then it is likely if you are a First Time buyer that you would not need to pay any Stamp Duty on completion due to your First Time Buyer relief but you may need to pay Stamp Duty when staircasing depending on how many additional shares you are purchasing.

This article is not to be taken as legal advice and to be used for information only.