By Penny Yorke
What are shared ownership properties?
Shared ownership is a part rent (specified rent), part buy scheme designed to get buyers on the property ladder. Buyers purchase a share of the property (usually between 25-75%) with the intention of purchasing a greater share over time, eventually leading to full ownership. Housing authorities, local councils and other organisations will own the property and act as the landlord. Buyers under a shared ownership scheme rent the remaining share of the property from the landlord. Whilst shared ownership is available in other parts of the UK, this article refers solely to shared ownership properties in England.
Leasehold properties
Shared ownership properties are always leasehold. This means that a person has a right to live in the property but does not own the land. The right to live in the property under shared ownership is usually given by way of a lease. Leases will likely be for a set period of time and will set out any responsibilities or restrictions on the leaseholder.
It is important to note that leasehold properties often give rise to additional charges. For instance, service charge and ground rent (not to be confused with the specified rent). Service charge is a fee paid to a landlord for the maintenance or upkeep of communal spaces or building. Ground rent is the fee paid for the occupancy of the freeholder’s land by the leaseholder, usually on an annual basis. If you are buying a shared ownership property with a new lease, or a brand-new property, ground rent is no longer applicable. This applies to new leases granted after 30th June 2022 under Leasehold Reform (Ground Rent) Act 2022. However, not all shared ownership properties will be subject to these fees, and it is worth checking the provisions set out in the lease for that property.
Who can buy a shared ownership property?
Shared ownership is available to those who are first time buyers, those already under the shared ownership scheme, and those who have previously owned a home but are struggling to re-buy.
In order to qualify for a shared ownership home, your total income must not exceed £80,000.00 or £90,000.00 in London. This is regardless of whether a person is buying individually or with another.
Mortgages
If buying with a mortgage, the mortgage will cover the purchase price of your share minus your deposit. For those with a mortgage, you will have to make repayments alongside paying rent on the share of the property that you don’t own. This means that you will be paying your mortgage and specified rent simultaneously and so it is likely that your monthly outgoings could be higher.
Selling a shared ownership property
When selling a shared ownership property you usually must give the landlord notice. They will have a period (usually 4-12 weeks) to find a buyer to purchase the share being sold. This is known as the nomination period and is often set out in the lease. If the landlord fails to find a buyer, you as tenant may be able to sell your share on the open market.
If a seller has a 100% share in the property, they usually have the right to sell the leasehold property on the open market without an involvement from the landlord. However, some shared ownership properties prevent a buyer from owning an 100% share or from selling on the open market, so this option would of course be unavailable. Any caps on share purchasing can be found in the lease or information documents for the property.
Are they worth it?
Although shared ownership properties might require additional fees, they can be a great way to get on the housing ladder. The scheme allows buyers to purchase a property over time known as ‘staircasing’. As the property is being bought gradually, it prevents buyers having to save larger sums to purchase the entirety of a property. Buyers are able to live in a property with a greater worth, despite having paid a lot less than required of a usual purchase. Notably, when it comes to selling a shared ownership property, there might be restrictions on who you can sell to, and it is likely that the landlord will have the right to find a buyer in the first instance. It is essential that buyers are aware of the elements affecting shared ownership properties and their agreements.
