LEGAL
Shared ownership – the New & Improved Product With a new shared ownership product and lease having recently been launched by Homes England and bringing the biggest changes to shared ownership in years, Adam Crawford, Partner and Head of New Build Homes, at Prince Evans Solicitors LLP looks at what this means for buyers BACKGROUND – WHAT IS SHARED OWNERSHIP? Shared ownership is a Government-backed scheme that allows you to purchase a share in a property and rent the part of the property you do not own (also known as part-buy, part-rent) from the landlord (which is usually a housing association or a local authority). Provided you meet certain criteria, such as a maximum household income of £80,000 outside of London or £90,000 in London, and you are a first time buyer or home mover (ie not buying as an investor), then you may be eligible to purchase a shared ownership property. You will still have to apply for a mortgage and save for a deposit; however, the deposit can be as low as 5% of the share you are buying. As shared ownership is Government backed, your landlord is under an obligation to act responsibly and ensure it only allows you to purchase the property if you can afford to keep up with the repayments on your mortgage and the rent you pay it and other associated outgoings. You will need to meet the affordability criteria, about which the housing association will be able to advise you. Shared ownership is, generally, considered by most (including the author) as an excellent route into homeownership for those who may not otherwise be able to afford it.
WHAT WAS THE PREVIOUS SHARED OWNERSHIP PRODUCT? Previously if you purchased a new build shared ownership property you would buy the property and be granted a lease on the following basis: 9 You purchase the maximum share you are assessed to be able to purchase of between 25%-75% 9 You pay rent on the share you do not own to your landlord 9 You have the right to buy additional shares in the property in minimum
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tranches of 10% (a process known as “staircasing”) up to 100% in most cases (some leases restrict staircasing to 80%). 9 For a minimum 99-year lease term (or more typically a 125-year term) 9 When you wish to sell the property, you must first give the opportunity to your landlord to find a buyer for the property – it has eight weeks in which to find a buyer after which you can sell on the open market (this is known as the “nomination period”) 9 The price for a sale agreed by the landlord referred above is set by a valuation, with the valuation being valid for eight weeks (exchange of contracts must take place within eight weeks and if not achieved, a new or extended valuation may need to be obtained). Please note as per the comments later in this article, this product will continue to be available for new builds constructed from pre-2021 funding and on resales.
SO, WHAT HAS CHANGED? Under the new shared ownership product, you will now buy a new build shared ownership property and be granted a lease on the following basis: 9 You purchase the maximum share you are assessed to be able to purchase of between 10%-75% (25% was the previous minimum) 9 You pay rent on the share you do not own to your landlord 9 You have the right to buy additional shares in the property in minimum tranches of 5% (a process known as “staircasing”) up to 100% in most cases (some leases restrict staircasing to 80%). Previously a 10% minimum was required 9 In addition, during the first 15 years of your ownership you will now have the right to buy an additional 1% share each year. This will be based on a value adjusted in line with the House Price Index (“HPI”) rather than the need for a valuation and the 1%
staircasing will be subject to reduced administration and therefore reduced costs for you 9 For a minimum 990-year term (previously 99 years) 9 When you wish to sell the property, you must first give the opportunity to your landlord to find a buyer for the property (nomination) – it has four weeks in which to find a buyer after which you can sell on the open market (previously eight weeks) 9 The price for a sale under a landlord nomination is set by a valuation with the valuation being valid for 12 weeks (exchange of contracts must take place within 12 weeks and if not achieved a new or extended valuation may need to be obtained). Previously eight weeks 9 Your landlord will be responsible for the cost of essential repairs to the external fabric of the building and the structure in the first 10 years – your conveyancer will explain in more detail what this means to you (previously you were responsible for these costs) 9 You may be able to claim up to £500 per annum from the landlord for essential repairs/replacement inside the home for the first 10 years – again your conveyancer will explain in more detail what this means to you; (previously you were responsible for these costs without any contribution). Please note the changes will not be retrospectively applied to shared ownership property previously sold or being sold on the previous model.
WHEN DOES THIS COME INTO EFFECT? This is where it becomes a little tricky as shared ownership is often, but not always, grant-funded (ie the Government provides public funds towards the cost of shared ownership). It is only shared ownership properties which are built and sold from the Government’s Affordable
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