Shared Ownership

SHARED OWNERSHIP EXPLAINED 

  • WHO CAN BUY A SHARED OWNERSHIP HOME?

    Shared ownership is designed to help those who cannot afford to buy a home outright on the open market and represents an excellent opportunity to get on the “property ladder”. Your income must be enough to cover your monthly mortgage, rent and service charge and you should also have some savings to cover the initial purchase costs.

    You should normally be a first time buyer although you may be eligible if you have previously owned a property. However, at the time of completion you cannot own any other properties. 

  • WHAT WILL I OWN? 

    You will buy your home on a lease which will normally be 99 to 125 years for new homes. If you are buying a second hand property, the length of your lease will be based on the number of years remaining since the original lease was first issued. If the property is a house and you later decide to buy it outright you are normally given the freehold. You will initially own a share in the property normally at least 25% although it may be possible to buy a larger share at the outset if your financial circumstances permit. This is sometimes known as owning a share in the equity of the property. You will pay a subsidised rent on the remaining equity in the property.         
  • CAN I BUY MORE EQUITY IN MY HOME? 

    After a set period you may be eligible to purchase more equity, or even purchase your home outright, if you wish. The important point is that it is you who decides what is right for you. You do not have to buy additional equity in your home if you do not want to.

    As you only pay rent on the part that you do not own, the more equity you own the less rent you pay. Should you decide to purchase your home outright in the future there will not be any rent payable.

    If you tell the housing association that you wish to purchase additional equity in your home, they will instruct an independent valuer from the Royal Institution of Chartered of Surveyors to determine its current market value and the price you pay for any additional equity will be based upon this valuation. You will have to meet the cost of this valuation.         
  • CAN I SELL MY HOME? 

    You may sell your home whenever you choose just like any other home owner. However, to make sure that your home can then be made available to others who cannot afford to buy outright, the housing association will have the right to find a buyer for your home. 

    There may be a small fee for this service although it is less than you would normally pay an Estate Agent. If the housing association is unable to find a purchaser within the period specified within your lease, you are then free to make your own arrangements to sell your home. 

    The housing association will instruct an independent valuer from the Royal Institution of Chartered of Surveyors to determine the current value of your home if you decide to sell. You will have to meet the cost of this valuation and the price you sell your equity for will be based upon this valuation.       
  • WHAT ARE THE INITIAL COSTS INVOLVED IN THE PURCHASE OF MY NEW HOME? 

    There are initial costs associated with purchasing a shared ownership home, just like there are if you buy on the open market. We have set out below details of the costs you are likely to incur:

Holding/Administration Fee

When you view a property you will be given the opportunity to place a holding/administration fee on the property of your choice. If the housing association is unable to offer you your choice of property, your cheque will be returned to you. If you accept an offer of a property and then do not proceed to complete your purchase, the housing association will retain this fee to meet their legal and administrative costs.

Survey and Valuation Report

Your mortgage lender will want to make sure that the property you are buying is worth the money you are being asked to pay and will therefore want to carry out a survey on the property before you purchase. If it is a new property, this will normally be a standard ‘Mortgage Valuation, however, if you are buying a second hand property you may require a more extensive ‘Homebuyer’s Report. The lender sets the fee you will be charged, but you should typically allow between £175 and £300 depending on the property you are buying and the type of survey you decide to have.

Legal Fees

You will need a solicitor to act on your behalf and fees vary. This firm's fees are £579 plus VAT with no hidden extras but other firms may be more expensive. Always use a solicitor who is familiar with Shared Ownership and remember to ask them about any disbursements.  
These are additional costs for Land Registry Fees. These fees are based on the price you are paying for your share in the equity as follows: 

£0 - £50,000                     £ 50
£50,001 - £80,000              £ 80
£80,001 - £100,000            £130
£100,001 - £200,000           £200

Stamp Duty Land Tax [SDLT]

If the value of the equity share you purchase initially is less that £175,000* you do not have to pay SDLT 

You do, however, have a choice to pay SDLT on each separate stage of the phased purchase by reference to the prevailing rates of tax in force at the time, or alternatively make a market value election by paying tax as if the property had been purchased outright now.

 Market Value Election 

On your behalf we will [if you ask us to] make an election to Revenue & Customs to pay SDLT on the basis of the market value of the property at completion of your purchase. The purchase will be treated as a conventional purchase and you will make a once and for all SDLT payment – even if you “staircase” later [increase your share in the property at a later date].

Typically a Market Value Election will normally be beneficial where the initial market value does not exceed £175,000.

If you do not decide to make a Market Value Election then SDLT may be payable on the original purchase price and then additional SDLT may have to be paid if you staircase in the future so as to hold an interest in excess of 80%.

Deposit on Exchange of Contracts 

When you exchange contracts on your new home you may be asked you to pay a further deposit to the housing association. This will be added to the holding/administration fee you have already paid to form a total deposit on exchange of contracts. When you complete your purchase this will normally be deducted from any rent and service charge payable and any remainder from the purchase price. 

  • WHAT ARE THE COSTS ONCE I MOVE IN?
If you have taken out a mortgage to buy your home there will be a monthly mortgage payment to the lender. There will also be the monthly rent to a housing association on the part you do not own. With some properties, usually flats, there will also be a service charge payable to cover the cost of maintenance and repair of the main structure and any communal areas. The service charge is payable even if you should decide to buy your property outright in the future.

 
The housing association will also have to take out buildings insurance on your new home and will recharge the cost of this to you, usually through your service charge.  

 HOW DO I APPLY? 

The housing association will ask you to attend a financial interview to establish the share you are able to purchase. We can recommend an Independent Financial Advisor who is a specialist in arranging finance for this type of purchase. Once this is established you will need to complete an application form and return it to the housing association that will check to see if you qualify. The housing association will let you know if your application has been accepted but may sometimes contact you for additional information. 

*Tax is subject to change at anytime. 

STAIRCASING EXPLAINED [your way up the property ladder]

 
If you currently share the ownership of your home with a Housing Association, you may wish to buy another share of your property or even buy it outright. This is called staircasing. You can agree with the housing association a percentage to staircase to - for example to increase the percentage you own from 50% to 75%, or you may buy all of the outstanding shares to own 100%. Please note that some leases do not allow you to purchase all the shares in your home. Please check with your Housing Association for confirmation.
 
WHAT DO YOU NEED TO DO?
You, your solicitor and the Housing Association must take the steps outlined below:
 
1)     You should contact your Housing Association in the first instance and they will tell you how to proceed.
 
2)     If you are considering ‘staircasing’ then you should find out from your building society or bank whether they are willing to lend you a further amount of mortgage. The additional amount you are able to borrow will help determine the size of the further share which you may be able to buy. If you decide to change mortgage companies, you should beware of any ‘redemption’ penalties you may have to pay. We can recommend an Independent Financial Advisor who can help you with this process if you are unsure.
 
3)     You should appoint a solicitor to act for you as it is important that you have a legal representative as the documentation involved is complex.
 
4)     Upon receiving written notification of your intention to purchase further shares, your Housing Association will instruct a valuer. The valuer will be an independent qualified (RICS) valuer agreed between the Housing Association and yourself.
 
You may provide the name of another valuer provided that your Housing Association agrees. You will need to confirm their name and address and your Housing Association will instruct them. You will be liable for the valuation fee.
 
An estate agent’s valuation is not acceptable, nor is the valuation provided by your bank or building society as this is principally for mortgage purposes and is not classed as an independent valuation for purchasing further shares.
 
The agreed valuer will confirm the market value of your property and the cost of purchasing any further shares in your house is based on this figure. The valuer will disregard any improvements you have made since moving into your property, or any improvements undertaken by previous occupants. Improvements could include the installation of double glazing, central heating or the building of an extension.       
                                               
5)     Within 7 days of the Housing Association receiving notification of the valuation, you will be informed of the current market value of your home and the cost of purchasing a further share.
 
6)     You have up to three months from the date of the valuation to complete the purchase. After three months the valuation is no longer valid and, if you decide to continue, a new valuation will be necessary and you will have to pay a further valuation fee.
 
7)     Once you have been notified of the valuation and the purchase price of your further share, and have decided that you wish to proceed, you must notify your Housing Association in writing of your intention to continue your ‘staircasing’ and provide details of your solicitor.
 
8)     In purchasing a further share, as well as the valuation fee you will have to pay:
•           Your solicitor’s fees
•           A valuation fee to the bank or building society should they decide to revalue the property
 
9)     When you purchase the remaining share in your property you will, generally after 3 months, be granted the freehold or 100% leasehold interest in your property, in accordance with the terms of the lease. Whether you can have the freehold will depend on whether you own a house or a flat. Your solicitor will advise you on the terms of the lease. In addition, in some circumstances there may still be a service charge payable.
 
Please note that the staircasing procedures are contained within your Shared Ownership lease and you should contact your solicitor if you have any further queries.