What is Shared Ownership? Explained by SAM Conveyancing
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What is Shared Ownership

11 min read
Shared ownership explained: shared ownership schemes are aimed at enabling people with lower income earners to purchase a property with a smaller deposit by sharing the ownership with a housing association. 

This article explains everything you need to know about buying a shared ownership property including (click on heading link to move to the section):

Click for information on Shared Ownership Stamp Duty

Click for information on Staircasing Shared Ownership

What Means Shared Ownership?

You buy an initial share of your property, from 25% to 75% of the full property value, and the housing association keeps ownership of the rest. For the part that you don't own, you pay a monthly rent to the housing association. 

The property is either a new build or an existing shared ownership property being sold as a 'Re-sale' through the Housing Association.

You buy your initial share via a deposit and a shared ownership mortgage (see below for more information on what type of mortgage you need to get).

Once you own you first share, you can look to buy a greater share over a period of time - this is called staircasing (read more about how to staircase here)

If you were to buy a 25% share of a property worth £180,000 (£45,000) with a £5,000 deposit, it would require you getting a mortgage for the £40,000

The balance of the £135,000 is owned by the Housing Association and you pay monthly rent on this (normally at a rate of 3% per annum, so in this example the rent for the year is £4,050 which equates to £337 per month).

Advantages of Shared Ownership

Disadvantages of Shared Ownership

1  You get to own something 
even though you're paying rent     

1  Conveyancing is more expensive and takes longer than normal

1  Buy with a much smaller deposit 
 - just 10% of your initial premium     

1  Added risk of eviction as a tenant as well as repossession

1  You can staircase to own more
and pay less rent     

1  Staircasing is expensive

1  Much smaller mortgage required     

1  May be more difficult to sell than normal and you'll need to buy a shared ownership valuation

How do you apply for shared ownership?

It takes 3 easy steps!

  • 1
    Check you are eligible

You could buy a home through Help to Buy: Shared Ownership in England if:

your household earns £80,000 a year or less outside London, or your household earns £90,000 a year or less in London (for shared ownership London properties - you can find many a shared ownership calculator online to see if your combined household income stays within the required amount)
you are a first-time buyer, you used to own a home but can’t afford to buy one now or are an existing shared owner looking to move.

What is a shared ownership scheme reserved for particular needs?

There are special shared ownership schemes for:

People with disabilities - which is called Home Ownership for People with Long-Term Disabilities (HOLD). You can buy any property for sale on a shared ownership basis.

Older people - which is called Older People's Shared Ownership. It is for people aged 55 or over and works in the same way as the general shared ownership except you can only ever own a maximum of 75% of your property.

  • 2
    Register with your local Help to Buy agent

  • 3
    Start your property search
Most online property portals, including Rightmove and Zoopla, have their own shared ownership section. You'll be able to search by:

  • re-sale or new build;
  • the rent you have to pay;
  • property price; and
  • location.

What is the process from start to finish?

Get your offer accepted

The process depends on whether you get your offer accepted on a re-sale or a new build.

New build - If you are buying a new build shared ownership property then the process is more stressful, costly and time critical. 

You'll normally have to pay a reservation deposit ranging from £250 to £2,000, the Land Registry fee doubles because you are buying a new build and you'll need to exchange within 28 days (or sooner as you are buying from developers). 

You are often buying a property off plan that hasn't been built so make you read this to find out exactly what you need to do when buying a new build

Re-Sale - The process is less time sensitive because you don't have to achieve a 28 day exchange and are buying a property that has already been registered. 

You'll need to do a HomeBuyer Survey to check if the property has any wear and tear since the previous owners have moved in.

Get your mortgage in principle

Shared Ownership Mortgages are specific mortgage products which are different to standard mortgages. Mortgage interest rates and mortgage fees can be higher than those offered on straightforward mortgages.

Before you see your mortgage adviser make sure you have the following ready for your meeting:

  • Proof of ID - bring photo ID and proof of address
  • Pay slips - last 6 months
  • Bank statement showing the deposit saved

If you don't get paid a regular salary because you run your own business read - How to Get a Mortgage for Self Employed

The mortgage process has 3 stages; mortgage in principle, mortgage valuation and mortgage offer - read more about how to get a mortgage here.

Click to book a Free Mortgage Consultation or call 0333 344 3234 (local call charges apply)

Instruct your conveyancing solicitor

Shared ownership conveyancing is more complex than standard conveyancing because your solicitor has to review the complex lease between you and the Housing Association along with reviewing your obligations to the freeholder. 

Given also that you are part renting and part buying and will have the option to buy an increasing share in your property over time, the contracts involved are far more complicated. 

Contracts may also contain restrictive covenants which might, for example, prohibit the keeping of pets and so these must be inspected very carefully by your solicitor.

Read our FAQS about Shared Ownership

What's the procedure regarding second applicants?

All persons aged 18 or over who will be living at the property must complete the 'second applicant' section, even if they will not be named on the mortgage/property deeds, unless they are the applicant’s child/children. 

This is so that the housing association involved can assess eligibility ensuring that the total household income does not exceed £80,000 per year (outside London, £90,000 in London).

How long does it take to complete a shared ownership purchase?

On a new build the exchange of contracts takes place within 28 days or less, however completion could be months ahead from that.

How do you buy more shares?

Once you've taken up ownership, normally after 2 years at most you can buy larger shares in your property from the housing association and pay less rent on the remaining share. This is called 'Staircasing'.

Can you acquire the freehold of your shared ownership property?

Depending on the individual housing association's terms and the particular shared ownership scheme you are involved with, you might be able to buy the freehold of your shared ownership property after you've staircased fully (to 100%).

Please note the following however:
  • Even if you can buy the freehold, this is only a possibility if your shared ownership property is a house - you won't ever be able to buy the freehold of a shared ownership apartment.
  • Not every housing association will offer you this option.
  • With certain schemes, most notably the Older Persons Shared Ownership (OPSO) scheme for example, you won't be able to staircase fully to 100% (with OPSO, the maximum you can staircase is to 75%), so buying the freehold isn't an option.

How do you sell a shared ownership property?

The Housing Association most often has the right of first refusal to buy it back from you and they retain this right for a certain period of time, depending on the individual housing association, after which you have neither restriction regarding whom you can sell to (assuming they meet the shared ownership eligibility criteria) nor how you choose to sell it (via high street estate agent or online etc.). 

This right of first refusal can sometimes even apply if you have staircased up to 100%. The process starts with you having to buy a shared ownership current market valuation.

Shared Ownership Valuations Expire

The valuation only lasts for 3 months. If you don't complete the conveyancing of your shared ownership property in this time frame you'll have to ask the housing association if it's still happy to proceed using the out-of-date valuation. 

The housing association has the right to require you to get a fresh valuation at your own cost. This is where having an experienced shared ownership solicitor is of vital importance - they are more likely to have completed your conveyancing within the 3 month period because they'll know where all the pinch points are.

Which housing associations do we work with?

We work with Housing Associations up and down the country, including A2 Dominion, Aragon, Ebony Sistren, Catalyst Housing Group, Hanover, Genesis Housing Group, Windsor, The Guiness Trust and many more - click for a List of Housing Associations in London (and elsewhere)

Call 0333 344 3234 and speak to one of our Shared Ownership Specialists.

Why does it cost more in legal fees to buy a shared ownership property?

Normally, if you're buying a home, your solicitor normally liaises with the otherside solicitor, the estate agent and your mortgage lender.  With shared ownership, they'll have to communicate with a housing association, its managing agents and their solicitors and there's a more complex legal framework.

An experienced shared ownership conveyancing solicitor will know how to conduct these arrangements efficiently while representing your best interests.

Housing association leases can be very complex
You agree a lease contract with a housing association when you become a shared owner. This can be very involved and might include responsibilities and restrictions you have to agree to, depending on which housing association you are dealing with.

The option to buy an increasing share of your property over time - is a common facet of most shared ownership leases. 

You need an experienced shared ownership solicitor to inspect clauses in a leasehold contract relating to staircasing very carefully to ensure that no mistakes are made and to explain the process particular to your housing association in a way that you can fully understand. 

There may, for example, be room for negotiation in the contract, but you need a knowledgeable shared ownership solicitor to spot this and to help you get the best arrangement you can. You should also bear in mind that you'll always need to get a Staircasing Valuation at the start of the staircasing process .

Chasing up...and more chasing up
Housing associations frequently take weeks longer than a normal residential seller to provide you and your conveyancing solicitor with necessary information. This particularly concerns the association's pre-assignment pack or management pack

This pack contains diverse and necessary information including for example the current balance of the service charge account connected to your property, details of buildings insurance and details of any unauthorised alterations or breaches of the lease.

The time taken to assemble the various parts of this pack and to check that certain documents therein have been correctly updated can stretch but an experienced shared ownership conveyancing solicitor will be able to keep this to a minimum. 

The solicitor will have to work that much harder if there is a managing agent involved in the process because of the necessary extra liaisons required.

Deadlines and the cost of not making them
A shared ownership valuation expires after 3 months, meaning that your solicitor must get you to completion within this time frame, otherwise you will have to pay out for an additional valuation.

An experienced shared ownership conveyancing solicitor will have extensive knowledge of housing associations' deadlines for certain procedures and will timetable their work correctly.

It is therefore highly advisable to pay the little extra for experience when it comes to this kind of conveyancing. If your fees aren't fixed and you don't get an experienced practitioner, delays and mistakes can end up making your choice of a less experienced solicitor a very false economy.

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