Shared property ownership

T: 0118 359 3125 E: [email protected]: setfords.co.uk


Shared ownership – Whose home is it anyway?

T: 0118 359 3125 E: [email protected]

Setfords Legal Guides For Individuals


Shared ownership – Whose home is it anyway?Shared ownership properties have become increasingly popular in recent years, particularly as a way for first time buyers to get onto the property ladder. However they are a bit of a tricky concept if it is not one you are familiar with. In essence the buyer of a property does not purchase a 100% interest but instead a simple percentage share.

ExampleA flat valued at £200,000

• The buyers share when purchased from the original developer is 25%, being £50,000.• The original developer retains the balancing share of 75%.• After completion the buyer owns 25% of the property and pays rent to the freeholder on the remaining

75% (either the original developer or the landlord the development has been transferred to - often a housing association).

In addition shared ownership properties are likely to be leasehold as in the case of flats, so any service charges payable to the management company will be payable by the buyer, as the person in occupation.

This method of ownership comes with advantages and pitfalls.

Advantages

• You are able to get on to the property ladder without needing a large cash deposit.• Many shared ownership leases are designed to provide houses to those with lower incomes and

therefore contain strict provisions about rent reviews (e.g. they must not exceed the rate of inflation).• Shared ownership properties are acceptable to a number of high street lenders so in the example above

it is possible to purchase the 25% share with a £5,000 deposit and the benefit of a £45,000 mortgage.• Often the lease on a shared ownership property will enable the owner of the initial share to “staircase”

his or her interest in the property.• You will still benefit from any increase in value of the property - for example using the example above,

if the market value of the property is £220,000 when you sell your share on, your sale price will be £55,000.

Drawbacks

• Many shared ownership properties prohibit subletting as the purpose of these properties is to provide homes and not to assist private landlords in making a profit.

• You will be limited in your choice of mortgage.• Living in a shared ownership property can be as expensive as purchasing a fully owned property but

without receiving the full benefit of any increase in value.



• Some leases of shared ownership properties may require you to sell the property only to a person on the housing association’s waiting list and be more expensive to sell on the open market if you choose not to go through the housing association. However, waiting lists are usually full or close to so there is unlikely to be a shortage of buyers.

How to find a shared ownership property

Good places to start are local housing associations and new developments where often the inclusion of shared ownership properties are a condition of the planning consent being granted. Also on the internet for specialist estate agents who deal solely in shared ownership properties.

Advice

It is sensible to instruct a lawyer who has experience of dealing with shared ownership properties because the legal structure associated with this kind of tranaction is relatively complex.

Likewise if using an IFA or mortgage broker, ensure that they have sufficient understanding of the shared ownership property market to advise you on your choice of mortgage.

If you are looking at buying a shared ownership property and would like to talk to someone to find out what more is involved or perhaps selling one please contact:

Sarah Gillbe T: 0118 359 3125E: [email protected]

Sarah is based in our Reading office but acts for clients across England and Wales.

This content is for information purposes only and does not constitute legal advice. For detailed legal advice please contact us and we will be happy to assist. No liability can be accepted in relation to any reliance on the content of this guide. Copyright in this publication

belongs to Setfords Solicitors. Extracts may not be copied without our express permission. Setfords Solicitors is a trading name of Meaby and Co Solicitors LLP. Our registered number is OC322672. Our registered office address is 2 Camberwell Church St

Camberwell Green London SE5 8QY. We are regulated by the Solicitors Regulation Authority SRA number 447880

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