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► Introduction
The Government introduced Shared Home Ownership schemes to help people who cannot afford to buy a home outright. Through Shared Ownership you buy a share of the property and pay a rent on the remaining share you do not own. Gradually you may buy further shares and eventually own your home outright.
Remember that house prices can go up or down. This means that sometimes you might pay more for buying additional shares or have to sell at a price less than you originally paid.
► What is a Registered Social Landlord?
Registered social landlords are non-profit making organisations who provide and manage homes for rent and sale for people in housing need who cannot afford to rent privately or buy.
A social landlord can be a housing association, a housing society or a non-profit making housing company. Most of these landlords provide housing with the help of public money given by the Housing Corporation or a local authority; in some cases, the social landlord may provide housing using its own money.
► Where does the Housing Corporation fit in all this?
The Housing Corporation was set up by Parliament in 1964. Our job is to fund homes built by registered social landlords from money we get from central government. We also make sure that the money is well spent and provides homes of a good standard for those people with the greatest need for housing.
Social landlords must be registered with the Corporation before we can give them public money. Once registered, social landlords are visited from time to time by our staff to help maintain a good standard of management of their property and finances.
► Who can buy through the Government Shared Home Ownership Schemes?
The scheme is intended for people who cannot afford to buy a suitable home in any other way. They must be in housing need and be unable to afford outright purchase. Priority will normally be given to existing public sector tenants or those on local authority or social landlords’ waiting lists.
Although you have not bought the property outright, you will have the normal rights and responsibilities of a full owner-occupier. You are advised to ask your legal adviser as well as the social landlord if there are terms you do not understand.
► Can I buy a Government Shared Ownership Home with someone else?
Up to four people can become joint owners but all joint applicants must individually and jointly meet the eligibility criteria. Ask your solicitor or licensed conveyancer to advise you.
► What kind of property can I buy through Government Shared Home Ownership Home
Shared ownership homes may be new or renovated flats or houses which are sold by social landlords. Prices vary according to location but are expected to be within the means of those people who cannot afford the prices of properties available for sale in the open market.
► How does Government Shared Home Ownership work?
The scheme allows you to purchase a share of a property from a social landlord, usually a housing association.
The share you purchase is funded by a mortgage which you will need to arrange with a bank or building society.
The remaining share you do not own is rented from the social landlord.
The size of the share to be purchased will depend on your income and savings. Normally applicants buy a 50% share but you may purchase a smaller or larger share (to start with, you can buy as little as 25% or as much as 75%).
The higher the share you purchase the less rent you will have to pay. You will also have to pay a service charge when you buy a flat. Later on, if you wish and can afford to do so, you can buy a further share.
When you purchase through shared ownership, the social landlord will grant you a lease which sets out your rights and responsibilities.
► What does the Shared Ownership lease entitle me to?
Whether you buy a house or flat under shared ownership terms, the social landlord will grant you a lease usually for 99 years. It will entitle you to live in your home as an owner-occupier. It will also entitle you to buy further shares in the property and sets out how you can do this. It also states that you can sell your property.
Other points covered in the lease set out your responsibility for repair and payment of rent and service charge. Although you have not bought the property outright, you will have the normal rights and responsibilities of a full owner-occupier.
► The cost of buying your own home
It is important to give careful thought to the costs and responsibilities of buying your own home. You will need to do some careful calculations to help you decide how much you can afford to spend on buying and running a home.
You should also look carefully at house prices in the area you would like to live in. Prices can vary considerably from one area to the next. You may also want to contact a housing advice centre for guidance and there are a number of books and magazines about buying a home which you may wish to look at.
► What are the initial costs of a shared ownership home?
You will have to pay for:
Survey
You may wish to have your own, independent survey which you must pay for.
Legal fees
You are advised to get a solicitor/licensed conveyancer to help you with buying your share. It is worth asking for an estimate before engaging a legal representative, as fees vary.
Deposit
Stamp duty
This is a form of tax on the transfer of property. You should check with your solicitor/licensed conveyancer whether stamp duty is payable at the time of your purchase. If stamp duty is payable, you can either pay duty on your share or on the full value of the property. Your solicitor/licensed conveyancer should be able to advise you on which option to take.
Mortgage indemnity insurance (if required)
Removal costs
You will need to consider the costs of removal. These can be quite large if you are moving several miles from the area in which you currently live.
What are the running costs?
Mortgage repayments
You may need to borrow all or part of the cost of your share from a building society or bank. You will normally get tax relief, currently on the interest you pay on the first £30,000 of a mortgage. Your building society or bank will arrange this and calculate the monthly repayments accordingly. Repayments will vary as interest rates change.
Rent
The monthly rent will be a proportion of the total rent the property would fetch, calculated by the social landlord based on the proportion of the share you do not own. For example, if you own a 50% share you would pay 50% of the total rent.
This rent will take into account the repayments you make as an owner-occupier, and your share of any insurance, maintenance and repairs. It will therefore be less than the normal rent you would pay if you were renting the whole property. The rent will usually be reviewed every year.
Council tax
You will have to pay the council tax to the local authority.
Repairs, insurance and service charges
If your home is a house, you will be responsible for all repairs and redecoration both internally and externally. The social landlord will insure the structure of your home and you will have to pay a small management charge to cover this and to help meet the costs of rent collection.
If your home is a flat, you will be responsible for all repairs and redecoration internally. The social landlord will undertake to keep the building in which your flat is situated in good structural repair, to keep the structure insured and to keep any common parts, such as the staircase and corridors, decorated, cleaned and lighted. You will have to pay a share of those costs. This is called a service charge.
The social landlord must tell you how the service charge is spent and you will be consulted before any major repair or maintenance work is put in hand. Any damage or defect should be reported to the social landlord immediately.
Heating and lighting bills and water rates
You are of course responsible for your own bills.
Fittings and furniture
You are responsible for supplying your own fittings and furniture and for the cost of insurance for the contents of your home.
► A step by step guide to buying through Public Shared Home Ownership
A step-by-step guide to buying through the scheme
How do I buy a shared ownership home?
Step 1 — applying to buy
The social landlord sends you details of the scheme and an application form.
Step 2 — the social landlord’s response
If they consider you a suitable applicant, they will usually ask to meet you to talk over your application.
If successful you will be invited to view the property and told the purchase price. The price is usually based on an independent qualified valuer’s valuation.
If you want to go ahead and buy, you agree the size of share you wish to buy and then arrange your own mortgage.
Step 3 — arranging a mortgage
If you already save with a building society/bank, approach them first.
If your building society/bank would like to see a copy of the lease, ask the social landlord to send them one.
In some cases the social landlord may be able to help you arrange a mortgage. They should certainly be able to recommend local building societies or banks which they know to be helpful.
Step 4 — purchasing the home
Once the building society/bank has offered you a mortgage, let the social landlord have the name and address of your solicitor/licensed conveyancer.
The social landlord then sends a copy of the draft lease to your solicitor/licensed conveyancer, who advises you on what it says, approves it on your behalf, makes a local authority search, and investigates title to the property.
The social landlord will advise you of the amount of rent and service charge you will have to pay on the remaining unsold share.
The purchase can then be formally completed and the house or flat will be yours.
Step 5 — buying further shares in my home
If you want to buy a further share, you will first need to tell the social landlord in writing the share you wish to purchase. The detailed procedure is contained in your lease. Your landlord will get the property valued when it receives your letter and will let you know the cost of the further share. You will have to pay the valuer’s fee. You should be given three months to arrange a mortgage and complete the purchase of the further share.
► Additional information for public scheme shared owners
► Can I make improvements or alterations to a Government Shared Ownership Home?
If you wish to improve your home or make structural alterations to it, you must request the social landlord’s written agreement to what you want to do.
► What if I fall behind with my mortgage repayments?
The mortgage contract is between you and your building society/bank. If you begin to have financial problems which may mean you cannot pay your mortgage, you should let them know as soon as possible. If you do fall behind on your payments and cannot agree on a solution with your building society/bank, there is a risk that they will take possession of your home and sell it. You would be entitled to your share of the money received, after all your debts have been paid.
► What if I fall behind on my rent or service charge?
Under the lease you will be obliged to pay the rent and service charge. Again, if you find you have financial problems, get in touch with the social landlord to see if they can advise you.
► What do I do when I want to sell?
You may sell at any time but you must tell the social landlord in writing that you want to move. You can either sell the part that you own or you can buy the remaining share and then sell the property outright. You will benefit from any increase in the value of the property according to the share you own, but you should be aware you may be affected by any fall in values.
Unless you own the property outright, clauses in the lease may enable the social landlord to nominate prospective buyers and to restrict the sale price to an independent valuer’s valuation. The reason for this is that they wish the property to remain available to the people for whom shared ownership is intended. Ask your social landlord whether either of these or any similar clauses are included in your lease.
In some rural areas the social landlord may restrict your ability to buy further shares in your home or reserve the right to buy back the property (at full market value). These arrangements are limited to rural areas and are intended to provide a means of keeping low cost housing for rural communities. The social landlord will tell you if the home you want to buy is in an area where these restrictions apply.
The web sites of each of the social landlords provide details of the shared ownership properties they offer and eligibility criteria.
An example is INplace, the trading name of Hyde Housing Association, a social landlord offering their own properties in Kent, Surrey, Hampshire, East and West Sussex and London, ranging from small blocks of flats to large family homes. Full details on their web site http://www.inplace.co.uk/shared-ownership.asp
On the page “Am I eligible for shared ownership” they say;
It is important to note, that the majority of INplace shared ownership schemes are prioritised to people living in the same borough as the development. Greater priority is given to purchasers who will be ending their tenancy of a council owned or housing association property when they move into their new shared ownership home.
To qualify for shared ownership products you must be in permanent employment and be in a position to raise a mortgage for the part you are buying. The amount you must be earning will vary depending on property prices where you want to live. However, we will be unable to help you if we feel that you earn sufficient to enable you to purchase a home outright without the assistance of our shared ownership scheme.
You must have a good credit history with no record of County Court Judgements, loan defaults or bankruptcy. We financially appraise and credit check all applicants for shared ownership.
You must be a first time buyer, although there are some exceptions to this. For example we can consider you if you have previously owned a property with a partner but where that relationship has broken down.
Government Shared Ownership schemes through RSL or Housing Associations is Government funded, and therefore priority is given to local authority and housing association tenants releasing a rented home.
If you meet their eligibility criteria homes will be allocated to applicants in the following order of priority:-
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Nomination from the local authority.
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Council & Housing Association tenants who, by purchasing a home, would vacate a rented home and who live in the borough in which the scheme is located.
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On local authority housing needs register within the borough.
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Council & Housing Association tenants who by purchasing a home, would vacate a rented home, but live outside the borough.
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Existing shared owners whose families have grown but cannot afford to buy outright (only resale properties).
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Key workers i.e. doctors, nurses, health workers, teachers, fire service, police or ambulance service.
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Private tenants or those living with family and friends.
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Applicants who need to move to another area to take up employment.
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The DirectGov website, link click here, has a section on shared ownership and the most relevant comment is;
Bear in mind that demand for shared ownership houses is high and that there are relatively few houses available. In some areas there may be none. Even if you are accepted as a suitable applicant, you may have to wait some time before a property becomes available.
About Public Shared Ownership Schemes
The Joint Equity Scheme is for first-time buyers, home owners and property investors. This site is developed and maintained by Joint Equity ltd. ©Joint Equity (2006)
Joint Equity Ltd works with Mortgage Beaters Ltd to provide case studies & Illustrations to prospective Owner-Partners & Investor-Partners. Joint Equity Ltd does not carry out any regulated activities and so is not regulated by the FSA (Financial Services Authority). Joint Equity Ltd are introducer appointed representatives of Mortgage Beaters Ltd, which are authorised and regulated by the Financial Services Authority.
The content of this website is accurate to the best of our knowledge and for information only. We do not provide financial advice.
► Public ‘shared ownership’ Schemes
This page tells you about the Government funded Shared Home Ownership schemes usually offered through Registered Social Landlords (RSLs) and financed by the Housing Corporation.
Source; http://www.housingcorp.gov.uk/yourhome/shared.htm
Please remember that many of the conditions RSLs apply do not apply to Joint Equity