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A Practical Guide to Shared Ownership Schemes

A Shared Ownership scheme can be a useful way to get onto the property ladder. However, there are many factors to consider, along with some advantages and disadvantages. Our practical guide to Shared Ownership schemes explains how this type of initiative works.


A Practical Guide to Shared Ownership Schemes

What is a Shared Ownership scheme?

Shared Ownership allows you to purchase a share of a property and you then pay rent on the remaining share. The scheme ‘provider’ is usually a property company, housing association or the local council. You would pay rent and other fees to this entity, such as service charges for maintenance.

 

Also known as a ‘part-rent, part-buy’ scheme, in England the average share is usually around 25%. However, this can vary depending on the scheme and location, and in some cases, can be as high as 75%. In many cases, the monthly rent alongside lower mortgage repayments can be lower than the average rental property.

 

You would still pay a 5% or 10% minimum deposit, but this would be in proportion to the shares you are buying. Therefore, if you bought a 50% share of a house worth £200,000 requiring a 10% deposit, you would just pay £10,000. Also, depending on the property’s value and your specific share, you might not have to pay Stamp Duty on the whole value.

 

As a type of long-term lease, Shared Ownership usually offers the option to buy the remaining shares at some stage. This can be achieved through ‘staircasing’, where people buy an increasing number of shares until they own the property outright.

 

When it comes to making home improvements, there might be restrictions in place for a Shared Ownership property. A level of decorating is allowed, but you would need the scheme provider’s permission for any structural alterations.

 

Shared Ownership schemes are not a new initiative and have been around since the 1980s. For first-time buyers on a low income, it can be a cost-effective way for them to own their own home. This type of scheme is usually available either for a new build property or an existing home through resale.


What happens when you want to sell a Shared Ownership property?


Similar to any other homeowner, the buyer will still benefit from any increase in the property's value, despite only owning a share of the property. Even if a buyer decides not to increase their share of the property, they can still sell their home at a later date.


  • 100% ownership – once you have full ownership, you would no longer be paying rent to the scheme provider. Therefore, you can sell your property in the same way as any other homeowner, for example, through an estate agent.

  • Part-owned – if you only part-own the property, then you must inform the scheme provider. They will try to find a buyer for your share within what’s known as the ‘nomination period’. Depending on the lease terms, this could be a timespan of either 4, 8 or 12 weeks, where they are required to find a buyer. If they cannot find a buyer, you would then be able to sell your share on the open market.


There are rare occasions when a scheme provider might be willing to buy back your share, but this is the exception rather than the norm. You would need an up-to-date valuation of your home, as well as factoring in any selling costs. In some cases, the scheme provider might charge you a fee for selling your home.


Check Shared Ownership terms and conditions


To conclude, there are advantages and disadvantages to buying a Shared Ownership property. However, for the right person or family, it can be a good way to get onto the property ladder. Always use an experienced property solicitor to check the terms and conditions of the specific Shared Ownership scheme before you commit to a purchase.

 

Salusbury Harding & Barlow will help you navigate the complexities of buying and selling a Shared Ownership property. We will scrutinise the lease terms on your behalf, so you’re aware of the rent, service charges, and any clauses. Our team are here to help you make an informed decision when it comes to buying your new shared home.

 

For advice on a Shared Ownership property or scheme, get in touch or email: iht@shbsolicitors.co.uk to arrange a face-to-face or telephone appointment.

 

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