Housing Association Shared Ownership Sale or Subletting

johndawson19

Hopefully someone can offer some advice on our predicament

2 years ago at the peak of the property market my girlfriend bought a 50% share in a flat in Birmingham thinking that she would own it for a couple of years and move on, obviously the market took a major nosedive soon after she moved in and is now left with the flat being worth considerably less than she paid for it. We are now wanting to settle down and start a family in my house (which I own) but cannot afford to sell her flat as it will mean taking on a large debt. The only option that we can see is to let the property out to a tenant for a couple of years in which time property prices will hopefully pick up somewhere close to 2007 levels and we can afford to sell it for what she paid but this is known sub-letting which is against the terms of her contract.

I'd be interested to hear peoples opinions or advice on our situation, we are not out to make any money from it only to avoid a £10 - £15,000 debt from selling it at todays prices.

Fire_Fox

Have you requested permission to let from the housing association and from the mortgage provider? Without that you can't let the flat. Then you need to account for vacancy (two months a year average), income and capital gains tax, and consider how you would fund the mortgage and rent if you had a tenant in arrears and needed to evict.

I'd run a search on the forums as people wanting to let to avoid crystallising negative equity comes up every few days, as does the issue of permission to let being refused.

Blondetotty

You definately need permission from the Housing Association. I'm shared ownership and we have it written into our lease that we are not allowed to sublet.
Saying that however, one of the upstairs tenants had been trying to sell the share in her property for a considerable length of time with no luck and eventually the HA agreed that because of the current financial climate, lack of buyers and the general state of the housing market, that she could sublet. She managed to sell the property a couple of weeks later....go figure!

poppy10_2

Yet another reason why shared ownership is a scam

tek-monkey

Why is it a scam? If you read the paperwork before signing you knew what you were getting into, if you didn't understand it you shouldn't have signed. Would it still be a scam if prices had doubled and she'd pocketed a shedload of cash? In fact hasn't the fact that she purchased just 50% meant she's protected from 50% of the house price loss? So this scam just saved her 10-15k?

johndawson19

I think tek-monkey is missing the point - the whole point of shared ownership is to help people on lower incomes who can't afford 100% to get onto the property ladder so there has definitely been no money saved.

It is unfortunate in this case the property market nosedived but the fact remains she is stuck with a flat that she cannot afford to sell and is being prevented from sub-letting by the housing association so is essentially trapped there which to me is unfair.

In my opinion shared ownership schemes are not all they are cracked up to be and would advise anyone to avoid them if they possibly can.

brit1234

It just illistrates the extra flawes of shared ownership. As a keyworker I ignore all these properties, they are a scam for you to buy overvalued properties.

If I was you, I would save as much money as you can for a deposit and hope that the HA will let your flat out.

Basic maths suggest house prices are going to fall as well as economic fundamentals. People can't afford to buy on present lending criteria and the FSA has clamped down on the mortgage products that over inflatted properties.

Blondetotty

JohnDawson - As a shared owner myself, I agree entirely. The scheme isn't all its cracked up to be and there are a lot of faults. Despite my screen name I'm not entirely stupid and thought I had done plenty of research. At its best, it does provide a 'start' for new owners but once you're into a scheme its very very difficult to progress further up the property ladder. I think the best you can hope for is to staircase to 100% but it is difficult to move on without staircasing. I'm hoping to get out by purchasing a property outright on the open market with my sister in the future as that seems to be the only way I'll be able to move on. It also depends on the HA - I've got a terrible one and terrible ones do make everything even more painful (for info - Hyde Martlett)

Don't get me wrong, I love my flat, its huge, and it's home and I would never have been able to get something like it on the open market at that time.

My advice is if you're considering shared ownership, read everything you can get your hands on, find a good HA and an even better solicitor to make sure everything you can think of and more is explained in detail. No question is too stupid to ask before committing to the scheme.

Fire_Fox

I don't think Tek-monkey is missing the point at all - if your girlfriend had been able to afford the entire flat instead of 50% she'd be looking at a £20K to £30K loss now. Many leasehold flats don't allow subletting without the permission of the management company, if it's in the deeds or long lease then it's hardly 'unfair'. The housing market crashed in the eighties and nineties with interest rates going up to 12%: anyone who buys their own home is taking a gamble and should plan for different scenarios. Your girlfriend has options - you could move in with her, you could remain living apart and overpay her mortgage, she could sell and accept a loss, she could leave the place empty, she could apply for permission to let.

tek-monkey

johndawson19 wrote: »

I think tek-monkey is missing the point - the whole point of shared ownership is to help people on lower incomes who can't afford 100% to get onto the property ladder so there has definitely been no money saved.

She's saved 50% of the fall in value hasn't she? She got a chance to buy a share of a house, but chose poorly. Or rather her circumstances have dictated a need to move, that her purchasing decision is at odds with.

I know what a SO scheme is, I've gone shared equity myself though. I just made sure I read everything multiple times, worked out possible scenarios and exit strategies, and made my decision based on what I believe are the most likely outcomes. Its not rocket science, its a gamble, just like any purchase. The value doesn't go up or down at different rates depending on how you buy it, the bricks and mortar are the same. Its just how the scheme can financially help you, if at all.

brit1234 wrote: »

It just illistrates the extra flawes of shared ownership. As a keyworker I ignore all these properties, they are a scam for you to buy overvalued properties.

I thought you were a landlord, and these schemes are for first time buyers, so not sure how you think you'd get on one anyway?

EDIT: Finally changed the sig then!

Dan_S_3

Shared Ownershiop schemes are for people who cannot afford to buy a house/apartment outright.

If people are looking to rent them out then they shouldn't have bought a shared ownership place to start with.

Some people do not have the luxury to be able to afford a house on their own so buy shared ownership to LIVE IN.

Its not a scam, its not rocket science.

They are just as easy to sell as normal houses and their will always be someone who cannot afford a property on their own looking to buy.