Shared Ownership Purchase - Advice Please

IKE25

Hi,

I have in principle agreed to purchase a flat in Swindon on a 50% shared ownership basis. Flat is in a great location, spacious for my needs and although the cost of the flat is a bit overpriced in my opinion, the monthly mortgage/rent/charges/bills were easily affordable.

However, today I have received a letter from my solicitor outlining the key terms of my lease agreement. It states: -

- Please note you can only use the Property as your own main residence, you cannot let it. This applies even if you staircase and own 100% of the property.

and

- If you choose to sell your share, you must inform, XXX. XXX will have the right to take back your share in the Property or nominate a buyer within 8 weeks of your notice. Please note this still applies even if you own 100% of the property.

I was not made aware of this when I handed over £500 to the sales team, £200 to mortgage advisor, £199 to mortgage provider and I've already paid £300 to the solicitor.

I fully appreciate they need to protect themselves from exploitive types who are in it for commerical gain. However, I am worried that as this applies to 100% ownership I have no flexibility if I want to move due to having a family or job relocation.

The asking price of the 2 bed flat is £136,500 and (in my opinion) it's highly unlikely that I would get this price if I chose to sell on say in 3-5 years.

Really gutted about this but I don't want to end up trapped. Am I best to cut my losses and cancel?

Also, should I have been aware of this sub let clause or do I have grounds to complain that I wasn't told about this by the sales team?

Thanks

Darren1977

You'll be fine, you officially can't rent it out but I know plenty of people that do who have shared ownership.

You can guarantee that the company will not be purchasing the flat back from you. However, they should have notified you of all of your concerns beforehand.

gazfocus

IKE25 wrote: »

- If you choose to sell your share, you must inform, XXX. XXX will have the right to take back your share in the Property or nominate a buyer within 8 weeks of your notice. Please note this still applies even if you own 100% of the property.

We're in the process of buying a shared ownership property (although a resale rather than a new build) and this sort of clause is pretty standard. Basically, all it means is that XXX have the right to find a buyer before you sell it on the open market, so it will just be as if XXX are the estate agents.

Regarding the issue to do with letting, as it's a flat, this is likely to be due to the flat being Leasehold as with majority of flats, you would need permission from the Freeholder to let the flat. You would also need permission from your mortgage lender.

Both clauses sound pretty standard to me so wouldn't cause me any great concern, but it's entirely upto you what you decide to do and whether or not you are buying to live in or with the intention of letting it out.

IKE25

Thanks both. They have a three year buy back guarantee - but no doubt the terms of this are in their favour.

I have no intention of sub-letting. I just want flexibility as due to only being 29 my circumstances may change. The sub let would only be an option if I was unable to sell!

gazfocus

IKE25 wrote: »

Thanks both. They have a three year buy back guarantee - but no doubt the terms of this are in their favour.

I have no intention of sub-letting. I just want flexibility as due to only being 29 my circumstances may change. The sub let would only be an option if I was unable to sell!

Hopefully to give you peace of mind...the lease for our shared ownership property says that we can't let the house, however, our sellers had the property up to let as well as for sale (with the permission of the housing association).

brit1234

Darren1977 wrote: »

You'll be fine, you officially can't rent it out but I know plenty of people that do who have shared ownership.

Personally I wouldn't follow that advice, both the banks and HRMC are increasingly targeting this. You won't be able to get consent to let/buy to let mortgage and if you get caught by the mortgage provider there can be some serious ramifcations meaning you could be black listed from mortgage products. Also if something goes wrong on a insurance basis you could have big big bills as you won't be covered.

Personally speaking I wouldn't touch shared ownership with a barge pole. I have many friends who have suffered through the schemes many restriction conditions and a few who have lost a fair bit of money as they are over priced. The scheme clearly is in favour of the house builder and housing association. Remember the rents and service charges go up by RPI not the lower CPI which wages tend to follow if you are lucky at this time.

If you are going for the scheme it may be better going for a 25% share rather than 50% share and paying the mortgage down quicker on the 25% share thus leave 75% risk of price falls with the housing association and giving you more equity.

Good luck