Our shared ownership trap

mykybaby

Hi,

In 2008, prior to the market crash and at a point in time where we were both far too naive and trusting, my wife and I purchased a 25% share in a 2 bed shared ownership flat at £130,000 (so £32,500 for our part, paying rent on the remainder). The housing association we went with recommended a solicitors that would be familiar with the SO lease, all good.

Eventually we had two kids (currently sharing a box room) and my workplace relocated a little further away, it became time to move. We put the flat on the market nearly 2 years ago, over time lowered the price to £27,500, and have had just 3 viewings (none so far in 2013). I decided to look into other options such as buying out the rest of the property and selling it on without the 'shared ownership' tag affecting people’s interest.

This is when I discovered the additional bit of nastiness in the lease. The lease states that we are able to purchase further shares at the Market Value. However, I had not seen that the term 'Market Value' had been redefined earlier in the lease to mean 'the higher of the Initial Market Value and the [current market value as determined by an independent Valuer]'. This was not highlighted to me by the housing association or the solicitors we used, and I was not legally eagle eyed enough to pick this up myself. Further, the solicitor’s “report before purchase” incorrectly stated that we could buy further shares at the market value at the prevailing time.

Even lowering the price of our own share further only lowers that 25% for any potential buyer. They would also need to staircase at the price we originally bought the flat for, which further lowers the value of our property in my mind. I understand that the laws have changed regarding SO leases and that anyone buying one of the other empty SO flats since 2010 has been given a lease without this restriction on stair-casing.

It seems that this SO property is unlikely to sell, particularly if any buyer spots this onerous lease, and we are unable to buy out the remainder of our property even though we could get hold of the deposit for 10% of the remainder, as doing so would quadruple our negative equity (and I cannot imagine a mortgage lender would finance such a move). It looks like we are trapped in this situation.

I've looked into renting out the flat as an option, as the HA seems to allow that although only for a year. The mortgage is about £211 a month, the rent part is currently at ~£310 and goes up at RPI +1% in April, and there's a service charge of £80 as well. All in all, the margins are not good with a loss of ~£150 each month if its occupied - we could afford this without too much trouble, but it being empty for even a month would cause us a problem.

I spoke to the lease-hold advisory service, who told me they couldn't do anything about this, and that I should speak to the HCA. I've spoken to the HCA, who informed me that although the lease is not in line with their model, our HA is privately funded and so they cannot do anything about it, and that I should speak to the leasehold advisory service(!). I have spoken to a solicitor briefly who told me that I might be able to get some sort of compensation out of the legal ombudsman over the original misinformation from the solicitor, though I’m not confident that it won’t be dismissed as our own fault for missing the problem on our read-through of the lease.

This is where we currently are. I will probably look into the legal ombudsman route next, though I'm not sure how that will go. After that, I'm at a loss. With £4-5k a year of rent+service charge, there’s likely to be a point where handing the keys back (if that’s even possible) would have been as good a move as continuing to drop the price and waiting for it to sell. It seems to me that it isn't right for us to get caught out in this way, that someone should be able to offer us some protection against this situation, but so far I haven't found that to be the case.

Any advice is welcome.

Mike

chanz4

Hi didnt the orbit information point this out?

Selling your Shared Ownership home

If you are a shared owner it is easy for you to move on by selling the share you own. You can do this by assigning your shared ownership lease to another party. Assignment is the term used to describe the transfer of the lease to another person(s).
You must tell your Housing Association if you wish to sell before you look for a purchaser. This is because they may have the right to nominate a person to buy your share. You will also need to obtain an open market valuation of your property so that your Housing Association may agree the maximum sale price for your share. Your Housing Association will have a panel of surveyors and can usually obtain this on your behalf, you will be responsible for the cost of the valuation. This will normally cost around £150. Once the sale price has been agreed your Housing Association can start marketing your share for sale in order that they may nominate a purchaser. Your property will be marketed on the Orbit HomeBuy Agents website and also promoted in the regular Orbit HomeBuy Agents Property Newsletter in order to help you find a purchaser. You will have to instruct a solicitor to act in the sale of the property for you once you have found a purchaser. Solicitors fees would normally be around £600. Your Housing Association will be able to give you more information on selling your home.
Buying Extra Shares in Your Home
Buying a Shared Ownership home is a great way of getting your foot on the home ownership ladder as at anytime you can buy more shares in your home. This is called staircasing. You can usually purchase further shares in stages of 10% or 25% depending what is says in your lease. If you wish to staircase and purchase additional shares you will need to inform your Housing Association. You will also need to obtain an open market valuation of your property so that your Housing Association can agree with you how much you will pay for the additional shares. You will be responsible for the cost of the valuation and will also have to instruct a solicitor to act for you in the purchase of the additional shares. You would normally be looking at around £150 for the valuation and £300 for solicitors fees. In addition your Housing Association may charge an administration fee for the work involved in dealing with your staircasing. They can give you more information on this and the process for purchasing extra shares in your home.

££sc££

as in the current cost of shares for staircasing are the 2008 value? :mad:

silvercar

Further, the solicitor’s “report before purchase” incorrectly stated that we could buy further shares at the market value at the prevailing time.

You pay your solicitor to advise you. If they have given you wrong information they are liable.

DuvetHound

I am so sorry to read about you plight Mike. My Dad is in a similar situation. I will read your thread with interest, but I hope you find a solution for you and your family.:(

ndf9876

I can offer you a lot of sympathy, because my wife and I ended up in exactly the same situation - but I can offer very little in the way of advice.

We got wise to the shared ownership scam about 18 months after moving in, and dumped the flat as fast as we could - wiping out all our savings in the process (due to the market crash, we bought at the top and sold at the bottom in effect).

Having said that, and I know each HA is different, in our case we were not permitted to sell the property ourselves as we only held a 33% share; we had to pay the HA a fee and let them do it. They had a great long list of folks waiting for SO properties so although we sold at a terrible loss, and had no say in the sale price, we DID get a sale. Perhaps your HA could assist in the sale rather than just selling out on the open market?

I wish you the very best of luck with your situation.

mykybaby

Hi didnt the orbit information point this out?

I think orbit must be a separate SO entity to our housing association. I'm being careful not to list the name of ours as I'm not sure about the legal position that might put me in moving forward.

as in the current cost of shares for staircasing are the 2008 value?

Yes, exactly. Seems really one sided to me, and sadly we're on the wrong side.

You pay your solicitor to advise you. If they have given you wrong information they are liable.

This is one avenue I hope bears some fruit. I don't think its going to get us out of the flat though.

What I would really love to do is work out how it is best to remove my family from this property, at least the rental commitment, in the event that this flat is unsellable. Morally I'm slightly uncomfortable selling this situation on to someone else, I'm not particularly against the idea of negative equity, I am very much adverse to giving this thieving HA any more money than I can feasibly get away with (though I'm not looking to upset the mortgage lender in the process). It's really been quite a dark cloud over our heads since we bought the place

aileth

Really feel for you. A lot of it has to do with the HA. Our shared ownership HA is actually very good and staircasing is very straightforward, as is selling. You get it valued by -your- surveyor and -you- put it on the market with any estate agent you like. The only thing that needs to be done by the HA is they just do the checks on an interested party and they aren't particularly restrictive. The only clause to buying from when I bought it was we couldn't earn more than £60,000 combined or have over £20,000 in savings.

Jamesdaniel

You should have read the lease documents properly. Now, if you put that house on rent then also you are in loss only. My suggestion will be to wait for sometime, let the market prices get a bit higher and then sell the house.

richardw

mykybaby wrote: »

.....The lease states that we are able to purchase further shares at the Market Value. However, I had not seen that the term 'Market Value' had been redefined earlier in the lease to mean 'the higher of the Initial Market Value and the [current market value as determined by an independent Valuer]'. This was not highlighted to me by the housing association or the solicitors we used, and I was not legally eagle eyed enough to pick this up myself. Further, the solicitor’s “report before purchase” incorrectly stated that we could buy further shares at the market value at the prevailing time......

It appears reasonable that a solicitor should've highlighted this clearly to you and made sure that you understood fully the implications.

Does the solicitor appear on http://solicitorsfromhell.net ?

mykybaby

Does the solicitor appear on http /solicitorsfromhell.net?

No, but they probably should be.

I've started the ball rolling with the legal ombudsman but its sounds a little like the most they will be able to do will be a slap on the wrists and maybe some compensation, but not enough to make a difference to the situation we're in.

The LO did recommend that we might want to talk to a proper solicitor about the situation to tackle it properly. I don't even know what type of solicitor we would be talking about here, but if anyone can offer some advice or even recommend one (preferably in the Leeds area) I would appreciate it?