Shared ownership resales - are short leases a problem?

hm1000

Hi folks,

I am looking at buying a shared ownership property. It's an old house, and a re-sale (ie not the normal new-build flat and new lease scheme).

The current lease on the share has only 80 years to run. Is this a problem?



Here's why I ask -

Normally, I wouldn't consider buying a property with such a short lease. But shared ownership leases aren't normal.

For a start, there's no legal right to extend the lease. That can only be done wtih the agreement of the housing association after I've bought the property. The cost of this is unknown. I'm assuming it's not cheap.

But more importantly, I'm told that if I want to sell my share of the property after a few/10/20 etc years, then the housing association has the right to try and find another shared owner. If they find one, then there's no problem. If they can't (eg because no one can get a mortgage on a lease under 80 years) then the housing association is obliged to offer the entire freehold on the open market. When they then sell the property, I am entitled to a sum equivalent to the share on which I hold the lease (irrespective of the length of the lease).

Is that true?! I can't find any advice about this anywhere, but shared ownership schemes have been going since the 1980s when most leases seem to have been granted for about 100 years so this can't be a new problem. And if it is a problem, I think it's important to try and put more information out about it so people know the risks of the schemes.

All suggestions gratefully received.

Thanks

kingstreet

Establish if the HA will extend the lease at completion. Many will.

At eighty years, you will very soon start to have future sale issues, regardless of this being shared ownership. There are fewer lenders lending on shared ownership to start with, never mind adding lease term problems to the mix.

hm1000

Hi kingstreet - thanks for replying. I didn't know that about extending on completion so will ask about that.

My thought about future sales was that there would be problems but that, oddly, those problems would act in my favour (so long as I'm happy to deal with the inevitable delays it would cause). I don't expect ever to own 100%. As I understand it, if I wanted to re-sell then the housing association has eight weeks to find a buyer of its choice. Potential shared owners will need a mortgage, and mortgage lenders will refuse to lend because of the short lease. In that scenario the HA is then obliged to offer the full freehold on the open market. Once it's sold, I'd still get a sum equivalent to my share and regardless of the length of the lease. If the property - which is old - is offered on the open market, I'd expect it to fetch a better price too.

But I fear there is a flaw in my thinking and may have missed something about this...!

carefullycautious

Are you saying that the full freehold can be purchased by you or if it goes to market anyone could buy it and then you would have to negotiate another lease with a private freeholder ?

Never heard of that before, who are the housing association.

hm1000

Hi carefullycautious - I'm saying that if the HA can't find another shared ownership buyer then the full freehold has to be offered to the open market.

This is suggested on various websites (sorry I am too new to post links). It's in clause 5.4.34 of the Homes and Communities agency's standard lease which is available on their website. Also in the Q&A of various HA websites