Shared ownership staircasing - To do or not to do?

lmh2000

Hi, i'm looking for some general advice/opinion on our shared ownership situation

I've started the process of staircasing to 100% ownership of our property but am now having doubts as to whether it is a sensible thing to do or not.

Our situation -

We purchased 50% of our shared ownership property (2 bed semi) in 2013 for £125,000. Now that our 3 year fixed deal is due to expire we explored the possibility of staircasing to full 100% ownership and acquiring the freehold.
We have had the property valued and have our mortgage offer for the full purchase price (now valued at £305,000) and both solicitors have been engaged but it seems that i have been a little naive in my understanding of what becoming a freeholder means and the on-going relationship we will have with the HA. I assumed that once we fully staircased our leasehold contract could effectively be ripped up but it seems that we will still have to abide by the covenants as written in the original contract.

Most of the covenants seem relatively standard and i am happy to accept them (maintain the upkeep, allow access etc) but there are some that have made me question whether we are doing the right thing with staircasing to 100% based on when we come to sell (seek permission for pets, seek permission for any external/internal alterations etc)

When we come to sell we will have to give the HA first refusal if within a 21 year time period from the point of acquiring the freehold and my doubts are if somebody would consider a property valued at 305,000 (assuming current market value) affordable when compared with buying on the open market or a % share of another property. The schedule also states that if the HA cannot find a purchaser we can then sell on the open market but would somebody be willing to purchase a property with covenants attached and a relationship with a HA.

This is not our 'forever home' so at some point in the future we will be looking to move and will potentially be faced with these issues.

By becoming freeholders we were hoping to achieve the ability to stop paying 'dead' rent oney and do things to the house like put a conservatory on for example but now i dont know whether we would be best placed to either-

Remain as 50% owners, remortgage to acquire a better deal and save for when we need to move. The likely benefits being easier to sell, less exposure to a fall in house prices but the disadvantages of wasting rent money and any increase in the property value being shared.
Or continue with staircasing to 100% whilst affordable for us and accept our concerns for when we eventually come to sell. Benefits being no waste of rent money and no shared equity but the downside of potentially being unable to sell, the covenants and full exposure to house prices going down.

I appreciate the opinions will be subjective and understand the need for the HA to maintain their affordable housing stock. For us shared ownership has worked, it has given us an opportunity to part own our own house which is something we never thought we would be able to do but now i'm not sure what our next move should be whilst we're in the fortunate position in terms of affordability.

Any advice appreciated
Thanks

marksoton

It sounds like you're confusing 100% ownership with owning the freehold.

Hoploz

Have you explored the option of selling your 50%?

Is the valuation of £305k reflective of still having these ties? In other words, are there other properties available locally which are similar, or is it valued at a little less than other houses? This could help you decide whether you're likely to be able to sell it on to someone else at this price or not.

I must say it doesn't sound ideal that the HA get first refusal on finding a buyer. I think this is often the case as they have people on their waiting lists for shared ownership. Not sure they'd have many people waiting for a 100% share at full market value though!

I think you're wise to be stopping to consider this.

Philuk

We have a similar SO scheme with an housing association, main difference being that we bought the smallest share we could (25%).

Staircasing really depends on how much you get charge by your HA for the rent (dead rent Vs dead interest payment). In my case, the percentage is lower than what a bank would charge me for a loan of a similar amount so we have 0 incentive to staircase from a financial perspective.

General rule on SO. As you mention, there are multiple restriction on SO which are not alleviate when you staircase, also you will always target a larger audience with a lower share as those property are usually for people that cannot buy the full thing.

If you expect to move out within 20 years, the only reason to staircase really is to track the market price increase. If price reverse or stagnate, less share is better, but if price double like they did in London, you will at least build some equity (although your next house will also have doubled in price but would have regardless of your equity share).

AliceBanned

I am in SO and I think if I could afford to staircase to 100% I would be considering selling up and buying elsewhere, unless I particularly wanted to be in that property for longer.


Lenders won't let me increase the mortgage at the moment and it does worry me a bit as prices are rising and I may be priced out of full ownership (here or elsewhere) if I don't increase my equity.


I am not sure - as previous post mentions a lot of the extra would only be interest on the mortgage anyway so I guess it depends how quickly (if at all) prices are rising in your area/the area you want to end up. Also depends how long you want to stay and what is happening during the whole of that time in the market.


There are a few restrictions on SO but I think it's not a bad deal if it's all you can get to begin with. If you are in an area of high demand you shouldn't have to sell it too much under market price, if at all. Personally I would probably sell up if I could afford something I liked and could get 100% mortgage for, but I can't at the moment. if you plan on buying outright in say 2-3 years' time then maybe It is not worth you staircasing now as there are extra costs involved, so you would be paying these both in the staircasing process and when you sell the full property later on.