Purchasing existing shared ownership flat (resale)

tantaraza

Hello. I’ve recently come into a small amount of money that would enable me to buy a 10% share of a shared ownership flat currently on the market with cash (no mortgage). I’m currently in private rented accommodation with a rubbish landlord and because of my personal circumstances it’s very difficult to find landlords willing/able to let to me, so shared ownership appears to be a good option for me.

I’ve not viewed the flat yet but I’m trying to do my research now so that I can proceed quickly if I decide to put in an offer. This is completely new to me however so I would appreciate any advice on questions to ask or things to check the lease for.

I’ve done some research and have the below questions (that I assume I would ask my solicitor to check the lease for?)

Fairly important questions:
—What were previous years’ service charges and how much have they previously increased?
—Is there a maximum that the service charges are allowed to increase by every year? Is there a cap at all?
—Am I responsible for 100% of the service charges or 10%? (Looking at the amount payable I suspect 100%, is this normal?)
— Who is responsible for repairs and maintenance in the flat?
— What restrictions are there on work that I’m allowed to carry out to the flat?
—Will I be able to let out the flat if my circumstances change in the future?

Less important questions, but still information I want to know before purchasing so that I can go into this with my eyes open:
—Is there a limit on how many times I can staircase?
— Am I able to staircase to 100%?
— Are there any restrictions on staircasing (10% minimum, can only staircase in 5% increments, etc)?
— When staircasing, who sets the value of the share I wish to purchase? The housing company, an average value from 3 estate agents, or a building surveyor?
— Same question, but for selling my share?
—If/when I decide to sell the property in the future, do the housing company have first refusal? If yes, does this also apply if I owned 100% of the flat?
—Would the housing company charge fees if I resold? If yes, does this also apply if I owned 100% of the flat?
—Would they be able to force me to sell below market price if someone made an offer less than asking price?
— If I still own the flat when it starts getting close to the 80-year mark, and I have to renew the lease, what costs should I expect to be associated with this?

What other questions have I missed? What should I look out for? Also, as I won’t have a mortgage, is it a good idea to have a building surveyor or would that be a waste of money since structural issues would be the responsibility of the housing company?

I know shared ownership isn’t for everyone but I’ve been living in a house deemed “unhabitable” for six months so this feels like the perfect opportunity to get secure housing with peanuts rent. If I didn’t go ahead with this flat then I would use the money to pay 6 months rent upfront for a new flat/house (to incentivise landlords to accept me as a tenant) but I’m concerned I’ll just end up having to move home constantly with all the moving costs involved and with this shared ownership flat, as long as I’m not in rent arrears I can’t get evicted.

Maybe it’s too good to be true which is why I would appreciate advice, especially if you’ve purchased a resale shared ownership flat. Many thanks if you’ve read this far, sorry it was a long post

eddddy

Is this a shared ownership scheme operated by an organisation like "Your Home" - http://www.yourhome.org.uk/ ?


You should be asking the company / housing association all the questions that you list right at the outset, long before you get a solicitor involved.

Or it might be more efficient to read the companies / housing associations guides on shared ownership first, as they'll probably answer many of your questions - then you can ask them about anything that isn't clear.


One thing - you mention "peanuts rent". If you only purchase 10% of the property, you will probably be paying rent on the remaining 90% of the property (i.e. 90% of the normal rent for the property.)

That probably won't be peanuts.

tantaraza

Yes — the building is owned by heylo housing and managed by a different company. I’ve contacted the management company about a query relating to the lease already so once they get back to me, I’ll forward these questions on to them.

The rent on the 90% is well below what I’m currently paying, and even once the monthly service and admin charges are added on, is still less than what I’m paying now. As long as the service charge remains around the same price, the monthly cost for the 90% I don’t own will be very affordable.

csgohan4

Some info on shared ownership which is freely available online:


http://england.shelter.org.uk/housing_advice/shared_ownership_leasehold/shared_ownership_schemes?gclid=EAIaIQobChMI4_uRvoeY4wIVipTtCh2E4wJeEAAYASAAEgJRAvD_BwE




I wouldn't touch SO with a barge pole, scam imo

AdrianC

I don't have a conceptual issue with SO - it's a good idea.

BUT... only with a sensible share. I wouldn't describe a 10% share as in any way "sensible". It's ridiculously small.

tantaraza

AdrianC, why would you consider a 10% share “ridiculously small”? What would be the cons compared to a larger share?

AdrianC

tantaraza wrote: »

AdrianC, why would you consider a 10% share “ridiculously small”? What would be the cons compared to a larger share?

You're still paying rent on 90% of the property.
You have 100% of the maintenance responsibility.
If you're FTB, then you're "wasting" your various FTB incentives.
When you want to move, you have 100% of the SO sale ballache.
You have 100% of the sale/purchase legal costs.

Upside? Umm... You have a whole 10% of any equity growth...?

tantaraza

Thank you for your thoughts, having some feedback is very helpful. With regard to the points you’ve made:

90% of that flat is still cheaper than the property I’m currently renting (even factoring in downsizing). Also, in a worst-case scenario, Universal Credit would cover the entire rent on the flat whereas the rent in most private rental properties are more than the amount they would pay so I’d have to make up the shortfall.

I’m currently in a private rented house where the landlord is neglecting his responsibilities and the house is in a major state of disrepair, so maintenance responsibilities sounds appealing to me at the moment. The flat seems in good condition from the photos and the major maintenance concerns would be the boiler and windows (if I’m responsible for those) so provided those don’t need to be replaced soonish, I’m not sure what other major maintenance issues would be likely to crop up? I’m a fairly good DIY-er so could deal with most things myself in my opinion.

I’m a FTB, but most of the perks are related to mortgages or stamp duty as far as I’m aware. I’m very unlikely to ever take out a mortgage and I live in the north so most FTB properties are below the stamp duty threshold anyway.

Your last point is something I will check but assuming no catastrophes, I would live in the flat for a minimum of four years. In that time I could potentially be moving home twice a year (if I had very unfortunate luck with landlords) with all the stress and moving costs associated with that, so a secure tenancy where I have somewhere to truly call home may be worth the SO stress.

Also, the money saved in cheaper rent and not moving constantly could be used to staircase.

Thanks again for your thoughts as it’s really helped to consider those cons you’ve mentioned.

AdrianC

You're buying 10%, without a mortgage?

Borrow. Buy a sensible proportion.

tantaraza

It is impossible for me to get a mortgage with my current circumstances, which is why I’m considering this flat instead of a more conventional, “sensible” option.

Chris142009

Hi,

I’m currently in same situation and wondering what to ask my solicitor regarding lease?

Have looked online and can’t find anything.

Help much appreciated

Chris