What are the implications of shared ownership

crazy_guy

When looking at the housing market there has been several properties which have been advertised as shared ownership with 25%-50% owned by a housing association or the like and has been seen as a way to get people onto the property ladder - but i'm just wondering what are the implications with this method of purchasing?

wherediditallgo

One of my friends is looking into shared ownership at the moment. So far, she's of the opinion that if you're going to do it, first set yourself a realistic timescale for buying the remaining portions. If you don't do that, you may find yourself in the position of trying to sell something you only part-own. Also, you need to very sure of what is your responsibility & what's the council/HA's in terms of maintenance, charges etc, otherwise you could find yourself with unexpected bills.

Lastly, if the property is part of a block with council/HA tenants in residence, you should also find out whether their council/HA has any plans for doing major works on the property withing the next couple of years. You could ask existing residents if they've been contacted by the council/HA about the condition of the building, & whether they've been told of plans to eg do work on the roof. I don't know whether that's your responsibility or your solicitors, but one of my ex-neighbours was a council tenant until she bought her flat under a shared ownership scheme. Six months after she bought it, the council wrote regarding start dates for major works to the building that had obviously been scheduled for many months. The works took several months to complete over the whole block, some of which she couldn't opt out of. She has recently been hit with a £7k bill for new windows, work to the roof, drains, external pipework & internal refurbishments to the communal areas. Had she known they were going to be happening, she'd have either delayed the purchase or worked harder to get it for a lower price.

cattie

Bear in mind that you have to pay rent on the percentange that you don't own as well as maintenance charges.

Often when you sell, you have to try to sell first to somebody on the HA's waiting list & the valuation is set by the HA valuer & not a local estate agent.

Bargain_Rzl

wherediditallgo wrote: »

One of my friends is looking into shared ownership at the moment. So far, she's of the opinion that if you're going to do it, first set yourself a realistic timescale for buying the remaining portions. If you don't do that, you may find yourself in the position of trying to sell something you only part-own.

So? It's certainly not essential to buy the remainder. You could pay off your mortgage and leave yourself with a low rent for life. When you eventually do come to sell, you sell it as a shared ownership property to a qualifying buyer. I'm not saying this is ideal, but then in an ideal world everybody would be able to afford a home outright.

Also, you need to very sure of what is your responsibility & what's the council/HA's in terms of maintenance, charges etc, otherwise you could find yourself with unexpected bills.

That is true of any property, not just SO - certainly with flats.

Lastly, if the property is part of a block with council/HA tenants in residence, you should also find out whether their council/HA has any plans for doing major works on the property withing the next couple of years. You could ask existing residents if they've been contacted by the council/HA about the condition of the building, & whether they've been told of plans to eg do work on the roof. I don't know whether that's your responsibility or your solicitors, but one of my ex-neighbours was a council tenant until she bought her flat under a shared ownership scheme. Six months after she bought it, the council wrote regarding start dates for major works to the building that had obviously been scheduled for many months. The works took several months to complete over the whole block, some of which she couldn't opt out of. She has recently been hit with a £7k bill for new windows, work to the roof, drains, external pipework & internal refurbishments to the communal areas. Had she known they were going to be happening, she'd have either delayed the purchase or worked harder to get it for a lower price.

Again, that is true of any purchase of a flat in a purpose-built block.

I'll add one or two things (as a shared owner myself):

1) Don't be seduced into thinking that owning property, even part of a property, is the be-all and end-all. Some schemes are overpriced (not least because the majority of SO flats are new-builds, and therefore have a habit of losing value initially) and in some cases it may be possible to rent in the same area for less.
2) Be aware that if the total value of the property is over the stamp duty threshold, you will have to pay stamp duty even if the value of your share is below the threshold.
3) Bear in mind that you're unlikely to be able to sublet your home unless you come to own it outright. This is a standard condition of SO schemes as the HAs do it so that people are housed, not so people can make money out of them. If you're intending to rent the place out, or even have a lodger, this is likely to be against the terms of ownership.
4) Bear in mind that many mortgage lenders will not lend on shared ownership. It's not sub-prime as such - several of the prime lenders do lend on SO, and at the normal market rates (I'm with Nationwide) - it's just that you won't have access to the full range of lenders as some simply don't do it.

I would advise any potential shared owner to do their research properly and ensure that they've done a full comparison with other options. As I've demonstrated on this forum a number of times, I currently have monthly outgoings which beat renting or outright purchase by at least £200, and am happy with my home. I haven't yet decided whether I will go on to buy the remaining share.

wherediditallgo

Bargain_Rzl wrote: »

So? It's certainly not essential to buy the remainder. You could pay off your mortgage and leave yourself with a low rent for life. When you eventually do come to sell, you sell it as a shared ownership property to a qualifying buyer. I'm not saying this is ideal, but then in an ideal world everybody would be able to afford a home outright.


That is true of any property, not just SO - certainly with flats.


Again, that is true of any purchase of a flat in a purpose-built block.

I was only posting some things for the OP to bear in mind, not criticising shared ownership as a method of buying a home. Whatever works for the individual...