Shared Ownership - Changed Circumstances/Maximum Earnings/Extending A Lease

KelzeJ

Hi all,

I hope everyone is well

I am hoping that someone else has had this experience and managed to find a way out of it! 

I bought my Shared Ownership house as a single parent in 2006.  Fast forward 15 years and I am now married and my partner and I want to now move to another area.  We have two options, either to sell our share in the property and move on or staircase to 100% ownership and then sell on the open market and move on. The issues are this;

1. When I purchased the property (a house) as a first time buyer in 2006 I was advised by my solicitor that lease of 99 years , in their view "was acceptable". However, what I failed to realise until now is that when I purchased the house in 2006, the lease had already been running since 1996, so at the point of purchase I had 86 years left on the lease.  So today, in 2021 my lease now only has 74 years left running.  I contacted the HA to enquire how much it will cost to extend my lease and they have said that;

a) I can request a new lease term of 125 years or an additional 90 years on top of the current lease term, and that the premium for these two options will be different. They have given me no indication of what the premium will be for these two options.
b) I will need to pay the HA legal costs = £600.
c) I will need to pay the HA costs of arranging for a surveyor to value my property for the purpose of calculating the price for the lease extension.
d) I will need to pay the HA for any payments they have to make on our behalf, such as the cost of getting a new lease plan of my property if one is needed.
e) I will need to pay for the price of the lease extension (they say that cant provide an estimate of this cost however, I have used the Lease Advisory Service Lease Extension Calculator and this has estimated the costs to be approx £37K to £39K (I based this on my guestimate of the lower end of what I think my house might be valued at!)


So as you can see from the above, the costs involved in extending the lease are significant, and I believe that I will have to do this in order to be able to sell on my share in the property (no-one is going to want to or be able to buy a lease with 74 years left) , so for me this is not an option.

The other issue is this:

2. I currently own 35% share in the property.  As I mentioned previously, I am now married and with this our 'Household Income' is now deemed to be above the current maximum earnings threshold for Shared Ownership, according to the HA.  I have spoken to the Leasehold Advisory Service and they have advised that they think that as i am an existing Shared Owner that I have the right to purchase the property, no matter what our earnings are now, as it's not unusual that since first purchasing a Shared Ownership property that my financial circumstances may have changed for the better.  The HA have said: 
a)  I can apply to add my partner to the lease (at a cost)
b) I will need to pay their solicitors fee and my solicitors fees
c) I will need to pay the valuers fees
d) in order to Staircase we will be required to undertake a financial assessment (I am guessing to determine affordability and to ensure our 'Household Income' threshold.
e) we will need to pay Stamp Duty Tax, once we own more than 80% of the property
f) I need to inform the mortgage company that our 'Household Income' cannot exceed £90K
g) we will become the freeholders of the property once we Staircase to 100% ownership.

So all in all, it seems to make better financial sense to staircase up to 100% ownership and become the freeholders in order to be then able to sell the property on the open market, however, we are unable to do this whilst we are earning above the current maximum 'Household Income' threshold for Shared Ownership! 

Do anyone else have any experience of this please? And if so, are the HA correct? In my mind the maximum threshold for household income only applies to the new Shared Ownership rules. 

Also, is the Lease Advisory Service correct when they say that we have a right to staircase up and it's not dependant upon our maximum earnings now? 

If we cant do either we will be stuck in this house, whilst the lease is running down further

Any advice or help will be gratefully received 

dimbo61

I think you will struggle to sell a 35% shared ownership house with only 74 years left on the lease so you will need to bite the bullet and apply to the housing association.
Some of the fees for adding your partner, staircaing to 100% and extending the lease will overlap so if you can afford it I would go for it.

AFF8879

Is staircasing up to 100% definitely an option? Many HAs restrict the maximum ownership percentage to below 100 in order to keep the property in their stock. As selling on the open market would mean they effectively “lose” a property.

Snuggles

This doesn't sound right. Why would there be rules around your income when staircasing to 100%, as you would then own the freehold and it would no longer be anything to do with the HA. You wouldn't be getting any particular advantage as you would be paying the market value of the entire property, so I don't see why there should be any restrictions around how much you are allowed to earn in order to staircase to 100%.

Lunchbox

I’m in a shared ownership property (although it’s a flat so will also be leasehold) and I always understood that the maximum earnings threshold was only ever relevant at the point of the purchase of the initial share. Check the provisions in your lease for staircasing; they can’t just unilaterally add new requirements/conditions in if they aren’t stipulated in your lease. Never, ever trust anything the HA tell you, always go with what’s written in the lease. The chances are they aren’t even aware of their own conditions.

With many shared ownership schemes, a financial assessment is only required for partial staircasing where the HA will still have a share; to ensure you can afford the ongoing rent and service charges. Your situation for full staircasing is frankly none of their business and only that of your mortgage provider.

KelzeJ

Thank you for taking the time to respond dimbo61 - it's really appreciated. Do you mean that I should go for the lease extension or outright ownership?

Thank you for taking the time to respond AFF8879- it's really appreciated. I have double checked and we definitely have the right to 100% ownership and then for the Freehold to be transferred to us. Of course, there is a clause (!) in that the HA will have first right of refusal before we attempt to sell it on the open market.

Thank you for taking the time to respond Snuggles- it's really appreciated. I totally agree with you. It doesn't sound right to me either! I'm hoping that the advice is wrong, but have searched the internet high and low and can't find any information about it. 

eddddy

KelzeJ said:

Do you mean that I should go for the lease extension or outright ownership?

My understanding is that you should definitely aim for outright ownership - you would lose any money you spend extending the lease.

Because...

• You own 35% of the house

• A staircasing valuation is done on the basis of "What would the house be worth if it was freehold - with no lease?"

• You will have to pay 65% of that freehold value of the house to staircase to 100% (and automatic freehold ownership)

• So it doesn't matter whether the remaining lease is 20 years, 74 years, 99 years or 150 years - in all cases you will have to pay 65% of the freehold value of the house to staircase to 100%

• So extending the lease won't reduce the cost of staircasing, so it's a waste of money

• As long as you staircase to 100% before the lease drops to zero years, it doesn't make any difference

But check all that with your HA.

dimbo61

If you can afford it go for both !
100% ownership and lease extension.
That way you will attract the best sale price

eddddy

dimbo61 said:

If you can afford it go for both !
100% ownership and lease extension.
That way you will attract the best sale price

If the OP staircases to 100% ownership - they automatically get the freehold.

That's why extending the lease first is probably a waste of money.

dimbo61

eddddy is more knowledgeable than me on this matter so 100% ownership is the way to go.
Good luck 

KelzeJ

Thanks again for taking the time to respond,   eddddy, Lunchbox and dimbo61. It really is appreciated. 

It looks like i have a task on my hands to prove to the HA that we do have the right to staircase to 100% ownership although our earnings are above the max threshold.