Shared Ownership: Does Decrease in Property Value Result in Lower Rent to HA for Unpurchased Equity

London_Lion

Hello,

I purchased a Shared Ownership (SO) property last year during the bank interest rate fluctuation madness. The lenders valuation was a whole 10% lower than the Housing Association (HA) nominated RICS surveyor valuation. Property prices were volatile and the bank interest rate was climbing up and the affordability window was closing for us, so we bought at the higher price. A full year later, the property price hasn't changed from the lenders valuation last year.

I'm wondering if it would be prudent to pay for a RICS valuation and if the property value is indeed 10% lower than when we purchased, would the HA be compelled to reduce the rent they are charging us? It seems logical since the rent is a percentage of the value of the property they own (unpurchased equity). 

I have read elsewhere on this forum that in a SO situation, if a formal valuation shows an increase in property value, the HA can use this to increase the rent payable on unpurchased equity. By that logic, a decrease in valuation should result in a drop in the rent. 

Has anybody here experienced this or have any thoughts about this please? 

KR, L

eddddy

London_Lion said:

I'm wondering if it would be prudent to pay for a RICS valuation and if the property value is indeed 10% lower than when we purchased, would the HA be compelled to reduce the rent they are charging us? It seems logical since the rent is a percentage of the value of the property they own (unpurchased equity). 

You need to read your lease to see what it says about rent increases.

But typically, housing association SO leases say the rent will increase by something like "Consumer Price Index + 1%" each year - so rent increases are not linked to property value.


But the cost of staircasing is linked to property value. So if the property value has dropped by 10%, the cost of staircasing will also have dropped by 10%.

(But if you need to remortgage to finance staircasing, you'll have to do some careful recalculations. e.g. If you bought with a 90% LTV mortgage, and prices have dropped by 10%, you'll now be at 100% LTV for your current share.)