Ex shared ownership property

Ybe

Ybe said:

annetheman said:

Disclaimer: I'm selling my shared ownership because I want to get as far away from leasehold as humanly possible, so my opinion is biased. There are the same downsides to buying a leasehold flat that was shared ownership as any other, because you are buying it in the "normal" way. The lease that is prepared is that of the "normal" 100% sale, so any leasehold covenants that are relatively standard for a purpose-built flat will apply. There is nothing special because it was shared ownership.

I know because I had the option recently and had to decide, and chose to sell my share instead (I have 6 asking price offers for my share and 1 low offer for b2b staircase and sale). With gratitude to my past self I made a full market value election at the purchase of the shares during the 2020-21 increased threshold period, so luckily no stamp duty was payable for me, so that didn't factor into things (a lot of people don't do the b2b for stamp duty complexity reasons).

The reason I didn't sell to the b2b person is 2-fold. First, I would be liable to pay much higher solicitors fees as the 2 transactions are charged seperately - 1 for the staircase to 100%, 1 for the sale of 100%. I also had more Housing Association fees to pay - so I needed a higher sale price in order for it not to be a loss at which I couldn't proceed with my onward purchase. The offer was £340,000 vs the £372,000 full market value of the share sale - no brainer for me.

W.r.t wooden balconies - they can often mean remediation is recommended per an EWS1 rating of A2 or B1, but it doesn't necessarily make it an "issue" as the risk is deemed acceptable - almost certainly your freeholder won't bother with the costly remediation if it's not required. It is more an issue if the balconies are 'stacked' vs 'staggered'. A wooden balcony that is staggered will not pose as much fire risk as one that is stacked.

E.g. my building is a B1 rated EWS1 due to the stacked balconies (albeit aluminium composite, covered underside).

You will get all this fire risk and EWS1 report info (if the building has one; the fire risk report only is mandatory) in the management pack if you proceed to legals stage, so you can review and make sure you're happy. Avoid if the report gives A3 or B2 rating - many lenders won't lend on B2 anyway. A1 is the best.

Happy to help with any other questions but also to note Housing Associations differ in their terms - mine allowed me to sell at whatever price after a nomination period and keep all profits; some only allow a sale at RICS valuation or split any profit. So that might change what your seller does.

But yeah - good luck!

Thanks. It’s stacked balconies. In this case, the owner tried to sell 75% for 6 months but couldn’t find a buyer so has had it on the open market for over 3 months now at the RICS valued price.  It makes me wonder why it hasn’t sold still. It’s a very nice area, flat is in good condition and it’s well connected too. 

Is it likely the 75% share is the reason it didn’t sell before?  It’s also unsold on the open market for 3 month. Is this a sign that even at 100% ownership it’s hard to sell?  What could be the reason?  Are ex shared ownership just hard to sell in general? 

Ybe

So I found out it has a clause where the ground rent doubles every 25 years.  Could this be why it doesn’t sell? The ground rent is currently £175 per year.  

annetheman

Ybe said:

So I found out it has a clause where the ground rent doubles every 25 years.  Could this be why it doesn’t sell? The ground rent is currently £175 per year.  

Pretty much one of the main reasons I am selling my flat. It's fine for now; £175 per annum is pretty standard amount and as far as ground rent review periods go, 25 year is pretty good, as many are 10 years - how long is left until 25 years?

The recently-passed Leasehold Reform Bill originally removed GR for all new leases including flats, then it capped it at £350 for London and £250 everywhere else, then only removed for houses and no cap for flats. So it was watered down massively (some good reform around lease extensions*) and it is the closest we've had to sorting the "issue" of ground rents for decades - fleecehold (the use of GR clauses to effectively extract increasing amounts from leaseholds until they eventually become worthless and lenders won't lend on them) really became a thing in the early 00s but no sign of it ending for flats.

It will become a toxic asset eventually. I guess it depends how long you want to keep it for if that is an issue for you...

But I digress on my leasehold rants. Basically - for now, most people wouldn't consider it an issue and you'll have no problem with any lender. Ybe said:

Ybe said:

annetheman said:

Disclaimer: I'm selling my shared ownership because I want to get as far away from leasehold as humanly possible, so my opinion is biased. There are the same downsides to buying a leasehold flat that was shared ownership as any other, because you are buying it in the "normal" way. The lease that is prepared is that of the "normal" 100% sale, so any leasehold covenants that are relatively standard for a purpose-built flat will apply. There is nothing special because it was shared ownership.

I know because I had the option recently and had to decide, and chose to sell my share instead (I have 6 asking price offers for my share and 1 low offer for b2b staircase and sale). With gratitude to my past self I made a full market value election at the purchase of the shares during the 2020-21 increased threshold period, so luckily no stamp duty was payable for me, so that didn't factor into things (a lot of people don't do the b2b for stamp duty complexity reasons).

The reason I didn't sell to the b2b person is 2-fold. First, I would be liable to pay much higher solicitors fees as the 2 transactions are charged seperately - 1 for the staircase to 100%, 1 for the sale of 100%. I also had more Housing Association fees to pay - so I needed a higher sale price in order for it not to be a loss at which I couldn't proceed with my onward purchase. The offer was £340,000 vs the £372,000 full market value of the share sale - no brainer for me.

W.r.t wooden balconies - they can often mean remediation is recommended per an EWS1 rating of A2 or B1, but it doesn't necessarily make it an "issue" as the risk is deemed acceptable - almost certainly your freeholder won't bother with the costly remediation if it's not required. It is more an issue if the balconies are 'stacked' vs 'staggered'. A wooden balcony that is staggered will not pose as much fire risk as one that is stacked.

E.g. my building is a B1 rated EWS1 due to the stacked balconies (albeit aluminium composite, covered underside).

You will get all this fire risk and EWS1 report info (if the building has one; the fire risk report only is mandatory) in the management pack if you proceed to legals stage, so you can review and make sure you're happy. Avoid if the report gives A3 or B2 rating - many lenders won't lend on B2 anyway. A1 is the best.

Happy to help with any other questions but also to note Housing Associations differ in their terms - mine allowed me to sell at whatever price after a nomination period and keep all profits; some only allow a sale at RICS valuation or split any profit. So that might change what your seller does.

But yeah - good luck!

Thanks. It’s stacked balconies. In this case, the owner tried to sell 75% for 6 months but couldn’t find a buyer so has had it on the open market for over 3 months now at the RICS valued price.  It makes me wonder why it hasn’t sold still. It’s a very nice area, flat is in good condition and it’s well connected too. 

Is it likely the 75% share is the reason it didn’t sell before?  It’s also unsold on the open market for 3 month. Is this a sign that even at 100% ownership it’s hard to sell?  What could be the reason?  Are ex shared ownership just hard to sell in general? 

Yes absolutely that is why it didn't sell - you didn't say how much it is but I would comfortably assume that 75% share cost would push pretty much everyone very near or outside of the £80,000 household income limit at which they wouldn't be approvable by the HA. It's a great technique to make a lot of money on SO if you do it smartly:
1. Buy low %.
2. Go up to 75% or higher, but not 100%.
3. Price out almost all SO buyers, so the HA is forced to let you sell on open market.
4. Sell for a price you want above the RICS valuation.
5. Keep all the profit.

It sounds like your seller can't sell above the RICS valuation, which many HA's do not let you do (I was very lucky to be fair); which is great news for you. If you like it, I wouldn't let the fact it isn't selling put you off. Right person right place and all that. Nobody wanted the rodent-infested house I'm buying, either... Lol.

*It's worth saying you can negotiate ground rent clauses when/if you come to need to renew your lease, and at that point I'm sure it will be possible to negotiate it down (it is becoming increasingly common to see them being reduced to peppercorn amounts at lease renewal, due to the number of litigations about fleecehold etc).

Leasehold is a minefield but it doesn't always cause issues. When it does, though, it's bad. You might be there for a short enough period that none of the issues even bother you - good luck!