Shared Ownership Home Improvements

henrygregory

Just looking for some advice.
I purchased my SO property with 75% owned by me five years ago. 
I am about to pay off the mortgage for the entire 75% (that's what you get for following MSE and being sensible) so I will just have rent to pay on the remaining 25% un-owned share.
My mortgage advisors have said every two years when I re-mortgage, I should just buy all of the property but I am not sure yet.

Can anyone tell me how improvements to the property and any uplift in the respective value of the property would be calculated.

As an example and to keep things simple....
If a SO owner owned 50% of a 100k property and they replaced the kitchen and improved the garden. If these changes increased the value of the property by 10k to 110k. If you were to buy the rest of the property or sell it, would the HA get 50% of the increase in value even though the HA did not contribute to the improvements which helped the value increase? How are these increases in value calculated? Is there a way in a valuation that changes you paid for are identified and seperated?

I would be grateful to understand more on how this works as I would like to refurbish parts of the house but it may be better to buy it all first and leave that until later hence my question.

Many thanks  

Myci85

As far as I understand it, any improvements you make the HA will benefit from as they would still get their share of any increased value. So that would be a very good argument for buying the final 25% before doing the improvements, so any added value is all yours. 

GDB2222

henrygregory said:

Just looking for some advice.
I purchased my SO property with 75% owned by me five years ago. 
I am about to pay off the mortgage for the entire 75% (that's what you get for following MSE and being sensible) so I will just have rent to pay on the remaining 25% un-owned share.
My mortgage advisors have said every two years when I re-mortgage, I should just buy all of the property but I am not sure yet.

Can anyone tell me how improvements to the property and any uplift in the respective value of the property would be calculated.

As an example and to keep things simple....
If a SO owner owned 50% of a 100k property and they replaced the kitchen and improved the garden. If these changes increased the value of the property by 10k to 110k. If you were to buy the rest of the property or sell it, would the HA get 50% of the increase in value even though the HA did not contribute to the improvements which helped the value increase? How are these increases in value calculated? Is there a way in a valuation that changes you paid for are identified and seperated?

I would be grateful to understand more on how this works as I would like to refurbish parts of the house but it may be better to buy it all first and leave that until later hence my question.

Many thanks  

Take a look at 
https://www.gov.uk/right-to-shared-ownership/buying-more-shares-staircasing

There is a section that answers your question. In short, provided you have permission for the improvements, you don’t need to pay the HA their share of the increase in value. 

However, what is classed as improvement as opposed to general maintenance is probably a bit blurry. 

In any case, assuming the kitchen was new 5 years ago, replacing it might be a major improvement in your eyes, but it may not increase the property value by very much. So, paying 25% of 'not very much' may be cheaper than getting a complicated valuation, with and without improvements, and then arguing about it with the HA. 

eddddy

GDB2222 said:

Take a look at 
https://www.gov.uk/right-to-shared-ownership/buying-more-shares-staircasing

There is a section that answers your question. In short, provided you have permission for the improvements, you don’t need to pay the HA their share of the increase in value. 

The document you're linking to is about 'staircasing'. The OP is talking about selling (when you own less than 100%).


Weirdly, many housing associations use different valuation approaches for staircasing and for selling.

If you staircase, the HA adjusts their valuation to take account of improvements. If you're selling, the HA often doesn't adjust their valuation.

So it may be a good idea to staircase to 100% before selling. Maybe even doing a back-to-back staircasing and selling on the same day.


Here are some extracts from research on this done in 2013 by Cambridge University. As far as I can tell, many HAs haven't changed their policy on this since 2013:




In 2013, the research found that 17 HAs used approach B - i.e. they ignored the improvements made by leaseholders.
Only 4 HAs used approach A - i.e. they took account of improvements made by leaseholders:




So staircasing to 100% might be a good idea:

henrygregory

eddddy said:

GDB2222 said:

Take a look at 
https://www.gov.uk/right-to-shared-ownership/buying-more-shares-staircasing

There is a section that answers your question. In short, provided you have permission for the improvements, you don’t need to pay the HA their share of the increase in value. 

The document you're linking to is about 'staircasing'. The OP is talking about selling (when you own less than 100%).


Weirdly, many housing associations use different valuation approaches for staircasing and for selling.

If you staircase, the HA adjusts their valuation to take account of improvements. If you're selling, the HA often doesn't adjust their valuation.

So it may be a good idea to staircase to 100% before selling. Maybe even doing a back-to-back staircasing and selling on the same day.


Here are some extracts from research on this done in 2013 by Cambridge University. As far as I can tell, many HAs haven't changed their policy on this since 2013:




In 2013, the research found that 17 HAs used approach B - i.e. they ignored the improvements made by leaseholders.
Only 4 HAs used approach A - i.e. they took account of improvements made by leaseholders:




So staircasing to 100% might be a good idea:

Thank you. That is very interesting. Back to back staircasing is not a bad idea. My reasoning for not outright buying is the HA has been poor. We have had several ASB related matters along with service charge issues relating to grounds maintenance or lack thereof. I feel more comfortable challenging an HA who owns part of my property than if I outright own it as then the HA has no affiliation to me, no responsibility to do anything to resolve my complaints. Seems crazy, but every time I have explained this to the mortgage advisors, they totally understand my reasoning when I explain some of the issues which have taken place. 

Secondly, another way of looking at this is that currently there are so many people trying to get on the housing ladder. I may find that I am actually more likely to sell my house as an SO than an outright owned home as it may actually appeal to a greater range of buyers who can't quite afford an outright owned home. 

Some food for thought for me. One thing I will say, is the place is immaculate and no expense spared on maintenance, improvements such as flooring etc so if it was sold in the future as SO, whoever buys it would be confident they won't have any issues and will at least have a very well maintained place.