We sell a lot of shared ownership property. So what is shared ownership?
Since new council housing became expensive for local authorities to build and maintain, the Government empowered housing associations under the umbrella of the Homes and Community Agency, formerly the Housing Corporation. They provide funding and guidance to these entities.
There are over 2500 registered housing associations in England and Wales. They build properties that fall under the category of social housing, sometimes known as ‘affordable housing’.
The tenure of these homes, houses or flats, can be affordable rental whereby the rent is subsidised for low earners. There are also schemes for key workers that live in expensive locations, for instance nurses that work in London.
Shared ownership is a category of social housing. Housing Associations (Social Landlords) will sell each respective house or flat whilst retaining a percentage of the equity. In that way, the buyer only needs to raise a percentage of the full price and therefore can better afford a step onto the housing ladder. A rental is paid by the occupant in addition to any mortgage, to cover the part of the property that is not ‘owned’.
Once the property is sold, any increase in value (or indeed any decrease) is shared by the occupant and the Housing Association pro-rata to the equity percentage. Often, shared ownership properties are 50/50 in split but can be 25/75, 40/60 etc.
Buyers can often ‘staircase’ by buying further equity as time goes on.
Social Landlords will have set criteria for shared ownership purchasers. The most common are that buyers must want to live in the property for their own occupation. You’re not allowed to buy for letting purposes. There’s also a criteria for earnings because the point of providing affordable homes is to assist lower earners. And that’s why there is generally a restriction on those that earn greater than £60,000 per annum.
You’ll need to use a mortgage broker and a conveyancing lawyer that understand shared ownership. We can recommend both.
If you’re selling a shared ownership property, beware estate agency fees. Many High Street agents will quote a percentage commission but will also have a minimum fee. So if you are selling at, say, £80,000 for your share of the property, you will find that the agent will charge a flat £2000 plus vat. But in percentage terms that’s 2.5% of the sale price. The highest we have seen so far, based on a shared ownership property that had a lower price, was a fee equivalent of 5%!
Check the small print or decide upon a low cost fixed fee agent like Emoov.co.uk. We charge the same low amount to all of our clients regardless.