Shared ownership has become an increasingly attractive option for many aspiring homeowners in the UK. It offers a chance to get a foot on the property ladder with a smaller initial purchase compared to a traditional freehold house. But before you step into your dream shared ownership property, there are some key legal and financial considerations to navigate.
Our award-winning conveyancing team are here to guide you through the essential factors you need to think about before taking the plunge into shared ownership.
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What is Shared Ownership?
Shared ownership means you buy a share (typically between 25% and 75%) of a property, while a housing association retains ownership of the remaining share. You’ll pay a mortgage on the share you purchase and rent on the portion you don’t own.
Benefits and Potential Drawbacks
There are clear benefits to shared ownership. The lower initial purchase price and mortgage deposit make it more accessible than traditional homeownership, particularly for first-time buyers. Additionally, some schemes offer benefits like maintenance support and right-to-buy options, allowing you to purchase additional shares in the future (known as staircasing) and eventually own the entire property.
However, there are also drawbacks to consider. You’ll be restricted in making certain alterations without permission from the housing association. Additionally, selling a shared ownership property can be a slower process compared to a freehold sale.
Key Considerations Before You Buy
Now, let’s delve into the nitty-gritty aspects you’ll need to consider before making an offer:
- Eligibility: Many shared ownership schemes have eligibility criteria. These may include income limits, residency requirements, and being a first-time buyer (though not always). Ensure you meet the specific criteria of the scheme you’re interested in.
- Leasehold vs. Freehold: Shared ownership properties are always leasehold. Carefully review the lease terms, paying close attention to the length of the lease (ideally a long lease with at least 90 years remaining), any restrictions on alterations, pet ownership, or subletting, and service charges associated with the property.
- Financial Calculations: Don’t just focus on the initial purchase price. Factor in your monthly mortgage repayments, rent on the unowned share, service charges, and potential future staircasing costs. Create a realistic budget to ensure the ongoing financial commitment is sustainable.
- Valuation: While not always mandatory, consider an independent valuation of the property, particularly if you’re planning to staircase in the future. This will help you determine the current market value of your share and any potential increase.
- The Housing Association: Research the housing association selling the property. Their reputation, financial stability, and the support they offer are all crucial factors. Ask them questions about maintenance procedures, right-to-buy processes, and any additional fees you might encounter.
The Role of a Conveyancing Solicitor
Shared ownership purchases involve additional legal complexities compared to a standard freehold transaction. Instructing a conveyancing solicitor experienced in shared ownership is highly recommended.
Here’s how a solicitor can help:
- Reviewing the Lease: A solicitor will meticulously examine the lease, highlighting any clauses that might impact your future plans or restrict your ownership rights.
- Carrying Out Legal Checks: They will conduct essential checks to ensure the housing association has the legal right to sell the property and that there are no outstanding charges or issues with the title.
- Liaising with the Housing Association: Your solicitor will communicate with the housing association on your behalf, ensuring a smooth exchange of information and addressing any concerns you may have.
- Explaining the Process: A good solicitor will explain the entire shared ownership process in clear, concise terms, ensuring you understand your rights and obligations every step of the way.
Shared ownership can be an excellent stepping stone on your property ownership journey. However, careful consideration and professional legal guidance are crucial for a successful purchase. By understanding the model, its advantages and drawbacks, and by involving an experienced conveyancing solicitor, you can make an informed decision and navigate the shared ownership process with confidence.
