Conveyancing for Shared Houses: Legal Considerations

Ola Leslie Solicitors

Five (5) great reasons to consider shared ownership.

They’re an easy way to get onto the property ladder – with deposits as low as 5% of the share you buy.
You can purchase bigger shares in your home until you own it 100% – a process known as staircasing. When you staircase the rent that you pay on the share that you don’t own will reduce accordingly.
Even when you add the rent and mortgage together, buying using shared ownership is usually more affordable than just plain renting or paying a mortgage.
The housing association is responsible for any repairs and maintenance of your home – in the same way as if you were a regular tenant.
You can sell up whenever you want to – and will benefit from any rise in the value of your share upon sale.

The Process -how does it work?

The Housing Association usually sells their share under a leasehold agreement. The lease is drawn up by the solicitors representing the Housing Association.
While there are differences between each scheme, in general shared ownership schemes have many things in common. The buyer is usually expected to pay a reduced price and gets in return a stated percentage of the property. [e.g. if the property is worth £100k they may buy a 1/4 share for £25k].
The other share in the property remains owned by the RSL or Housing Association – and in return the buyer pays them rent calculated on that share.
Most shared ownership schemes allow the buyer to keep buying further shares in their property as they raise the funds to do so, with the aim of eventually owning the property entirely.
Bear in mind every shared ownership scheme has their own eligibility criteria. Some shared ownership schemes are only open to people with certain occupations. And in some areas, you could have to join a waiting list – sometimes “preferred key workers” like nurses and teachers can jump the queue.

Shared Ownership Conveyancing: Why choose specialist solicitors?

When it comes to shared ownership conveyancing, both the sales and purchase process are simply more complex than buying or selling a traditional residential property.
Shared ownership schemes themselves are usually quite complicated and can have confusing terms and conditions. Also, there are a limited number of mortgage lenders who are happy to fund shared ownership purchases.
You need to have a conveyancing solicitor to protect your interests, to clearly explain what you’re buying and to understand how to make sure that the process of your shared ownership purchase goes ahead smoothly – which often means sticking to tight Housing Association deadlines.
It’s therefore very important that you deal with a solicitor who has plenty of knowledge and experience of shared ownership when you are thinking about buying a property on this basis.
But beware – some law firms might quote fees based on the costs for a standard leasehold purchase. That’s probably because they don’t understand what’s involved. Conveyancing for shared ownership properties is more complicated than a “normal” purchase, and the most sensible thing to do is to work with solicitors who can show both experience and knowledge in this area.

Helping you get on the property ladder.

Shared ownership schemes can help first time buyers get on the property ladder if you can’t afford or can’t borrow enough to buy on the open market. Generally, shared ownership schemes require a smaller deposit, reduce monthly costs, offer the potential to grow your equity and may be personalized to your circumstances.

However, they can be a bit more complicated than outright purchases. There are more rules than with a traditional mortgage arrangement, so it’s vital that you speak to a share to buy a mortgage broker to help understand how much you can afford to borrow.

Some of the things you’ll need to think about include:

How sharing ownership of your home with someone else, for example, a housing association, affects your personal circumstances.

Paying your way. If you’re taking out a mortgage for the part of the property you own, you’ll also have to pay rent on the part that you don’t own.

Frequently Asked Questions about Shared Ownership

Is shared ownership a good idea for everyone?

Shared ownership might not be the right solution for everyone, to get onto the property ladder. Your suitability for a shared ownership scheme will depend on your specific circumstances and financial situation.

Benefits include a smaller mortgage and deposit being required, but it needs to be taken into account that as well as rent being due on the share percentage that you don’t own, annual ground rent may also be due and you might be restricted with any changes you want to make to the property.

How do I know if I am eligible for shared ownership?

Not everyone will be eligible for shared ownership or shared equity schemes – there are a few factors to keep in mind. For example:

If your household earns £60,000 a year or less, OR £71,000 a year or less in London for a 1- or 2-bedroom property, OR £85,000 a year or less in London for a 3 or more bedroom property, you may be eligible for shared ownership.
If you are a first-time buyer, or you used to own a home but can no longer afford to buy one, you may be eligible for shared ownership.
If you are currently renting a council or housing association property, you may be eligible for shared ownership.
If you are aged 55 or over, you can get help from another home ownership scheme called “Older People’s Shared Ownership”. It works the same way as the general shared ownership scheme; however you are only entitled to buy up to 75% of your home. When you own 75%, you will no longer have to pay rent on the remaining share.
If you have a long-term disability, you may be able to buy a home that is for sale on a shared ownership basis through “Home Ownership for People with Long-Term Disabilities”, also known as HOLD. You are only able to apply for HOLD if the properties available in alternative Help to Buy schemes do not suffice; for example, if you require a ground floor property in regard to your disability.

How to apply for shared ownership?

If you want to apply for a shared ownership property, the first thing to do is check whether there are any schemes running in the area in which you want to buy a property, by contacting your local Help to Buy agent.

How does shared ownership work when you sell?

If you want to sell your shared ownership property, there are additional steps that you need to go through, when compared to a standard property sale. Your housing provider should be approached first as they may already have a buyer waiting through a similar scheme.

You will need to pay for a valuation of the property, get an EPC certificate and agree a contract of sale with your housing provider. If your housing provider is unable to find a buyer through their scheme after an agreed period, you can advertise the property privately or through an estate agent. However, the buyer will need to meet the criteria set out by your housing provider to purchase using a shared ownership scheme themselves. You will need a solicitor to help you through the selling process and ensure that exchange and completion go ahead as required.

How long does shared ownership conveyancing take?

The length of the process for buying a shared ownership property can vary, depending on whether it is a new build or an older home. In most cases for a new build home, conveyancing can be done within a few weeks.

However, some shared ownership properties might have more complex circumstances, which can mean that conveyancing takes longer than usual and can be more costly, as more work is required by your solicitor to ensure the sale goes through.

How much do solicitors cost for shared ownership property purchases?

Solicitor conveyancing costs can vary somewhat for shared ownership property purchases, as they can be quite complex in some cases. Your solicitor will be able to provide an estimate of costs when you instruct them.

Shared ownership can be a fantastic way to get on the property ladder. Buying a property may seem like a distant goal to many people, but with schemes in place such as shared ownership and shared equity, you may be able to purchase a home sooner than you think. It is important that you are equipped with all the knowledge you need to help you through the process of using this type of scheme.