Frequently Asked Questions
Can anybody buy a shared ownership property?
Shared ownership is open to anyone, although priority is given to existing tenants of RSLs (Registered Social Landlords), councils, or those on local authority or RSL waiting lists.
Key workers eligible for the Key Worker Living programme may buy newly built properties on a shared ownership basis.
Purchasers need to demonstrate that they can comfortably afford the mortgage, rent and all associated costs of home ownership. They need to be able to raise a mortgage from a lender or have sufficient savings to cover the cost of the share they are buying.
What are the benefits of shared ownership?
Shared ownership offers the chance to buy a home in stages at a lower initial cost than purchasing outright, which allows people who could not otherwise afford to buy a house to get a foot on the property ladder.
How big a share can be bought?
From 25% to 75%, depending on the purchaser's financial circumstances.
What costs are involved in buying a shared ownership property?
As with all house purchases, the initial costs include a survey, legal fees, stamp duty, a deposit (if required), mortgage indemnity insurance (if required) and removal costs.
The ongoing costs will include mortgage repayments, rent, repairs, insurance and service charges.
For a house, the shared owner will be responsible for all repairs and redecoration both internally and externally. The RSL will insure the structure of the property and the shared owner will have to pay a small management charge to cover this, and to help meet the costs of rent collection.
For an apartment, the shared owner will be responsible for all repairs and redecoration internally. The RSL will undertake to keep the building in which the property is situated in good structural repair, to keep the structure insured and to keep common parts decorated, cleaned and lighted. The shared owner will have to pay a share of these costs and this is called a service charge.
How much rent has to be paid?
The monthly rent is set by the RSL in line with local rents for similar properties in the area (although the rent is often subsidised at below market levels). The shared owner pays rent in proportion to the share of the property they do not own. For example, if someone owns a 75% share they would pay 25% of the rental value.
Can shared owners purchase further shares?
Shared owners may purchase further shares in their property at any time after the first year and may eventually own their home outright. This is known as 'staircasing'.
The purchase of further shares is based on the current market value of the property, whether it has gone up or down.
When further shares are purchased, the rent is reduced accordingly.
There is no obligation for the shared owner to buy further shares, if they do not want to.
Is it more difficult to get a mortgage for a shared ownership property?
Shared ownership properties are designed to be affordable and, as the applicant is only purchasing a percentage of the property, the mortgage application will be for a lower amount than it would be for an outright sale property. This should make getting a mortgage easier, not harder, although the RSL will specify a minimum annual income requirement for applicants, in line with realistic mortgage repayments.
Are shared ownership properties only available in cheaper areas?
Most London boroughs have a range of shared ownership schemes to provide local people with the chance to buy a property close to where they want to live and work. Property prices are set in line with local market conditions so, in more expensive areas, prices will inevitably be higher.
Why are key workers given priority?
London is facing an acute shortage of affordable accommodation for its essential workers, which is why many schemes target key workers in particular.
However, many low cost home ownership schemes are not restricted to just key workers. Different RSLs have different selection criteria so those interested should check with their local authority or local RSLs.
How much does someone have to earn to qualify for shared ownership?
The minimum income requirement will vary depending on the housing scheme, the price of the property and the share that is to be bought.
Most shared ownership schemes set a minimum single or joint income requirement for applicants. Whilst the single income may be out of reach to some, the joint income requirements are usually only slightly higher. As with outright sale properties on the open market, many people find purchasing with a joint income more realistic than buying alone.
With shared ownership, what happens if the shared owner wants to move?
The shared owner may sell their property as soon as they are the legal owner of it. Selling the share is known as an 'assignment' (assigning the lease to someone else).
If the shared owner wants to move, they will benefit from any built up equity from their share when they sell it. Most RSLs will require the shared owner to give them a written request of their intention to sell.
An independent valuation will have to be carried out to establish the price at which the property can be sold.
Can property shares be sold on the open market?
Shared ownership exists to help people who cannot afford to buy their own home outright on the open market. Therefore the RSL will want to continue to offer this opportunity to other people so that the property remains in the sector, and will probably have a clause in their contract permitting them to offer a share in the property to other suitable registered applicants.
The RSL will have a 'nomination period', as stipulated in the lease for the property, which is the time that they have to find a purchaser (usually twelve weeks).
Should the RSL be unsuccessful in securing a buyer during the nomination period, the owner will be free to sell it on the open market via an estate agent. Any potential purchasers will need to be approved by the RSL.
What does it cost to sell a share?
The costs vary, but the RSL will charge an administration fee, which is usually a small percentage of the share that is owned. This contributes towards providing a resale service, including marketing and selling the shared ownership property. An administration fee will not usually be charged if a suitable purchaser cannot be found.
The cost of an independent valuation of the property will also need to be paid.
There will be legal fees and, if the property is sold on the open market, estate agent fees would need to be paid.
With shared ownership, won't people still have problems buying a house in the future, as they only own a share of the property and will not get the full market value when they sell?
If property prices rise, shared owners will benefit from any increase in value, in proportion to the amount of the property they own. If they own 50% they will gain 50% of any increase. They could then use the additional money they make when they sell to put towards another house in future.
Through shared ownership, of course, people can buy additional shares of the property until they own the property outright.
If property prices fall, shared owners will be cushioned from any reduction in value and will be affected less than if they owned the property outright.