Shared Ownership - Seller Beware
Discussion
I thought this would be as good a place as any to share and document a potential and expensive tale of woe.
A bit of background first.
We bought our 2 bedroom semi in a lovely village, a few miles away from where we both grew up and within 15 minutes of our parents houses. This was back in 2009 and was a first home for us both.
Being Shared Ownership and in a rural location, it came with a number of covenants mainly stipulating that you must have a connection to the local area and that we could only ever own up to an 80% of the property to ensure that it continued to provided affordable housing to the local community.
We didn't have a problem with this as we would have never been able to afford a property locally at the time, but kept us close to family in the rural area and when the time came to sell, it would mean that someone else in out shoes would have the same opportunity.
Fast forward 15 years, we now have two kids and have outgrown the house with a boy and a girl in bunkbeds meaning we have to move.
Now here comes the woe. Back in 2021 our neighbour put her house up for sale and had 4 buyers drop out due to mortgage issues. We knew at the time we bought ours that there were only a few lenders that were willing to offer a mortgage due to the 80% covenant, however what we didn't know or anticipate was the issues were due to the "lease" having less than 80 years to run.
What a lot of people don't realise is that Shared Ownership properties have leases with the Housing Association, ranging from 99-125 years when they are built. When it falls below 80 years (or sometimes 85) it is pretty much impossible to get a mortgage (our fixed rate ended and we are currently on 8.49% but that is another story).
This isn't a headlease, but a lease between ourselves and the Housing association.
That brings us to today, we have started the ball rolling and the costs have already started. Because the housing association have a 6 week nomination period where they get to find a buyer themselves first, they require a RICS valuation. The cost of this was £430 as we needed one with the value of the house as it is with the short lease and if it had a lease extension.
Within the valuation it states that it is unlikely the property would sell without the lease extension and gives an estimate to do this of between £6,000 and £12,000 based on a 50% share, however I have done some research and this suggests that the housing association we are with normally charge the full amount so we could be looking at between £12,000 and £24,000. Oh and we have to pay all of their legal fees as well.
I will try to keep this updated as we go through the process with the good and the bad. Looking at it positively we could be far worse off as the property is a house with no cladding issues.
A bit of background first.
We bought our 2 bedroom semi in a lovely village, a few miles away from where we both grew up and within 15 minutes of our parents houses. This was back in 2009 and was a first home for us both.
Being Shared Ownership and in a rural location, it came with a number of covenants mainly stipulating that you must have a connection to the local area and that we could only ever own up to an 80% of the property to ensure that it continued to provided affordable housing to the local community.
We didn't have a problem with this as we would have never been able to afford a property locally at the time, but kept us close to family in the rural area and when the time came to sell, it would mean that someone else in out shoes would have the same opportunity.
Fast forward 15 years, we now have two kids and have outgrown the house with a boy and a girl in bunkbeds meaning we have to move.
Now here comes the woe. Back in 2021 our neighbour put her house up for sale and had 4 buyers drop out due to mortgage issues. We knew at the time we bought ours that there were only a few lenders that were willing to offer a mortgage due to the 80% covenant, however what we didn't know or anticipate was the issues were due to the "lease" having less than 80 years to run.
What a lot of people don't realise is that Shared Ownership properties have leases with the Housing Association, ranging from 99-125 years when they are built. When it falls below 80 years (or sometimes 85) it is pretty much impossible to get a mortgage (our fixed rate ended and we are currently on 8.49% but that is another story).
This isn't a headlease, but a lease between ourselves and the Housing association.
That brings us to today, we have started the ball rolling and the costs have already started. Because the housing association have a 6 week nomination period where they get to find a buyer themselves first, they require a RICS valuation. The cost of this was £430 as we needed one with the value of the house as it is with the short lease and if it had a lease extension.
Within the valuation it states that it is unlikely the property would sell without the lease extension and gives an estimate to do this of between £6,000 and £12,000 based on a 50% share, however I have done some research and this suggests that the housing association we are with normally charge the full amount so we could be looking at between £12,000 and £24,000. Oh and we have to pay all of their legal fees as well.
I will try to keep this updated as we go through the process with the good and the bad. Looking at it positively we could be far worse off as the property is a house with no cladding issues.
bennno said:
Bit of a misnomer, a lease < 80 years is a mortgage issue irrelevant of shared or non shared ownership properties.
Yes you are correct. Just trying to highlight that when a property is less than 20 years old and marketed as "affordable housing" it feels like a money making scheme. Now that I am older and wiser, I now question the "ownership" bit in Shared Ownership. Had it had a 999 year lease I could understand.
we have family friends that extol the virtues of owning a new build shared equity
paying rent and a mortgage and it has to be sold back to the developers when sold,
they do seem to be convincing themselves wht a good deal it is, because its a tony one one on the edge of an estate with some big houses on.
i jsut cant see the attreactoipn myself,
my daughters been in the situation this year, the solution was bank of mum and dad and shes bought a terraced house in the peak district.
deers and badgers and canals and all sorts, its such a better option that a barratt box
paying rent and a mortgage and it has to be sold back to the developers when sold,
they do seem to be convincing themselves wht a good deal it is, because its a tony one one on the edge of an estate with some big houses on.
i jsut cant see the attreactoipn myself,
my daughters been in the situation this year, the solution was bank of mum and dad and shes bought a terraced house in the peak district.
deers and badgers and canals and all sorts, its such a better option that a barratt box
We are in the process of moving and the people buying out house are selling a part buy part run flat. Never again will we have any involvement with the total s
t show that the housing association are. Everything takes an ages. We are 5.5 months in now on a complete chain, the flat, our house and the house we are buying, and we are all waiting on them to do stuff.
t show that the housing association are. Everything takes an ages. We are 5.5 months in now on a complete chain, the flat, our house and the house we are buying, and we are all waiting on them to do stuff. Danm1les said:
We are in the process of moving and the people buying out house are selling a part buy part run flat. Never again will we have any involvement with the total st show that the housing association are. Everything takes an ages. We are 5.5 months in now on a complete chain, the flat, our house and the house we are buying, and we are all waiting on them to do stuff.
Yeah, we are not even going to start looking until we have a buyer with a mortgage in place.t show that the housing association are. Everything takes an ages. We are 5.5 months in now on a complete chain, the flat, our house and the house we are buying, and we are all waiting on them to do stuff. It took our neighbour a year to sell and she got lucky with a cash buyer who were downsizing and didn't care about the lease.
Never again.
dirky dirk said:
my daughters been in the situation this year, the solution was bank of mum and dad and shes bought a terraced house in the peak district.
deers and badgers and canals and all sorts, its such a better option that a barratt box
Thats the point, if there isn't a 'bank of mum and dad' then the shared ownership model principally serves those who cant raise a full mortgage.deers and badgers and canals and all sorts, its such a better option that a barratt box
Housing associations are in business to build and rent property, and pocket a huge amount of government cash for doing so. Absolutely anything else is totally outside their sphere of expertise, and they are bloody useless at everything from being a landlord, to helping with sales.
When you buy a shared ownership property all you are buying is an option on buying the whole thing in the future. You get precious little security compared with just renting. Furthermore you have to pay all the HA's legal costs, and when you extend your lease you do it on their terms, because not being 100% owner, you have to go the non-statutory route. While the lease may say something like if you are responsible for some of the value uplift when you sell you will get 100% of that, in reality this is impossible to prove and you can whistle for it.
When you do sell they want their nomination period, which makes it difficult. And mortgages on part-ownership properties are a lot harder to get and more expensive than regular ones.
With all that said, if you go into it with your eyes open you can do well. If you play the long game.
In 1999 I bought a 50% share in a £90k flat in Bethnal Green for £45k. It was the only way to get a mortgage and buy somewhere on the £15k a year I earned at the time.
By 2016 prices had risen a great deal, post-olympics investment and 20 years of the area getting cooler and cooler, and for this and other personal reasons I decided to sell. I extended the lease first to remove that issue, which was quite pricey. Then I told them I wanted to sell. I persuaded them to drop their nomination period as nobody who was eligible for social housing could now afford the 50% share. Having valued it for the lease extension, that valuation also stood for the staircasing. It turned out that it was worth a fair bit more on the market at that time. I sold it as a 100% share flat on the open market, with the staircasing happening at the same time as the purchase. Again, this was expensive in legal fees, but the buyer got a regular 130 year leasehold flat and I got over half a million quid, half of which immediately went to the HA to cover the staircasing cost. On the day of exchange I had to stay on the phone with the HA to bloody make them actually do the things they were supposed to do, or the sale would have fallen through. They had been useless throughout the whole process.
So, It's a st deal, but also sometimes it can be the only deal, and therefore worth having.
HAs are staffed by people too st to work at local councils though.
When you buy a shared ownership property all you are buying is an option on buying the whole thing in the future. You get precious little security compared with just renting. Furthermore you have to pay all the HA's legal costs, and when you extend your lease you do it on their terms, because not being 100% owner, you have to go the non-statutory route. While the lease may say something like if you are responsible for some of the value uplift when you sell you will get 100% of that, in reality this is impossible to prove and you can whistle for it.
When you do sell they want their nomination period, which makes it difficult. And mortgages on part-ownership properties are a lot harder to get and more expensive than regular ones.
With all that said, if you go into it with your eyes open you can do well. If you play the long game.
In 1999 I bought a 50% share in a £90k flat in Bethnal Green for £45k. It was the only way to get a mortgage and buy somewhere on the £15k a year I earned at the time.
By 2016 prices had risen a great deal, post-olympics investment and 20 years of the area getting cooler and cooler, and for this and other personal reasons I decided to sell. I extended the lease first to remove that issue, which was quite pricey. Then I told them I wanted to sell. I persuaded them to drop their nomination period as nobody who was eligible for social housing could now afford the 50% share. Having valued it for the lease extension, that valuation also stood for the staircasing. It turned out that it was worth a fair bit more on the market at that time. I sold it as a 100% share flat on the open market, with the staircasing happening at the same time as the purchase. Again, this was expensive in legal fees, but the buyer got a regular 130 year leasehold flat and I got over half a million quid, half of which immediately went to the HA to cover the staircasing cost. On the day of exchange I had to stay on the phone with the HA to bloody make them actually do the things they were supposed to do, or the sale would have fallen through. They had been useless throughout the whole process.
So, It's a s
t deal, but also sometimes it can be the only deal, and therefore worth having. HAs are staffed by people too s
t to work at local councils though.Your left at the mercy rent increases and also maint fees
And the buyers market is small
A relative of mine worked at a we will take your house if your hands sharpish type company
And Thry wouldn’t entertain them.
My advice would be creative where you want to live and what’s affordable or get saving
And the buyers market is small
A relative of mine worked at a we will take your house if your hands sharpish type company
And Thry wouldn’t entertain them.
My advice would be creative where you want to live and what’s affordable or get saving
I think the experience of ST above was not typical: For the sake of clarity that's not to say 'I think it's not true' - but for most the sale price will not escalate like that.
It is my firm belief that shared equity is only there as a means to achieve an original sale price which is entirely unrealistic and unfortunately adds 'fuel to the fire' or ever-increasing property prices. If only the banks would stop lending so much money (ie salary multiples), and this practice was maintained over the years we would perhaps see social improvement with really affordable properties instead of a scam. As soon as the prices show any sign of 'levelling out' the banks just lend more money and force the prices up again. It was the banks that lent to the people like the OP who bought from the developer/housing assoc, but now, clearly are reluctant to do the same for the next buyers. The rich lining their own pockets with no thought for anyone less well-off.
It is my firm belief that shared equity is only there as a means to achieve an original sale price which is entirely unrealistic and unfortunately adds 'fuel to the fire' or ever-increasing property prices. If only the banks would stop lending so much money (ie salary multiples), and this practice was maintained over the years we would perhaps see social improvement with really affordable properties instead of a scam. As soon as the prices show any sign of 'levelling out' the banks just lend more money and force the prices up again. It was the banks that lent to the people like the OP who bought from the developer/housing assoc, but now, clearly are reluctant to do the same for the next buyers. The rich lining their own pockets with no thought for anyone less well-off.
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