Where the Shared Ownership property is being sold by a Housing Association, the terms of the lease are strictly controlled by the Housing and Communities Agency and as a general rule, have more protection for the buyer of the Shared Ownership property.
As well as protecting the owner of the Shared Ownership property, the standard Homes and Community Agency leases offer more protection for the mortgage lenders, and as a result, mortgage lenders are far more likely to agree to lend on a Shared Ownership property provided by a Housing Association or other Registered Social Housing Providers.
In order to purchase a Shared Ownership property from a Housing Association, the buyer needs to register either with the Housing Association or their local “Homebuy Agent” or both and to be able to meet the eligibility criteria.
The buyer will also have to obtain a mortgage from a lender who lends on Shared Ownership properties (as not all mainstream lenders will lend on Shared Ownership properties).
Shared Ownership Schemes are not available to everybody. In order to qualify for a Shared Ownership Scheme you must:
- Have an annual income of no more than £60,000 per annum for a family; for individuals no more than £18,000, and for couples no more than £50,000.
- Be able to demonstrate that you are unable to buy a property on the open market
- You must have sufficient funds to pay for the professional fees associated with the purchase, the stamp duties and any mortgage arrangement fees that may be applicable.
- Have sufficient income to be able to afford both the monthly payments on your mortgage as well as your monthly rent
- You must have satisfied any financial Court Orders such as CCJs, creditor agreements and be clear of bankruptcy.
- You must be a member of the EU or have “indefinite leave to remain in the UK”
- You must not be in rent arrears or in breach of an existing tenancy agreement
You must be a first time buyer (this requirement may be varied to take account of medical needs or such circumstances such as an increase in family size
Selling a Shared Ownership Property
When selling their share in the property, the owner of the property will face certain restrictions on the sale of property. These are typically:
“The Right of First Refusal”- The owner of the property must first offer the property to the Housing Association who will then choose or nominate a suitable buyer. This nomination process typically takes around 8 weeks (“the nomination period”). The length of the nomination period may vary between Housing Associations. If at the end of the nomination period, the Housing Association is unable to nominate a buyer, the owner of the property may then sell the property on the open market. As a general rule, the Right of First Refusal applies even after the owner of the property has purchased 100% of the value of property for a period of 21 years from the date on which 100% ownership was achieved.
“Administration fee” Housing Associations will generally charge an administrative fee for dealing with the sale of the owners shares in the property. Administration Fees of one-to 1.5% of the Sale Price or the “open market value” whichever is the higher are not untypical.
“Valuation fees”- When selling their share in the property, the owner of the property must apply to the Housing Association to have the owner’s share in the property valued and can only sell their share at the price set by the Housing Association’s valuer. The owner of the property has to pay for the valuation costs.