The COVID-19 pandemic has made stepping onto the housing ladder even harder for first-time buyers, with a 12% fall between July and December 2020, but the changes to the shared ownership scheme means it could now increase the number of first-time buyers in the UK.
In September 2020, the Government announced its Affordable Homes Programme, which has a new model for shared ownership to help more UK citizens onto the property ladder.
Key changes to shared ownership are:
- The minimum share of a property you need to buy has been reduced to 10% from 25%
- The rules around ‘staircasing’ to increase the percentage of the property you own have been revised (see ‘What is staircasing’ below)
- The property landlord will now be required to assist with repairs and maintenance for the first 10 years of your ownership
- When selling a shared ownership property, the landlord will now only 4 weeks rather than 8 to find a buyer before you can choose to sell on the open market
If shared ownership sounds like something that could help you step onto the property ladder, then read on as we’ve gathered all the key facts you need to know.
What is a shared ownership?
Shared ownership allows the buyer to purchase a share of a property with the rest usually being owned by a housing association. You will then pay a below-market rate of rent on the portion of the property owned by the housing association.
Shared ownership allows people who cannot afford the deposit to buy a property outright to get on the housing ladder and start building equity, while also paying less in rent than they would if they were simply renting an equivalent property.
In the past, the minimum share of a property you could buy with shared ownership was 25%, but the new rules will allow people to buy a minimum share of 10%. This is intended to help those on a lower income to be able to get on the property ladder.
What is staircasing?
When a property is purchased through a shared ownership scheme, the purchaser might have an opportunity to purchase additional shares of the property (depending on the lease terms). This is known as staircasing.
The bigger the share of the property you own, the less rent you will need to pay. It is possible to reach 100% shares of the property, where you will become the outright owner of your home, meaning that you no longer have to pay rent. But you could possibly still need to pay ground rent and service charges, depending on the type of property.
The previous shared ownership rules only allowed staircasing to happen in 10% increments each time. Under the new scheme, purchasers of a shared ownership property can now instead increase their share of the property by 1% increments each year. This is called gradual staircasing.
Gradual staircasing only allows a maximum increase of 1% each year and is only offered for a minimum of 15 years. The legal and mortgage fees for this will be heavily reduced.
What are the changes to repair and maintenance on a shared ownership property?
If there is a problem with the property in the first 10 years of ownership, the landlord or housing association will be responsible for the repair and maintenance costs, up to £500 every year.
Anything above this cost, the property owner is responsible for paying. If the £500 is not used in any given year, this can roll over to use the next year but no further than this.
What are the changes to the pre-emption clause and nominations period?
Before the new Government scheme was introduced, when a shared ownership purchaser wanted to sell their home, their landlord was allowed an 8-week period where they had exclusive rights to find a new purchaser. If they could not find a new buyer after the 8-week period, the property would be placed onto the open market, either selling through the shared ownership market or to a normal buyer.
The new scheme benefits the shared ownership purchasers by giving them the opportunity to end the 8-week period at 4-weeks. Meaning if they wanted to have a private or open market sale earlier, they could do so. This gives the owner more control over the resale and can also be a quicker process overall.
What’s the minimum mortgage share can I get for a shared ownership?
To qualify for a mortgage on a shared ownership property, you will normally need to be buying at least a 25% share of the property. This has not changed as a result of the new shared ownership rules.
Our experienced solicitors in Hoddesdon or Broxbourne can help you with your shared ownership property purchased
If you are interested in purchasing a shared ownership property, our friendly conveyancing solicitors can assist you. For a free, no obligation conveyancing quote or to find out more about how we can help you, please get in touch:
Telephone: 01992 464552