When you buy a shared ownership house it is important to understand that the property will be leasehold and what this means. Your appointed shared ownership solicitors and housing association should be able to give you more details.
MPs have recently claimed that the leasehold system needs to be reviewed. In light of this, we thought it would be helpful to explain what leasehold is and what it means to shared ownership homes.
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Some leasehold statistics
We have discussed further down in the article the proposed changes to this, which were made in January 2021.
According to the leasehold dwellings report for England in 2020-21, there are expected to be 4.86 million leasehold properties. This equals to 20% of the housing stock in England. 2.82 million (58%) were owner-occupied, whereas 1.79 million (37%) were privately owned and rented out in the private rental sector. The remaining 256,000 houses (6%) were held by social landlords and rented out in the social rental sector
What does leasehold mean?
When you buy a property it can be freehold or leasehold. Freehold means that the homeowner owns the property and the land that it is on. Leasehold means that the property is ‘leased’ to the homeowner often for a set period.
You will need to find out what opportunities there are to extend the lease. If you live in a leasehold property, you will be expected to pay ground rent. Also depending on the property type, service charges as well.
Are shared ownership properties leasehold?
Most shared ownership houses are leasehold properties. The occupier owns a share of the home. The remainder, as well as the land, belongs to the housing association.
When you live in a shared ownership home, you will pay your mortgage on your share. You will also pay rent to the housing association for the remainder. You will also pay a service charge. A service charge is the cost for the upkeep of the grounds and any other costs such as administration.
You can increase your share of a shared ownership property, this is called staircasing. You may be able to buy your shared ownership home outright. However, you will need to ask the housing association if you can also buy the leasehold. This will depend on many things including the type of property your shared ownership home is.
If the housing association are happy for you to buy the leasehold, your property would then become freehold. However, the housing association are not under any obligation to sell it.
What do I need to do about the leasehold on shared ownership?
If you are buying, or considering buying a shared ownership home, you should ask the housing association at this stage whether you will have the opportunity to buy the leasehold later on. Discuss this with your solicitor who will be acting on your behalf and they should be able to get an agreement in writing.
It is also useful to find out the length of the current lease and what the options are to extend it.
We have teamed up with reallymoving.com to offer shared ownership solicitors quotes. Get your free shared ownership conveyancing quotes if you are moving to a new shared ownership home, selling your current shared ownership home, remortgaging or looking to staircase (buy a bigger share of your existing shared ownership home).
If you do not have an agreement, the housing association could refuse to sell the leasehold later on which could impact the value of your property as well as creating delays when you do come to sell.
If you need to find out more, there are some helpful sites available online, such as The Leasehold Advisory Service.
Once you have made your decision use our moving house checklist which lists the things you need to do when moving house.
New leasehold changes
Under new plans the government announced in January 2021 that it is to plan legislation to allow leaseholders to extend their lease to 990 years with 0 ground rent.
They have also suggested establishing a Commonhold Council. Commonhold is an alternative to leasehold which allows people to own the freehold of individual properties in a building or estate. Unlike leasehold, there is no limit on how long you can own the property for.
This looks like it will change how shared ownership works, make sure to keep an eye out for any announcements.
Shared Ownership: Key Topics
- What questions should you ask when viewing a shared ownership property?
- Is shared ownership right for you?
- What is the downside to shared ownership houses?
- What does shared ownership service charge cover?
- What are solicitors fees for selling shared ownership property?
- Buying or selling shared ownership what are the costs?
- Shared ownership vs renting what will you do?
- How does shared ownership work when you sell?
- Is shared ownership only for first time buyers?
- How does shared ownership staircasing work?
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