When you buy a shared ownership property it is important to understand that the property will be leasehold and what this means. 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.
What is leasehold?
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 period of up to 125 years. If you live in a leasehold property, you will be expected to pay ground rent and, depending on the property type, service charges.
Are shared ownership properties leasehold?
Most shared ownership properties 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 as well as 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. If you decide to buy your shared ownership home outright you will need to ask the housing association if you can also buy the leasehold.
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.
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 https://www.lease-advice.org/.