Shared ownership experiences

[pollysproggle]

Has anyone bought this way?

DH and I are a bit stuck in a rut trying to get on the property ladder so would love some experiences from people who have gone down this route!

Yes we did about 20 years ago & it really helped us. We sold the house 3 years later (growing family) & paid the 25% back to the housing association. We were then in a better position to buy without the 25% from the housing association.
The only thing I regret was not getting the house we wanted (the bigger house that was detached etc,) & instead bought small.
Our scheme was one that allowed us to buy on the open market & the housing association paid 25% of the house,vwe paid nothing on that until we sold. Just wished we'd bought a bigger house instead of having to move again 3 years later. Even with this though it was a great scheme & helped us. We're now almost mortgage free & are looking at moving again, but only because we want to move areas.

They use ‘independent’ surveyors but I found they upped their price on them selling but lowered on you selling. We never bought outright and they were awkward when we can to sell and allowed loads of people to come round that couldn’t get a mortgage. I lost my shit and said no to people who weren’t ready to move. It was ok, it meant I could afford to live alone rather than in a shared house but would look at alternatives first.

Hi!

We moved into one in March! Anything specific you wanted to know? Xx

Dp bought his in 2008 (50%share). When the market dropped in 2012, he bought the second half and the freehold, really cheap. It worked well for him as he wouldn't have otherwise been able to afford to buy.
When we sold it in 2017, he had made a fair bit of equity on it and as a result we have bought a much bigger house than we could otherwise have afforded.
BUT... the housing association were absolute arseholes when we came to sell. Although DP owned the freehold and 100%, the deeds stated we had to ask permission from the housing association and they had to agree that they didn't want the chance to buy it back. It took them 4 months!!! And a huge amount of pushing from us to eventually get a 3 line email saying 'as you own the freehold you can sell it', well yes we told you that 4 months ago!
In the meantime we had an interested buyer, who was losing interest and thought we were taking the piss and missed out on a house we loved.

So my advice would be that they can be an excellent way to get on the housing ladder and DPs certainly benefited us, but read up on the legal implications thoroughly of when you will eventually sell BEFORE buying it.

Thanks for the replies!

It's definitely the selling on aspect that's most concerning as this would be a properly for right now and not to live in forever although we'd like to think the area would be forever.
It's a 3 bedroom house and we're soon to be a family of 5 so in the future would like a bigger property but we rent a 3 bed house now and it's fine.
We're in a situation where our savings would allow us to use this sort or scheme and buy now or the alternative is another 2-3 years adding to our savings for a better deposit whilst high London rents swallow up a big chunk of our money each month.

DH and I are just sick of handing over 1.5k a month in rent quite frankly in an area we don't like for a house that's not ours and these offers seem so tempting and affordable.

Are you sure you cannot afford anything without the shared ownership scheme? Some people later say they wished they had bought slightly smaller or in a less good area and accepted what they could afford at that moment with hindsight.

The affordability and often the shiny newness of the new build is tempting and it encourages people to just think about the monthly affordability rather than the longer term issues. You absolutely must look at both and talk to people who've been in this particular scheme who've then sold on, about any issues.

Realise it can be the only buying option for some people - and fair enough, you do what you have to do. It's a bit like having to have a pre-pay meter which will cost you more long term, but it's necessary to have electricity if you can't be accepted for monthly payments.

How financially savvy and confident are you? How much of the shared ownership would you be getting? I guess if it's a small share you probably can't afford to buy without help, but if it's a big share you will take on, I suspect that you might be able to find something without the scheme...especially now if you can wait 6-9 months as prices are likely to fall and you could benefit as FTB. Prices are coming down, so be very sure that anything you agree with a housing association etc reflects prices are falling - although they will fall on the HAs share as well.

Def take the broader and longer view and not just the short term affordability view.

if you can afford to buy without it I would do that, we used the scheme (as previously posted) but if we didn't need to we wouldn't have, you still have to pay rent on the percentage that the housing association own? (we didn't as we were on a different scheme that I don't think they do any longer), mortgaged purchasing especially at the moment where they are so low in interest rates is the best way to go if you can

In the past few years shared ownership homes have been monetised by house builders/councils/large investment companies.
Be very very careful.

I bought my SO house in 2018. 3 bed semi. We're in an area where house prices vs salary are the worst in the UK. We had the deposit to buy a 3 bed new build using help to buy scheme, but not the salaries to get a mortgage. We were 2 years off buying a whole house but obviously couldn't forecast that, and to be honest I no longer like the idea of a HTB loan. We are hoping to buy the other 50% this year provided the house value hasn't dropped and our LTV is within the criteria of our lender.

The advice I give any one buying SO is: do you have the means to buy it outright or move to a property that you can own outright? By this I mean, are you early in career and you have a greater earning potential, or can you afford a mortgage you can pay down quickly, to get enough equity in your share to get a mortgage for the 100% or other property?

If you do say yes to the above, shared ownership could be a good step. You want to make sure you get a freehold at 100% ownership of the property (not applicable to flat) and that you are not capped on your share (some cap ownership at 80% etc) this is because you want the house to be yours if you buy 100% and also at sale to be able to sell on the open market. There are lots of T&Cs to read up on in the contract.

Note, also, if you go to sell an SO, and you sell for less than the value given at valuation by the housing association survey, your share has to cover the loss to the HA. E.g. if you own 50% and you want to sell. House is values at 200k. You accept and offer of 190k. 50% of the valuation in 100k, from your sale you owe HA 100k. You would only take away 90k from the sale. In extreme cases this could significantly reduce your equity and even put you in negative equity. Effectively unable to sell.

This brings me onto my next bit of advice. Only buy SO in areas with high demand - it makes resale easy and SO properties aren't normally negotiable to SO buyers, so the above is unlikely. In less popular areas you can sit on the market for a long time.

Third bit of advice, choose a good housing association to buy with. This can make or break you SO experience. We have a good HA, they are their for their residents. Not perfect, but they listened, our rent increase YoY was reduced retrospectively because we complained and they listened. The other HA in the area is awful for SO and so are some of the big national SO ones.

Also consider:

Are you a ftb and close to 100% within 1-2 years on a house with no compromise on size etc?

If you say yes to the last question, you would probably end up spending as much on fees and stamp duty buying and selling in a short time, as you would on rent to save for 1-2 more years.

And remember if you do SO, rent increases YoY. If you are struggling with the costs when you buy, you can be priced out. Some people have had to sell and go back to rented because they couldn't afford the rent increase on the SO after 5 years of increases. When we bought, we made sure our salaries at the time would not be stretched after 5 years of rent increase and that we could extend our mortgage term to lower monthly payments if needed.

I hope that helps. For us it's been great and we are glad we did it.

Yes, I bought my first flat via shared ownership over 12 years ago.

Selling it was a pain in the arse as the HA are very slow to do anything and require a lot of chasing. You have to use a surveyor on their approved panel and in my experience they seem to undervalue the properties significantly (in my case by about £25k, in the basis that "property prices were falling" (this was in 2014 where property prices in my area had increased year in year and it was very much a sellers market).

They also charge the same selling fee as an estate agent, however, they literally provide a pack and do a basic affordability assessment. No professional pictures, no attempts to drive the price up (because it's fixed) and they don't do the viewings. So a bit like purple bricks but for a high street agents price.

We’re also a family of five, living in south London. We’ve just bought our first property in Feb - a two bed flat. Kids are young enough for sharing not to be an issue.

For a really long time, I assumed we’d only be able to afford SO. When we finally got to looking at it last year, I was really put off. Agree with a PP who said it’s a once affordable housing scheme that has now become monetised by housing associations and developers. We looked at a 3 bed, 3rd floor flat. It was on for almost 600k. 3 bed semis with massive gardens in nice areas of where we live go for less than that.

We asked about purchasing 40%, thinking you could go for what you could afford. Went through all the finance checks and the woman literally said to me “my computer says you can afford 72% so that’s what you have to buy.” When you factored in sky high ground costs and additional rent, it was nearly 3k a month. Her computer might have said we could afford it but we were far from comfortable with paying that on housing a month! She would t budge when I asked if there was no way we could purchase a much lower percentage and rent the rest. I suspect the property developers are looking to offload as much as possible. Far from the affordable London housing scheme it used to be. Maybe 10, 12 years it was a great helping hand onto the property ladder but not now. We still would have needed a big deposit and we just thought - fuck this. With the same deposit, we can buy a smaller place on the open market and own all of it for much, much less.

Have you actually gone through all the checks for the place you’re looking at? The flat I enquired about was detailed as 40% share. Nobody, in all my years of dipping in and out of researching SO, has ever said they control how much you buy and if they think you can afford more, they’ll push you into that share, regardless of what it’s marketed at.

This combined with the incredibly inflated prices of SO properties, I would think very carefully about doing it.

We looked into doing this but, like you, we knew we could afford a house the normal way in a few years so we stayed put in rented for now.
Mainly, because around here they're all leasehold, so even if we found one we could stay in for a long time we would either not own or have to buy the freehold.
Secondly, there was no point in us buying a house that we'd move from in a few years and have to pay stamp duty on the next house plus all the other associated costs again.

I also really really dislike that you own, say 50% but are 100% liable for any repairs/work that needs doing.

Caution - long post!

I am a shared ownership tenant, and shared ownership has been the biggest mistake of my life.

There's this BBC investigation into shared ownership that might be of interest.

And the Sunday Times did a 3-page spread on the scheme in 2018 (behind a paywall, sadly www.thetimes.co.uk/article/shared-ownership-scandal-dbl3bfj8f )

By necessity I have had to come to understand the scheme very well indeed. I've got a summary here that I share with anyone who asks me about shared ownership. To the best of my knowledge everything I say is factually correct. I hope this is helpful to you:

1/ What's most worrying about the shared ownership scheme is that it's not actually ownership. You do not have a "a foot on the ladder." All you have is an assured tenancy for the duration of the lease. This means that if you get into eight weeks arrears with either your rent or your service charge, the housing association can and will take you to court. Shared Ownership falls under the Housing Act 1988, which gives the courts no choice but to allow a repossession order - the HA will take the entire flat back, and will not give you back the money you paid for your share, much less the value of the share at the point the repossession takes place. You can lose everything. See Richardson v Midland Heart 2007.

2/ After that, there's the problem of service charging. Service charge is mandated under the terms of the lease, but the level of service is not. You will not be given a service level agreement. This means that you will have to pay service charge but the service you get in return is variable at best, and non-existent at worst. It is routine for housing associations to be lax about repairs and maintenance of their properties, and if tenants wish to complain they have to take legal action for breach of lease. If you take legal action, there is no mechanism by which any judgement you may win can be enforced, and it is possible that the HA can add their legal costs to your service charge going forward. Service charge in residential buildings is entirely unregulated, in both housing associations and in the private sector.

3/ And then there's staircasing - Every time you staircase you have to go through the same process as when you bought your first share. You must pay your own legal fees, and, as far as I know, those of the housing association too. Unless you staircase to 100% you still just have an assured tenancy.

4/ After that, there's lease extension and marriage value to consider. Shared Ownership flats usually come with a relatively short lease, 99 years. Once a lease gets below 80 years, most lenders will not give a mortgage on it. So, if you want to retain the value of your shared ownership investment, you will need to extend the lease. Shared Ownership lease extensions are not subject to law in the same way that private residential leases are. So, you will have to negotiate with the HA, and rely on their good will in terms of the clauses they include. You must pay their legal fees and yours. Their legal fees are determined by the length of the remaining lease - the shorter it gets, the higher the cost. The legal term for the cost of lease extension is "marriage value" and it can be up to £20k or more once your lease gets close to 80 years.

5/ And then there's housing associations themselves. There are some good ones but not many. Before you buy a shared ownership tenancy, try putting the name of the housing association that will be your landlord +review into google and see what comes up.

Hello,
Thanks for your advice on this tread, regarding buying a shared ownership flat.
Can I ask a question? How do you know which HA is good or rather better? I checked reviews on Trustpilot and Google’s, but almost 90% of all have bad (!) ratings. Specifically, I’m in torn between Peabody and Clarion to choose from. Both flats look very good in desirable areas.
Have you got any views on these HAs? Your advice will be very helpful on making my decision.
For more information about these two flats,
Peabody one has got a very high rent £900 +Service charge £237 but relatively is a new built (2017)
Clarion one has a very low rent £250 + service charge £370 ( as it has a large beautiful communal garden). This one , I will need to get a small sum of mortgage and it works out roughly the same amount of money I’d need to pay monthly.

Any advice will be greatly appreciated.
Xx

A dd’s partner bought a shared ownership of a HA 2 bed house quite a long time ago. TBH I don’t know whether he’s ‘staircased’ up since, though quite likely. Dd spends much of her time there and they both seem perfectly happy with it. Nice house with garage and garden.

The great advantage over renting is presumably that you can’t be kicked out by a LL who’s suddenly decided to sell, and you can decorate as you wish.