SHARED OWNERSHIP

[20questions]

PANORAMA - All about Shared Ownership - this Wednesday 25th November at 7.30 pm.
If you or anyone you know is thinking about buying a shared ownership property, this programme is for you!
(Should come with a health warning..)
The new shared ownership model is an ugly beast..

What is the logic behind the SO person paying 100% of the service charge, 100% interior property repairs, 100% communal property repairs and 100% of the sink fund? I think I'm right in saying the 'landlord' earning rent on their portion isn't paying any of those things, right?
If this was a stardard property the landlord would pay a proportion of those. The 'landlord' certainly benefits from all these things when the property is re-sold and in maintaining its long-term value.

@DianaT1969 Unfortunately it's an unregulated market. Imagine "owning" a 25% share and being landed with an extra £300 a month added to your service charges for a waking watch/being landed with a bill for £30,000 per flat, to remove cladding..
So utterly wrong..

[quote 20questions]@DianaT1969 Unfortunately it's an unregulated market. Imagine "owning" a 25% share and being landed with an extra £300 a month added to your service charges for a waking watch/being landed with a bill for £30,000 per flat, to remove cladding..
So utterly wrong..[/quote]
None of those things are anything specifically to do with Shared Ownership as a vehicle, though; except that SO properties are leasehold until, in the case of houses, the owner purchases 100%, though flats always remain leasehold.

Leasehold flats will always have service charges whether SO, private or commercial. And freeholders are obliged to provide statements of account for how charges are spent, and the charges can be appealed. Plenty of people who own their entire flat and bought it outright are potentially on the hook for cladding.

SO as a home ownership vehicle may have elements where practice and process needs to be improved, but the main complaints against it generally seem to be that people saw it as the only or best way to get a foot on the ladder, didn’t really pay much attention to whether it was the best option available to them, and then later decide that they wish they’d made a different choice. That isn’t a scam, or consumer unfairness.

There is a lot of misunderstanding around SO, and few solicitors take the time to inform their clients of the bigger picture. It's important to differentiate between new and old schemes (the latter tend to be much better value), and also between flats and houses. My (old scheme) SO house had no service charge and a very low rent, more recent SO flats have high service charges and rents comparable to those on the open market. One is a brilliant way of getting a step on the housing ladder, the other will be a burden for years to come.

@ComtesseDeSpair - yes I do agree that you could say this about leasehold in general. However SO is marketed as "affordable" housing. Would be buyers, often inexperienced first time buyers, are encouraged to use the developer's "recommended" solicitors, either by being offered incentives or told they "are more efficient as used to SO conveyancing", or just downright bullied and told they have to. They often don't see sight of the terms of the lease/TP docs until the 11th hour, let alone understand them. They trust the conveyancer who is supposed to be working for them - the client. In fact their client is actually the developer. Total conflict of interest.
SO/New Build Estates have become a highly monetised model and has been cleverly developed and finely tuned to extract as much of an income stream as possible, to - in the words of investors and those who advise them - "to sweat the assets fully". It's disgusting and will cause huge problems for the future generation who think they own (part of) their home..but don't..

@Hayeahnobut I agree with you.

We were told things by the builder that were not true. We were told that the leasehold was 999 years and would revert to freehold on completion of the building of the estate.

When our solictor got hold of the documents they said it was a 125 year lease and would not revert to freehold.

We were outright lied to by the sales office of the builders. DH and I were pretty pissed off about it.

We did decide to proceed anyway, but were pleased that our solictor gave us the opportunity to at least make an informed decision.

So I know for certain that building companies are outright lying about certain aspects of shared ownership because it happened to us.

I think the difference between shared ownership problems and more general issues is that shared owners are much more vulnerable to problems. Negative equity is bad, but if you are shared owners the problem is more acute. You can't just let out your property for example if you have to move. So its like negative equity on steroids.

You can be caught up in problems that affect both owners and renters.

Whilst it has the potential to offer the best of both - a secure home without the worry of your landlord evicting you at the fraction of the price - it can also trap you with unaffordable rents and fees but no way to move somewhere cheaper. And that makes the experience of shared ownership different to either renting or full ownership.

I watched the programme, I was quite shocked tbh as I wasn't aware of the extent of the problem. I think it's awful how the housing associations shown were taking advantage of it, particularly the leases and service charges, how stressful. As they said they're aimed at the more financially vulnerable so it should be more carefully thought out.

@comptessdespair - my question really is why doesn't the 'landlord' of SO (the company receiving rent) pay anything towards the fabric, maintenance, communal works, sink fund etc. If a boiler breaks in standard rented accommodation, the landlord pays for it. If window frames rot in a standard rented property, the landlord pays. If roof tiles fall off, the landlord pays.
Why doesn't the 'landlord' of SO pay anything towards these costs? I understand that the 25% / 40% ownership person pays it all. Is that correct?

There is so much more than a 30 minute programme could show.
There are over 19,000 members of the National Leasehold Campaign Facebook group with many horrific stories - many, many, but not all - shared ownership victims.
The Housing Associations are the very worst culprits because being a "charity ", they are exempt from even the lightest of regulations.

because the point is the person buying wants to own a home. when you own a home you pay for the upkeep of it. it just helping them get in there in the first place, not a hand hold for the rest of their lives.
s/o doesn't start make housing associations money for around 35-40 years on the rental income (outside of london) - there simply isn't the funds to pay for all the repairs long term. the new changes to the s/o model (whereby associations will pay 500 a year towards repairs costs) is already going to make a of schemes unviable and less houses will be built as a result.

The landlord benefits from any increase in equity. They have guaranteed income from a long-term tenant. No "empty" rental periods, no cost of finding new tenants. The person in need of affordable housing pays all the costs for maintaining the property. The landlord earns market rate, and additional income from inflated service charges. They will earn on the lease renewal. The deposit of the SO 25% / 40% tenant also paid a substantial amount towards their land and build costs.
Hmmm

associations have to get nearly 40k per unit in grant from Homes England just to match the cost to build the property. its really not a valuable asset for them. the subsidised rent is so low it takes 30ish years to break even.
a standard Rent property, even affordable rent is much better option for the housing associations.

@Liftup Are you saying that those who purchase SO, should bear the responsibility for the social housing? Because that's exactly what's happening. The SO "lease-renters" are being made to subsidise the social housing flats. And what about next year when people are sold the dream of home "ownership" by being allowed to buy 10% of the property. So if the roof fails or the heating system fails (through shoddy building - though go prove it!), then they should pay the full 100% whack? How about those who struggled to buy 25% of the lease and have been handed a £30,000 bill to fix the cladding.
Sorry - I cannot agree with you.

So we have just watched this, our lease is 94 years (99 when we started). Slightly terrified by the lady who had to find £12800+ to extend her lease hold to be able to sell.....

@clouds87 Is your freeholder a Housing Association? If so, not all HAs allow you to extend the lease unless you have staircased to 100% ownership so maybe check that out.

Gosh, I see from LiftUp that the landlords of SO get £40k government grant per unit too.

@DianaT1969

What is the logic behind the SO person paying 100% of the service charge, 100% interior property repairs, 100% communal property repairs and 100% of the sink fund? I think I'm right in saying the 'landlord' earning rent on their portion isn't paying any of those things, right? If this was a stardard property the landlord would pay a proportion of those. The 'landlord' certainly benefits from all these things when the property is re-sold and in maintaining its long-term value.

our housing association, are responsible to maintain the communal area, decorating it every 5years, cleaning, lift repairs, roof, window frames. even if you pay rent outright 100% with HO you still need to pay for service charge.

@dianaT1969 They get 40k per unit because the cost of building it is more than they can sell it for. they literally can't build without the grant.

Everyone with a short lease should look to quickly extend the lease ( as should be advised by your own solicitors) the cost of which will be minimal/ under a couple thousand if you don't leave it to go under 90 yrs. the lady on the bbc programme was blaming the housing association for not knowing this but it really should have been her solicitor advising on this if she hadn't researched what owning a leasehold means.

@20questions on a new build you have 10 -12 years cover for major defects such as those that you have mentioned. for more minor items you will have 500 a year paid for by the housing association. you should also have warranties against any white goods registered by yourself then, and your own home insurance.
then beyond that yes as a 'normal' homeowner you should pay for your own wear and tear repairs.

the cladding is a totally separate issue and isn't a shared ownership specific one.

@gillianan To quickly extend a short lease isn't possible because you have to have owned the property for minimum of two years before you have the "right" to do so. To extend a longer lease, it can cost you £2000 - £3000 in legal fees and surveyor's fees alone as you have to pay both your fees and the Freeholder's fees. And that's without the cost for the actual extension.
With regard to the new build warranty, the NHBC is in bed with the developers. There are so many exemptions to the cover, they often claim "tolerance", and claims have got to be over a certain amount of money before they will even think about it. They will find every which way to wriggle out of covering defects and you can end up fighting them for years. The stress is unbelievable.
Housing Associations are a disgrace. When they took over from the council on the understanding they would be responsible for the subsequent 10 years of maintenance and repairs, they let the properties fall into disrepair. People are left living in damp, mouldy and sometimes dangerous conditions, boilers not working etc. The fabric of the building is neglected as well. This affects both social tenants and owners/shared owners - think Clarion, L @ Q , Genises etc. Then when they eventually get round to doing something, the owners and Shared Owners are presented with eye watering bills.
The picture you paint sounds lovely. What's not to like? However the reality is a different story.
It is virtually an unregulated and financially uncapped market hence they can do what they like.
Finally - the cladding may be seen as a separate issue. It's not. It falls under exactly the same leases that leave the Shared Owners and leaseholders with full financial responsibility.
I'm not saying this is for all properties in these schemes - just the vast majority.
These government backed schemes were devised as income streams and someone else's investment. Not yours sadly.

Hello everyone. Shared ownership tenant here. This is what I know about the scheme. I hope this is helpful for you all :)

Firstly, shared ownership is not ownership. All you are buying 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. The law 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.

Secondly, rent and ground rent will go up as per the terms of your lease, and any changes in the law around rent do not usually apply to shared ownership properties. Housing Associations can charge pretty much what they want.

Thirdly - 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 which can frequently escalate rapidly for little or no apparent reason, but the service you get in return is likely to be 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 their complaints procedures often fail to resolve tenant issues satisfactorily. So, 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.

Points Four and Five - Staircasing and lease extensions.

Every time you staircase you have to go through the same process and you did 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.
You buy a share at the current market rate, and unless you staircase to 100% you still just have an assured tenancy.

Lease Extensions. Shared Ownership flats usually come with a relatively short lease, 99 or 125 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 statutory lease extension 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. The marriage value (ie the amount you must pay on top of legal fees for a lease extension) is determined by the length of the remaining lease - the shorter it gets, the higher the cost. It can be up to £20k or more once your lease gets close to 80 years.

And then we get to housing associations themselves. They are not charities, whatever they may say. They are "registered societies" - which means that they are regulated by the FCA, not the Charities Commission. The FCA does absolutely nothing in terms of regulating housing associations. There is also the Regulator for Social Housing, which is a government quango that regulates housing associations, and this is necessary because of the amount of public money they receive. The government sets out the terms under which the RSH operates, and they, literally, can do nothing unless and until there is a direct risk to life. For everything else, the RSH is very hands-off. The Housing Ombudsman will investigate complaints if you have exhausted the HA's own complaints procedure, and have also written to your MP. However, HAs will shut down a complaint without ever investigating whether they have addressed it, so oftentimes a complaint against a HA ends up going full Kafka without anything getting resolved. All of this means that Housing Associations are, pretty much without exception, awful organisations. If you put [name of any housing association +review] into google, you will see what I mean. There may be good ones, but they are generally few and far between.

I hope this information is clear but please feel free to come back to me if you have any questions, and I'll try and answer them as best I can :)

if you Google the housing association im with there are about 20 loud negative reviews.but they manage 50,000 properties. so whilst those 20 have also set up Facebook pages and twitter accounts to complain it's hardly representative of the the huge majority. shared ownership here sell houses on 999 year leases - the service charge is £3.50 a week ..

People living in Central London in a shared ownership highrise flat with High service charge because they're paying for lifts, gardens, concierge
etc because they can't afford the £700k plus outright is not "shared ownership" model seen in the majority of the country and it shouldn't be used to put other people off a scheme that helps so many.

I’ve been very fortunate with mine too. I’ve been in my shared ownership for 6 years and It’s meant I could live in a beautiful flat within Zone 2 London at a fraction of the costs of renting privately. When my partner moved in, my housing costs were only around £200 per month! Unheard of in central London. It’s a fairly new one-bed new build so I haven’t paid much for upkeep (certainly less than the costs associated with moving from rentals every couple of years) The value of my share has risen and I could now easily staircase to 100% if I wanted to. My friends have just bought theirs outright without problems. But we’ve saved so much money living here that we are now in a position to buy a 3 or 4 bed house in a decent part of London. The right SO scheme can be fantastic for people like my partner and me who don’t have family help or huge city salaries for deposits.