Shared Ownership

One way of getting on to the property ladder is to purchase a Shared Ownership property - in these cases the freehold (the "bricks and mortar") remains in the ownership of a Landlord (either local authority or Housing Association) who grants a Shared Ownership Lease of a percentage of the equity in the property. 

Buying such a lease means you effectively own the percentage of the equity within the Lease and pay rent to the Landlord on the percentage that they retain. In due course you can purchase further shares in the property up to 100% of the property (do note that some schemes limit the amount the upper percentage to 80%). The purchasing of further shares is known as "Staircasing". 

A shared ownership lease refers to the Gross Rent - being the full rent on the property - and Specified Rent - the proportion that you will pay on the percentage of the property retained by the Landlord. 

It is possible to buy a shared ownership lease on both freehold (houses) and leasehold (flats) properties. At final staircasing of a leasehold property you will obtain the leasehold title of the flat. 

Stamp Duty is calculated on the premium of the property. You can elect to either pay on the initial Lease premium and rent (if the premium is less than £125,000 there would be no Stamp Duty payable but you may have to pay when purchasing the final staircasing 100%) - you can elect to pay on the full market value of the property at the outset and would then have no further liability on further purchases of shares. We can advise you on this. 

There are a number of things to consider:

1. You will need to be approved by the Landlord - if you contact us as soon as you are approved we can advise on the next steps

2. Your Mortgage lender needs to be aware of the initial percentage and rent that you are paying. Be aware that if the upper percentage is limited (to 80% for example) some lenders will not lend on these schemes.  Most shared ownership leases are on a Homes & Communities Agency standard form. This includes Mortgagee Protection clause which allows the lender to purchase the balance of the Lease in the event that you surrender the lease. 

3. The Mortgage offer needs to be formally approved by the Landlord. This is something that we arrange as part of the work on your behalf. 

4. At completion you will often be required to pay a proportion of the Specified Rent for the remainder of the month of completion and a further month in advance. There is also likely to be Notice fees (either notice of transfer and/or notice of charge) payable to the Landlord 

5. Be aware that there may be restrictions on future re-sales as any buyer will need to meet the Landlord's requirements / be approved; the buyer will need to go through the same application process as you do! 

Newbuild properties 

  • Most new developments have Affordable Housing schemes sold under Shared Ownership leases
  • On a newbuild property there is likely to be a Document fee (this can be up to £200) payable to the Landlord's solicitors for the production of the Lease documents. 

Existing Shared Ownership properties 

  • Where there is an existing lease, we will need to ensure that the current lease meets the requirements of the current HCA standard 
  • Landlords will have particular requirements where an existing lease is transferred. It may require additional Licence to Assign granted by the Landlord. It may be possible to have a staircasing of a further share at the same time. 

If the property is a leasehold flat or freehold on an estate where there is a management fee payable be aware that you may also be required to pay a service charge or management fee in addition to the Specified Rent.

One way of getting on to the property ladder is to purchase a Shared Ownership property - in these cases the freehold (the "bricks and mortar") remains in the ownership of a Landlord (either local authority or Housing Association) who grants a Shared Ownership Lease of a percentage of the equity in the property.

Buying such a lease means you effectively own the percentage of the equity within the Lease and pay rent to the Landlord on the percentage that they retain. In due course you can purchase further shares in the property up to 100% of the property (do note that some schemes limit the amount the upper percentage to 80%). The purchasing of further shares is known as "Staircasing".

A shared ownership lease refers to the Gross Rent - being the full rent on the property - and Specified Rent - the proportion that you will pay on the percentage of the property retained by the Landlord.

It is possible to buy a shared ownership lease on both freehold (houses) and leasehold (flats) properties. At final staircasing of a leasehold property you will obtain the leasehold title of the flat.

Stamp Duty is calculated on the premium of the property. You can elect to either pay on the initial Lease premium and rent (if the premium is less than £125,000 there would be no Stamp Duty payable but you may have to pay when purchasing the final staircasing 100%) - you can elect to pay on the full market value of the property at the outset and would then have no further liability on further purchases of shares. We can advise you on this.

There are a number of things to consider: 

1. You will need to be approved by the Landlord - if you contact us as soon as you are approved we can advise on the next steps.

2. Your Mortgage lender needs to be aware of the initial percentage and rent that you are paying. Be aware that if the upper percentage is limited (to 80% for example) some lenders will not lend on these schemes.

Most shared ownership leases are on a Homes & Communities Agency standard form. This includes Mortgagee Protection clause which allows the lender to purchase the balance of the Lease in the event that you surrender the lease.

3. The Mortgage offer needs to be formally approved by the Landlord. This is something that we arrange as part of the work on your behalf.

4. At completion you will often be required to pay a proportion of the Specified Rent for the remainder of the month of completion and a further month in advance.

There is also likely to be Notice fees (either notice of transfer and/or notice of charge) payable to the Landlord.

5. Be aware that there may be restrictions on future re-sales as any buyer will need to meet the Landlord's requirements / be approved; the buyer will need to go through the same application process as you do!

Newbuild properties

  • Most new developments have Affordable Housing schemes sold under Shared Ownership leases
  • On a newbuild property there is likely to be a Document fee (this can be up to £200) payable to the Landlord's solicitors for the production of the Lease documents.

Key Contact

Judith Park

Partner

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+44 (0)1392 333707


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