What is shared ownership?
Shared ownership is a scheme under which the buyer can purchase a share of a property and pay rent on the remainder. The part on which the buyer pays rent, remains in the ownership of the landlord.
As time goes on, the buyer can acquire increasing shares in the property by a mechanism called “staircasing” and, through this mechanism, the buyer could increase their percentage ownership up to 100%.
As the percentage ownership increases, the rent which the buyer pays on the remaining share of the property owned by the landlord, will decrease proportionately.
Stamp Duty Land Tax (SDLT)
There are options as to how a buyer of a shared ownership property pays SDLT. SDLT complications might also arise if a buyer uses the staircasing mechanism to increase their percentage ownership of the property. In certain circumstances, however, SDLT may not be payable at all.
A buyer should be aware that, in relation to any part of the property on which they pay rent, there is normally provision for a rent review. This is usually on a yearly basis and will usually be upwards only. This can sometimes affect the willingness of lenders to lend against the property by way of mortgage.
An additional area for consideration by the buyer will be that, on any future sale, there will also have to be an assignment of the lease if they are still paying rent on any share of the property which has remained in the hands of the landlord.
In that case, there is usually a requirement that you must give notice to the landlord of your intention to sell the property. There will normally be a provision that, on any sale of the property, if you own less than 100% of it, you would need to pay the landlord an amount owing to the current value of the percentage owned by the landlord.
If the sale is to a person nominated by the landlord, you will normally be required to pay the landlord a fee, usually 1% of the sale price of the property.
Any buyer of a shared ownership property will have obligations, among other things, to pay rent and service/maintenance charge for the property and will also be obliged to keep the property in good repair and condition.
These are some of the more important considerations upon which buyers of shared ownership property should obtain advice and consider seriously.
Get in Touch
If you are considering purchasing a shared ownership property or you would like to staircase your existing shared ownership, please contact Alan Warnes, one of our specialist advisers and Head of our Residential Conveyancing Team on [email protected] or 0118 958 9711 and he would be glad to assist you.