Shared and low-cost home ownership schemes are intended to help people, who could not usually afford to do so, buy a home on the open market.
- Shared and low cost home ownership schemes
- Availability of schemes
- Shared equity schemes
- Mortgage guarantee schemes
- Shared ownership schemes
- Housing benefit and help with housing costs
- Rent and security of tenure in shared ownership homes
- Increasing the leasehold share by staircasing
- Buying the freehold
- Selling the home
- Variation of shared ownership leases
- Subletting a shared ownership home
- Succession rights to a shared ownership home
- How to complain about a social housing provider
Shared and low cost home ownership schemes
Shared ownership and low-cost home ownership schemes are intended to help people who cannot afford to buy a home outright, either because they do not have enough money for a deposit or because they are unable to afford full mortgage repayments.
Most shared ownership schemes are set up and managed by private registered providers of social housing (PRPSHs).
Some schemes cater for the needs of first-time buyers, with priority for an offer of a shared ownership or low-cost home-ownership scheme often being given to PRPSH or local authority tenants.
Availability of schemes
Some schemes are only available on a local or regional basis. Some may prioritise a particular group of people such as key workers or members of the armed forces. Own your home provides a useful on-line tool to assist potential home buyers to find an appropriate shared ownership or low cost home in England, with links to sources of information on home ownership in the rest of the UK.
Shared equity schemes
These schemes enable people to buy a property on the open market by providing an equity loan, which supplements a standard mortgage loan that they have obtained from a qualifying lender (for example a bank or building society).
Mortgage guarantee schemes
These schemes enable people with a smaller deposit than is normally required to purchase a property by providing the lender with a government-backed guarantee of up to 15 per cent of the purchase price. This enables lenders to offer high loan to value mortgages.
Shared ownership schemes
These are schemes where occupiers part-buy and part-rent their home from the housing provider. The part-owner becomes the leaseholder to the part of the property s/he owns, with the housing provider retaining the freehold. The part-owner can buy additional shares over time, known as staircasing.
Types of shared ownership property
Properties available to buy through conventional shared ownership are usually properties that have been either newly built, or bought and refurbished, by an PRPSH. The purchase price of the property varies according to type and location.
The property must be suitable for the applicant's needs, for example, it should not be considerably larger than needed for the applicant and their household.
How the shared ownership scheme works
Applicants for conventional shared ownership usually buy a 50 per cent share of a property from a private registered provider of social housing (PRPSH) such as a housing association. Some schemes allow the purchase of anywhere between 25 and 75 per cent.
The purchaser must arrange a conventional mortgage through a bank or building society for this share of the property. They then pay rent to the PRPSH on the remainder.
Generally, the larger the share of the property purchased by the applicant, the lower the rent they have to pay, as the rent is calculated on the proportion of the share not owned by the applicant. The rent should also take into account the fact that many applicants will be responsible for repairs.
Applicants who buy leasehold flats also pay service charges.
After the initial purchase, applicants can buy further shares in the property, though as prices may rise, additional shares could cost more. In some rural areas, there may be a restriction on the option to buy further shares. Eventually, many applicants can own the property outright.
Eligibility for shared ownership
Applicants must be unable to buy a home outright and in a position to raise a mortgage.
Priority is often given to existing social housing tenants, those who have applied for an allocation of such accommodation, key workers or first-time buyers.
Housing benefit and help with housing costs
An occupier of a shared ownership scheme property where rent is payable on a percentage of the property can claim housing benefit to cover their rent payments, provided they meet the usual eligibility criteria.
An applicant may also qualify for assistance in paying the interest on the mortgage in the same way as any other home owner. However, applicants who take out a mortgage whilst receiving certain benefits may not get help, and many applicants in receipt of benefits may find it difficult to get a mortgage.
Rent and security of tenure in shared ownership homes
The PRPSH sets a rent for the property, which is subject to annual increases. Applicants are also granted a lease of the property, usually for 99 years.
The lease includes terms and conditions.
The leaseholder of a house is responsible for all repairs and redecoration inside and out. The rent includes a service charge covering the costs of insuring the building, rent collection and a share of the cost of maintaining any other common areas.
If the lease is for a flat, the PRPSH is responsible for all external maintenance and repairs, including exterior paintwork. The leaseholder would pay for this through the service charge, which includes their share of the cost of maintaining all common parts, and they may be liable for extra charges to pay for major repairs. The leaseholder is responsible for all internal redecoration, and is often responsible for internal repairs, though the lease sets out all the leaseholder's obligations.
Most applicants buying a share of a property need to take out a mortgage. The mortgage is a contract between the leaseholder and the mortgage lender and is entirely separate from the lease. The mortgage lender and the terms of the mortgage must first be approved in writing by the PRPSH who must be provided with full details of the original mortgage and any subsequent loans. Both parties should liaise closely to deal with any problems quickly and avoid misunderstandings.
Increasing the leasehold share by staircasing
The leasehold share of a shared ownership property can normally be increased in blocks; this is known as 'staircasing'.
The minimum share that needs to be purchased varies between schemes. Often, staircasing is prohibited during the first year of the term of the lease. There may also be restrictions on staircasing in designated protected areas and in certain rural areas. The cost of staircasing is determined by the valuation of the property at the time staircasing takes place. Applicants are usually responsible for the cost of the valuation, and the cost of their own and the landlord's solicitors. Applicants who staircase to 100 per cent may also have to pay stamp duty.
The landlord will not usually give consent to staircasing if there are any rent arrears on the property. If the property is a house, the freehold is automatically transferred when the leaseholder owns 100 per cent of the equity. However, in designated protected areas in England, certain leases must contain a requirement for the leaseholder to sell their property back to the original landlord or its nominee when they want to sell the property.
If it is a flat or maisonette a long lease at a nominal ground rent is granted, usually 99 years for the first owner.
It may also be possible to 'downward staircase', or request the registered social landlord to buy back shares, if the occupier has difficulty paying the mortgage.
Buying the freehold
If all the leaseholders of flats in the same scheme have staircased to 100 per cent, the private registered provider of social housing (PRPSH) landlord may decide to dispose of its freehold interest. Disposal is likely to be to a management company formed by the leaseholders themselves who would then be responsible for the management of the properties and landlord obligations under the lease.
100 per cent leaseholders of flats in existing shared ownership schemes also have the right to collectively buy the freehold if they can satisfy the required conditions under the legislation Leaseholders with smaller shares would then have to lease back their properties from the new freeholders.
Selling the home
An applicant who wishes to sell the property can sell the lease at any time. They must inform the landlord in writing that they want to move. The applicant can either sell the share that they own or buy the remaining share and then sell the property outright.
The leaseholder benefits from any increase in the value of the property according to the share they own.
It may be possible to sell the property on the open market in the normal way through an estate agent. However, there may be a clause in the lease that prohibits this. This would enable the social landlord to nominate prospective buyers and restrict the sale price to an independent valuer's valuation at the time of sale.
Applicants who need to move to a more suitable property because of a change in household circumstances may be able to move to another shared ownership property, provided they are still eligible.
Variation of shared ownership leases
Subletting a shared ownership home
Subletting the whole of the property is prohibited for shared ownership properties, although the landlord may consider a request to sublet in certain circumstances. These include the:
reason the shared owner needs to sublet is unavoidable and is not for speculation or gain
sub-lessee meets the criteria for shared ownership
shared owner is subletting the property on a fixed-term agreement
The shared owner also needs the consent of the mortgage company before subletting the whole of the property.
Succession rights to a shared ownership home
If a person with a shared ownership lease dies, the part of the property that is owned passes to the beneficiary of the will. The rented part passes to any successor.
Where these two people are different, the tenant has the right to occupy and the beneficiary has the equitable interest, which would only be realised when the property is sold.
The beneficiary's position would be similar where there is no successor: the landlord would have vacant possession of the property, but the beneficiary would be more likely to succeed in obtaining an order for sale to realise the equity.
The laws of intestacy apply if there is a successor but no will.
If there is no successor and no one to inherit the equity, then the landlord will obtain vacant possession and the equity will eventually pass to the Crown or the Duchy of Cornwall or Lancaster under the laws of intestacy. Many shared ownership leases have a clause to clarify these situations.
How to complain about a social housing provider
Complaints about social housing providers can be made to the Regulator of Social Housing.
The Regulator requires all registered providers of social housing, including local authorities and private social landlords, to have a clear and accessible complaints procedure in place under the 'tenant involvement and empowerment standard'.
Last updated: 30 March 2021
s.35 Housing Act 1988.
Housing (Right to Enfranchise) (Designated Protected Areas) (England) Order 2009 SI 2009/298.
Housing (Shared Ownership Leases) (Exclusion from Leasehold Reform Act 1967) (England) Regulations 2009 SI 2009/2097.
s.1 Leasehold Reform, Housing and Urban Development Act 1993.
Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 SI 2013/1169; the First-tier Tribunal and Upper Tribunal (Chambers) (Amendment) Order 2013 SI 2013/1187.
s.46 Administration of Estates Act 1925.