Getting onto the property ladder can be a struggle for many first-time buyers in today’s challenging housing market. Shared ownership is a more affordable way to buy a home when the full purchase price is out of reach. However, the residential property conveyancing process has extra steps for shared ownership properties, so it’s important to choose an experienced conveyancer to guide you through.
What is shared ownership?
Shared ownership works by letting you buy just a portion of the property (usually between 25% and 75%) while a housing association owns the rest. It is an alternative to the local Help to Buy schemes which ended in 2023.
You’ll pay a mortgage on the bit you own and rent on the bit you don’t. This setup means you need a smaller deposit and mortgage than if you were buying the whole property outright, making it easier to get on the property ladder.
One of the best things about shared ownership is that you can buy more of your home later when you can afford it. This process, called ‘staircasing’, lets you gradually increase your share until you own the whole property if you wish. Each time you buy more of the property, you will incur conveyancing costs, so it’s worth planning how best to do this to minimise your costs.
Most shared ownership homes are new-build homes or recently renovated properties that housing associations have specifically set aside for this scheme. But you can buy a shared ownership property that has been previously lived in and resold via the same scheme. You will buy the previous owner’s share and continue paying rent on the rest. If you want, you can buy more of the property than what the previous owner had.
Each shared ownership scheme will have its own eligibility criteria, but they are usually open to first-time buyers and anyone who has owned before, but isn’t able to purchase outright again.
The Shared Ownership Conveyancing Process For Shared Ownership Properties
Instruct the Right Conveyancer
Start by finding a conveyancer who specialises in shared ownership purchases. Not all legal professionals deal with these regularly, so it’s worth asking specifically about their expertise in this area when you’re making enquiries.
Once you’ve chosen your conveyancer, you’ll need to formally instruct them to act on your behalf. They’ll ask for some initial information and ID documents to get started.
Receive the Draft Contract & Review the Lease
Your conveyancer will request the legal paperwork from the housing association, including the lease document. They will then go through the lease with a fine-tooth comb to check all the specific terms of your shared ownership arrangement.
Conduct Searches
Your conveyancer will also carry out all the usual common legal checks and searches to look for any issues that might affect the property. These include local authority searches to uncover planning issues, environmental searches, and water and drainage checks.
Raise Enquiries
If your conveyancer spots anything unusual or concerning in the paperwork, they’ll ask the seller’s solicitor to clarify before you proceed.
Get a Mortgage Offer & Meet the Lender’s Requirements
If you are buying a property with a mortgage, your lender will also have legal requirements. They’ll want to make sure the shared ownership lease meets their criteria before they commit to the purchase. Your conveyancer will check that the lease meets their requirements and deal with the legal aspects of your mortgage.
Exchange Contracts
When all checks are complete and any issues resolved, you’ll exchange contracts with the seller. This makes the agreement legally binding, and you’ll pay your deposit at this stage.
Completion
On your completion date, the property becomes yours! The money is transferred, the housing association registers your ownership of your share, and you receive the keys to your new home.
Registration
Once the sale has been completed, your conveyancer will register your ownership with the Land Registry. You’ll then be officially recorded as the owner of your share of the property.
Legal & Financial Considerations When Buying a Shared Ownership Property
During the shared ownership conveyancing process, your conveyancer will go through all the terms and conditions of the lease and the contract with you. There may be a lot of legal jargon, so they will be happy to explain any sections that are unclear to you. It is important you feel comfortable with the terms of the sale and that you understand what that means for you in the short and long term. Here are some broad considerations that you should be aware of:
Terms of the Lease
The lease is the most important document in a shared ownership purchase. It sets out:
- The exact percentage of the property you own
- How much rent you’ll pay on the portion you don’t own
- When and how this rent can be increased (usually annually)
- Whether you can sublet or make changes to the property
- The process for buying more shares (staircasing) in the future
- The housing association’s rights when you decide to sell
- Any restrictions on making changes to the property or restrictive covenants
- Service charges and what they cover
Your conveyancer will check these details carefully and explain what they mean for you before you commit to buying.
Costs Beyond Your Shared Ownership Mortgage
When you buy a shared ownership property, your mortgage isn’t the only regular payment you’ll make:
Rent
You’ll pay rent on the portion you don’t own, typically around 2.75-3% of its value per year. Your conveyancer will check how this is calculated and when it can increase.
Service Charges
Most shared ownership properties come with service charges for maintaining communal areas, building insurance, and management fees. Your conveyancer should find out:
- What these charges pay for.
- How they’re calculated and increased.
- Whether there’s a reserve fund for major works.
- How much they’ve gone up in recent years.
Ground Rent
While many new shared ownership properties now have zero ground rent, older properties might still charge this. Your conveyancer will let you know if this applies and what it might cost you.
Stamp Duty
You have two options for paying Stamp Duty Land Tax when buying a shared ownership property:
- Pay Stamp Duty on the full market value of the property in one go, even though you’re only buying a share.
- Pay Stamp Duty on your share initially, then pay more if you buy additional shares that take you over the Stamp Duty threshold.
If you are a first-time buyer, you might be eligible for Stamp Duty relief on properties up to a certain value, which can make the first option more attractive. Your conveyancer will be able to run you through both options and advise which is most cost-effective for your specific circumstances.
Common Challenges When Buying a Shared Ownership Property
Delays From Housing Associations
Housing associations often have their own legal teams and approval processes that can move more slowly than private sellers. These additional layers of administration can extend your timeline.
Your conveyancer can help manage these delays by establishing clear communication channels with the housing association from the start and sending regular, polite follow-ups to keep things moving.
Complex Lease Terms
Shared ownership leases contain specific clauses that don’t appear in standard leasehold agreements, including detailed conditions for staircasing, specific requirements for selling your share and rent review processes.
Your conveyancer will need to carefully check these terms and may need to unpick anything that seems unclear or potentially problematic.
Mortgage Availability
Getting a mortgage on a shared ownership property can be more complicated than for regular homes. Not all lenders provide mortgages for shared ownership properties, and those that do might have specific requirements (like a higher deposit) or restrictions (such as income thresholds). This can narrow your options and potentially affect your ability to secure competitive rates.
It’s worth speaking to a mortgage broker with experience in shared ownership early in the process. They can help identify suitable mortgage lenders and advise on any specific requirements you’ll need to meet.
Service Charge Uncertainties
Sometimes there’s limited historical information about how service charges have been managed, especially for new developments. Your conveyancer should request detailed information about current service charges and any planned increases. For new developments, they can ask about projected service charge levels and what these will cover.
Resale Challenges
When you eventually want to sell your property, you’ll typically need to offer it back to the shared ownership scheme first. They usually have a period (often 8 weeks) to find a buyer before you can market it yourself. This extends the selling process, so you need to be prepared that the sale may take longer.
Your buyer will also need to be eligible for shared ownership, which limits your pool of potential buyers. However, with support from your home ownership scheme, this is doable.
Staircasing Complications
While buying additional shares of your property is a benefit of shared ownership, the process involves its own set of challenges:
- Each time you buy more, you’ll pay for conveyancing, property valuation, and possibly new mortgage arrangements.
- You’ll buy additional shares at the current market value, not your original purchase price.
- Some leases limit how much you can buy (though many now allow up to 100%).
- When you reach 100% ownership, houses usually become freehold while flats remain leasehold.
- Some leases have restrictions on how often you can staircase.
Need Conveyancing for a Shared Ownership Property?
Ready to take the next step with your shared ownership purchase? Contact our experienced team to get started with a conveyancing quote. We offer expert advice on shared ownership property transactions and will provide clear guidance every step of the way, from your initial purchase through to future staircasing options.