Shared ownership – where nothing is shared and you don’t own a thing
You are simply paying a hefty down payment for an assured tenancy, the right to live in a property for a set number of years and a share in the equity once the property is sold. That’s it!
| 1. | In some instances, you have fewer rights than someone who rents. According to Section 8 of the Housing Act, under shared ownership if you are a mere two months behind in your rent, the Housing Association is entitled to start possession proceedings. Should you still be in rent arrears by the time the case has gone to court, the court MUST issue a possession order enabling the Housing Association to reprocess your property. You have no right to pay off the debt. They can repossess your property and you DO NOT A RECEIVE A PENNY. YOU LOSE YOUR HOME AND YOUR WHOLE INVESTMENT.
The Housing Association is legally entitled to retain your ENTIRE capital investment in the property because in the eyes of the law all you own is the lease. And before someone shouts ‘Read the contract’, it’s not in the contract. In fact, you would have to be pretty au fait with housing law and have specific knowledge of Section 8 of the 1988 Housing Act as it pertains to assured tenancies. You would also need the Housing Association to clarify that you are not part owning a property but just paying a hell of a lot of money for an assured tenancy. When I bought my flat I don’t recall the term assured tenancy being mentioned once. You are sold the idea that you are buying a property not an assured tenancy – hence the name, Shared Ownership. Not surprisingly, you assume that if you are part ‘owning’ a property and it has to be sold, you would get your appropriate share. Nothing says how much Shared Ownership is a misnomer than the fact you can lose your whole investment for the sake of two month’s rent. That’s right. YOU DON’T OWN ANYTHING. What you’re paying for is a contractual obligation that you receive a percentage of the sale price once the property is sold and an assured tenancy giving you the right to live in the property for a certain number of years (usually 99 or 125 years). |
| 2. | You might also want to bear in mind Housing Associations are apparently looking to offload their shared ownership portfolios to institutional investors. Imagine what will happen if they own your property and presumably come up with interesting ways ‘to sweat the assets’ i.e. make money out of your home. Do you really want your home to be beholden to a private equity firm?
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| 3. | Shared ownership leases are short leases. Generally they are only for 99 or 125 years. Housing Associations could issue longer leases but then they would be unable to make money out of you further down the line. Given that most mortgages are paid off over 25 years, assuming you have a 99 year lease, by the time you have paid off your mortgage, your property may be a ‘wasting asset’ where the property reduces in value year by year. Why? Because properties with leases of 80 years or under are harder to sell, as potential buyers may find it difficult to find banks who will lend on them.
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| 4. | Under shared ownership you also do not qualify for the right to purchase the freehold, under the provisions of the Leasehold Reform Act 1967. In addition, if you do not own 100% of your shared ownership property, you do not have a legal right to extend your lease. The housing association may have its own policy of allowing lease extensions but they can add their own caveats. When I asked about extending mine I would have to agree to a doubling ground rent which would end up costing £1,600 per annum (for absolutely nothing) and over the term of the lease would cost a total of £77,500. That seems a rather expensive sum for an 80 years+ lease.
Moreover, when ground rent exceeds £1,000 in London (£250 elsewhere) the nature of your tenancy changes to an Assured Shorthold Tenancy where you have fewer legal rights. A legal technicality the Housing Association failed to point out when they sent me their lease extension information. In other words, in order to extend my lease, I would have to agree to conditions that would make it less attractive to buy my property. Not forgetting that lease extension premiums are at 100% charge, irrelevant of what % you own. You will also no doubt be expected to pay the surveyor’s fee in addition to the housing association’s administration fee. On the other hand, they could have just issued you with a longer lease in the first place.
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| 5. | As a leaseholder you have little to no say as to how the building is managed and maintained. If you live in a block where the Housing Association has leased a number of the flats but does not own the building, it is not responsible for putting right any defects. On the other hand, when it is responsible, you have no control over costs yet are liable to pay for all of it. Important to note is that the original service charge quoted in your lease may well end up having no relation to what you are asked to pay in the future. Paying service charges can be like signing a blank cheque. The only thing that is certain is that any expected rises in service charges is likely not to be disclosed at the point of sale. Bear in mind that Housing Associations do not contribute to service charges despite owning a share in the property. You pay for everything.
On a personal note, I have faced attempts to increase charges within an 18 year timeframe by three digit percentage hikes rising as much as 210% at a time when the inflation rate was so low the Bank of England was talking of possible deflation. This is for a property where the Housing Association provides no services. Usual excuses for such hikes are ‘historical undercharging’ and ‘overspend’. From what I can gather that is Housing Association speak for ridiculous hikes in service charges which they are unable to justify otherwise. My association has used ‘historical undercharging’ as an excuse for increasing charges by triple digit percentage points within a 15 year period alone. Residents at the St Andrew’s Estate in Bow saw their monthly service charges increase to £643 a month! Who can afford £643 on top of rent, mortgage repayments and other bills?
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| 6. | Bear in mind too that if you have to pay to have something fixed and they send out contractors who do such a bad job that it has to be done again, you will have to pay again. And (possibly) again. You pay for all of it, irrelevant of your share of the property and the fact you have no say as to who does the work.
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| 7. | I’d also advise checking any bills and receipts. When residents of an estate in Mitcham were faced with a £22,000 bill by Circle Housing (now Clarion) for major works, they commissioned their own reports. They discovered that not only were some of the works unnecessary but also unearthed cases of excessive overcharging by the contractors such as £331.69 for a £5 earth bar which takes 10 minutes to fit. (That’s a 6,534% mark up.)
Conveniently, just before the case went to a tribunal – one has to ask why Circle Housing insisted on taking the case that far – Circle Housing’s maths improved as did presumably theirs of their contractors and the charge was reduced to £3,500 (and an extra £3,200 for those who had had their windows replaced). But £3,500 vs. £22,000? The original estimate is a staggering 529% more than what the cost turned out to be.
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| 8. | Thanks partly to deregulation by successive Conservative governments, an inadequate building regulatory regime has left millions of leaseholders in Britain facing life-changing bills as they are asked to pay for remedial work to buildings, now deemed to be death-traps. These buildings had previously been signed off by building control and the leaseholders had bought their properties in good faith.
On reflection it seems that when the Tories said they are ‘getting rid of red tape’ in the construction industry, it is Tory English for ‘increasing the profit margin for friends in the industry’ by lowering regulatory building requirements. Some developers seem not to have adhered even to those standards, safe in the knowledge that due to the inherent unfairness of the leaseholder system under English law, it is not those who are responsible for building the death-traps in the first place or those who own them or regulated their construction that are legally or financially responsible to rectify the problem but the leaseholder i.e. the person who bought in good faith, buying a building they had been told adhered to all regulatory requirements at the time of purchase. They are the only innocent party in all this yet are liable for 100% of the costs. Failure to pay these bills ranging upwards to £250,000 per flat is a breach of your lease and you are liable to have your property forfeited if you don’t pay.* You are responsible for the WHOLE cost irrelevant of how small a percentage you ‘own’. leaseholdknowledge.com/a2-dominion-to-dump-100-cladding-costs-on-to-25-shared-owners-at-city-wharf-hoxton/ Moreover, the government is currently passing a new law – the Building Safety Bill which would allow a landlord to bill leaseholders a building safety charge whereby leaseholders will have a mere 28 days to pay these bills. 28 days! This gives leaseholders little time to hold landlords to account or check their maths. At present, leaseholders are being billed upwards to £250,000 to rectify building works and make buildings safe. Who has that kind of money lying around?
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| 9. | Stair-casing can be complicated and costly in both administration and legal fees. Some Housing Associations do not even permit you to staircase to 100%, whereby you would have more rights.
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| 10. | Shared Ownership can be difficult to sell and you are not allowed to sublet. When you come to sell you have to commission the surveyor and all sales will have to go first via the Housing Association who will charge you a fee for doing so – usually 1% of the sale price. |
*The Government is proposing to make shared ownership tenants not liable for repair bills for 10 years in new blocks of flats. A move which is being opposed by Housing Associations.
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Seems I purchased 50% of a house 16 years ago, last month I looked into selling as aproaching the 80 year mark, was never told by anyone i had to pay service charges just thought i would pay rent for the part i didnt own. Last month when I looked into it, I asked the housing association for my lease agreement as I didnt sign 1 when i purchased the 50%, i was after stating I refused to pay £40 just for a copy sent via email as land registry dont have my lease agreement. 4 days later i recieved an email with the lease, it was in the name of the woman i bought my 50% off. I dont have a lease as i didnt sign one,. Im not a home owner, im a tenant, liable to pay for my grass to be cut, repairs inside but i have to ask permision of my overlords. If I do it up and increase its sale value, like you said Maureen in 4 years the housing assiciation will after i pay for my lease extention legal fees and the landlords legal fees and the expected value of the property 50 years down the line etc etc etc. Everything you stated above is depressingly 100% truth. and the government knew it in my case 16 years ago. that their was no shared ownership, just a legal agreement for the freeholder, im so dumb didnt even know I was a leaseholder. Thought I was a homeowner as the government of the day proffesed . So if I serve a tenacy notice to extend the lease the landlord will require as part of it a leasehold aggreement copy, I didnt sign one, they dont have the original because their isnt one. The solicitors who the estate agents mortgage brocker dealt with on my behalf, no longer exist and the estate agent I used said we have no records going that far back. Wow, Marrage value below 80 years left how did that get through, so the investment I made for 16 years to give my daughter is worthless. To say im angry is an understatement. No wonder the powers that be kept it hush hush.
Excellently put I now have a 79 year lease on my so called share of nothing. I didn’t realise until last month I’d purchased a legal agreement not a home I devastated after 20 years I’m so deflated. My housing association is a so called charitable organization receiving millions of government money yet are demanding I pay an undecided sum for insulation for their property when I can get it free! Unbelievable! I only realised what shared ownership actually meant because I looked into my lease I think iv been misold and want to take action but I’m scared of repercussions from them as they hold all the cards. What I thought was my home for life isn’t mine it’s theirs and IV had to pay for everything I’m so stressed I have to sell because of the lease and Interest only mortgage ends this year. I totally think it is miselling.
I feel your pain. You should join SHAC https://shaction.org/ & by the way, you are not alone!