Guide to Shared OwnershipWhat is Shared Ownership?
Shared ownership is a part-buy, part-rent scheme designed to help people who cannot afford to buy a home on the open market. The scheme offers you the opportunity to buy a property in stages from Nottingham Community Housing Association (NCHA). You buy a share of a property and pay a subsidised rent on the remaining share. Gradually it is possible to purchase further shares as they become affordable, and progress to full ownership in most properties. How does Shared Ownership work?
You buy a share of a property, usually 50 or 75% on a long term lease. You will need to be able to raise a mortgage or purchase the share with a lump sum. The lease states the monthly rent you have to pay and lays down the responsibilities and duties for you and NCHA. Although you have not bought the property outright, you will have the normal rights and responsibilities of home ownership. After the initial purchase you will be able to increase your share, and in most cases progress to 100% ownership. Who qualifies?
First time buyers, keyworkers, housing association/council tenants and previous homeowners are eligible to apply. You must have a housing need and when assessing need consideration will be given to the following:
- Your current accommodation and its suitability
- Your ability to meet your housing need through other housing options
- Your ability to meet the costs of home ownership without hardship
- To qualify you must be unable to purchase a home on the open market.
Priority will be given to applicants with a local connection.
Will I be able to get a mortgage?
Mortgages are available from banks and building societies subject to your credit status and a valuation on the property. It is your responsibility to arrange the mortgage, although NCHA can give you a list of recommended mortgage brokers and lenders. Under the terms of the lease, NCHA will have to approve your mortgage offer before the sale can proceed.
What other costs will I have to consider?
If you buy a shared ownership home, you will have to meet the following costs:
- Reservation Fee - Once your application has been successful, NCHA will require a reservation fee as a sign of your genuine interest. If the sale proceeds, this fee will be offset against the purchase price. If you withdraw from the sale NCHA reserves the right to retain the fee.
- Deposit - At exchange of contracts, NCHA will normally require a deposit from you equal to 5% of the purchase price. If you are purchasing with a mortgage, the mortgage lender may require that you have a larger deposit to put down.
- Mortgage Costs - If you require a mortgage from a bank or building society you will have to pay their valuation fee, the legal fees relating to the mortgage and any fees for the mortgage product. Your bank or building society should be able to estimate this cost for you.
- Legal Fees - You are responsible for instructing and paying for your solicitor. The legal fees will cover advise on purchasing the property, local searches, approving the lease on your behalf, having the lease registered with Land Registry and paying stamp duty, if applicable. Legislation on stamp duty is subject to change, ask our sales team whether or not you will be liable to pay. Before instructing a solicitor, always obtain a detailed estimate of the legal costs.
The sales team can help you find a solicitor or financial advisor and help you if you have questions at any stage of the sales process. You should not instruct a solicitor, pay a mortgage valuation fee or enter into any other commitment until you have written confirmation that you have been accepted for shared ownership.
A step by step guide to buying your home:
- Arrange a visit to one of our developments and find your new home
- Get a mortgage offer in principle
- Complete an application form
- Reserve your home with a reservation fee
- Instruct your solicitor and arrange your mortgage
- A valuation and searches will be carried out
- Exchange contracts
- A completion date will be set for you to collect the keys to your new home
What are the ongoing costs?
Once you have moved into your new home, your outgoings will be your monthly mortgage, rent and service charge payments. In addition you will have to pay your gas, electricity, water and council tax.
The rent is worked out on the share of the property that you do not own. It is payable in advance, on the first day of the month by direct debit.
You may be charged an amount for services provided by the Association. This will include the cost of the following services where they are provided:
- Buildings insurance
- Maintenance of communal gardens
- Cleaning communal areas
- Repairs and maintenance of the structure of the building, in the case of blocks of flats
- Electricity charges for communal lighting
- Sinking fund for the long term repair and replacement of major items in the building in the case of blocks of flats and/ or on the estate
- Health Safety checks
- Management charges
- Audit fees.
This list in not exhaustive. There may be other items particular to your scheme. NCHA will consult you in advance of any proposed increase in your service charge. Service charge accounts for your scheme will be prepared and audited annually. A copy will be sent to you along with a summary of your rights as leaseholders. Please note that you should arrange your own insurance for your contents, fixtures and fittings.
What about repairs and alterations?
If you live in a house you will be responsible for all repairs and maintenance costs. If you live in a flat, you will usually be responsible for repairs inside your home, and NCHA will be responsible for repairs and maintenance of the structure of the building and any communal areas. The only exception to this is for repairs which may be covered under a defects liability period. This relates to new homes and usually covers the first six months following completion of the building work. Details of the defects liability period will be available from the sales team. If after moving in, you wish to make any alterations or improvements to your home, you will need to get NCHA's permission before work starts.
What if I fall behind with my rent and service charge?
Under the terms of your lease you will be obliged to pay the rent and service charge. If you fall behind on these payment get in touch with NCHA straight away to see if we can help. NCHA will try and find a satisfactory solution, and will only recommend sale of the property as a last resort. If the property has to be sold you will be entitled to the balance of any sale proceeds left after the bank or building society and NCHA have been repaid in full.
How do I increase my share in the property?
You can increase the share you own by purchasing further shared in multiples of 10%. This process is known as 'staircasing'. You will have to pay for a valuation by an RICS surveyor to assess the value of the new share. As soon as the valuation is received you have three months to buy a further share. In most cases you can staircase to full ownership, and if you live in a house, the freehold will be transferred to you. There will be no further rent to pay, but there may still be a service charge to pay.
What do I do if I want to sell?
You can sell your share of your property at any time. You will need to contact NCHA in writing to inform them that you wish to move. We may also have a waiting list for properties in your area. Any purchaser will have to complete the shared ownership application form and be approved by NCHA. If you sell, whatever the new purchaser pays for the property is yours, subject to repaying any outstanding mortgage you have on the property. NCHA offers a re-sale service for existing shared owners as an alternative to using an Estate Agent, click here for details.