Shared ownership explained
In 2021 the Government announced some big changes to shared ownership. This new model is making it easier for people to buy a home through the scheme.
Our first shared ownership homes under the new programme are due to be completed in Summer 2023.
We thought it would be useful to explain how some of the changes differ from the old model of shared ownership.
Previously, customers had to buy a minimum initial share of 25% of the home’s full value. On the new model, customers buying a newly built home will be able to purchase shares as low as 10% of the home’s full value, making it easier for those with lower incomes to buy a shared ownership property.
All shared ownership homes are leasehold properties. Under this new programme, shared ownership leases will be offered with a lease term of 990 years.
Previously, leases could be as short as 99 years. The value of a leasehold property decreases with less than 80 years remaining, which means that shared owners have to pay for a lease extension when they want to sell their home. The term remaining on a lease is an important consideration for mortgage lenders.
Once you own a shared ownership home you can buy more of it - this is called staircasing. The share available to buy changes with the newer programme.
Customers who buy homes on this programme can buy 1% more per year during the first 15 years of the lease.
Shared owners will still be able to staircase in larger shares of 5% or more, but these will involve legal fees. There’s an additional method to calculate the current value of the home. This is an estimate using the original valuation and house price inflation. This valuation will be sent to shared owners once a year, or whenever they ask to buy an additional 1% of their home.
Help with repairs
On the older model, shared owners are responsible for all repairs and maintenance. For the newer model, there’s a 10-year period where Grand Union will provide support with the costs of essential repairs and maintenance. This ends when customers own 100% of their home. The 10-year period starts from the completion of building.
Repairs to the exterior and structure, that are not covered by warranty, are covered by the landlord.
For repairs to boilers, heating systems and bathrooms, customers can claim a repairs allowance to cover the cost. Repairs will need to be reported to Grand Union first and, if approved, arranged by the customer. Repairs will need to be completed by an approved tradesperson. Claims are limited to £500 per year.
More flexible selling
When selling shared ownership properties, Grand Union will look to find a buyer for the customer’s share of the home. This is called the nominations period and it has been reduced from eight weeks to four weeks for homes built as part of the newer programme.
If we don’t find a buyer during this time, then customers can sell their share on the open market. The valuation still sets the price of the home being sold.
Right to shared ownership
People who are renting a home created by the Affordable Homes Programme will have the legal right to buy it using shared ownership. They must have been a social tenant for three years and have lived in the property for 12 months.
The eligibility requirements for shared ownership have not been changed. Shared ownership is for people who cannot afford to buy a home outright. Buyers need a 5-10% deposit for the share they are buying. Purchases are dependent on being able to afford the rent and mortgage commitments, and your household income should be less than £80k.
Changes will not apply to existing shared ownership leases.