For many older people buying a new home outright can seem impossible, but shared ownership schemes could help you realise your dream. Just make sure you fully understand the practical and legal implications before you decide to take the plunge.
What is shared ownership?
Shared ownership is where a housing association allows you to buy a share of one of their properties, usually 25%, 50% or 75%, and then pay a low, affordable Occupancy Charge on the remaining share. You can find out if there are any participating schemes near you by visiting the Scottish Housing regulator’s website
Am I eligible for shared ownership?
You can apply for shared ownership if you’re a first time buyer, council or housing association tenant, or if you’re in the armed forces, left in the last two years or lost a partner in the services in the last two years. You could also qualify if you have a long-term disability through the government’s Home Ownership for People with Long-term Disabilities (HOLD) scheme.
Can I buy the remaining share later on?
Yes. You can buy back additional shares of your property from the housing association until you own it outright. This is called staircasing. The price of these shares will depend on the market value of your property at the time – more if the value has gone up, less if it has fallen.
In some instances – usually in areas where there is little affordable housing and no room to build additional affordable homes – the Scottish Ministers will keep a 20% ‘golden share’ in the property. Your registered social landlord will tell you if this applies in your area. You won’t have to pay an occupancy fee on the share belonging to the Scottish Ministers – but neither will you be able to own your property outright, see the disadvantages below.
What are the benefits?
Buying a share of the full asking price makes it easier to get on the property ladder, to buy in a more expensive location, or to buy a bigger property than you could not otherwise afford. And because you pay less rent, you can save some money every month to buy a greater share later.
What are the disadvantages?
The housing association remains the property owner until you have a 100% share. This means that if your circumstances change and you can’t pay your rent, you could be evicted for rent arrears regardless of the percentage of the property you have paid for – and with no claim on the payments already made.
If you decide to sell your share, for example to move closer to relatives or for a new job, if you don’t own 100% the housing association will have a say in who can buy your home. So they could make it more difficult to get a quick sale. They will also have the right of first refusal for 21 years after you initially bought your home. And don’t assume that you can get someone else in to cover your rent – many housing associations forbid shareholders from renting out their property to anyone else.
If the housing association only leases a number of flats in a block, you may not be able to get them to make repairs as they won’t have responsibility for the condition of the entire building. So you might have to bear the full cost of any leaks, heating issues or defective fittings. At the same time, as you don’t own the property outright, you may have to ask their permission to make any improvements.
Lastly, if you die without making a proper Will, unless you own 100% of the property your share will automatically revert to the housing association.
How can I ensure I pass on my share when I die?
If you want to ensure your loved ones benefit from the equity that has built up in your property, and that ownership doesn’t immediately pass to the other joint owner, you need to make sure that you change the legal ownership from joint ownership to common ownership.
The good news is that you don’t need the housing association’s agreement to do it, you just have to be careful to follow the correct procedure. This is easily done by giving the housing association a formal written notice (a notice of severance) – although you may want to have it drawn up by a solicitor to ensure the wording is legally binding. Once you have taken care of that, you will need to update your Will to ensure you choose who receives your share of the property.