Key information about shared ownership.
The information in this document is for the standard shared ownership model. There are variations of shared ownership which have different features. For more information on the variations, see the ‘Key information about the home’ document.
When you are looking for shared ownership homes, you should always check the key information document to see which model covers that specific home.
When you buy a home through shared ownership, you enter into a shared ownership lease. The lease is a legal agreement between you (the ‘leaseholder’) and the landlord. It sets out the rights and responsibilities of both parties.
Before committing to buy a shared ownership property, you should ensure you take independent legal and financial advice.
This key information document is to help you decide if shared ownership is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference.
It does not form part of the lease. You should carefully consider the information and the accompanying lease and discuss any issues with your legal adviser before signing the lease.
Failure to pay your rent, service charge, or mortgage could mean your home is at risk of repossession.
The costs in this document are the costs as at the date issued. These will increase (typically on an annual basis) and you should take financial advice on whether this will be sustainable for you.
1. How shared ownership works
1.1 You pay for a percentage share of the market value of a home. You enter into a lease agreement with the landlord and agree to pay rent to the landlord on the remaining share.
1.2 You can buy more shares in your home, which is known as ‘staircasing’. This is covered in section 6, ‘Buying more shares’.
1.3 When you buy more shares in your home, the rent you pay goes down in proportion to the landlord's remaining share.
1.4 You can rent out a room in the home, but you must live there at the same time.
1.5 You cannot sublet (rent out) your entire home unless you either:
- own a 100% share; or
- have your landlord's permission which they will only give in exceptional circumstances
and
- have your mortgage lender’s permission if you have a mortgage
An example of an exceptional circumstance for sub-letting is if you're a serving member of the armed forces, and you're required to serve away from the area where you live for a fixed period.
2. Lease
2.1 All shared ownership homes are sold as leasehold, even houses. This is because you only pay for part of the market value up front, and the landlord has an interest in the remaining share.
2.2 You are buying a long leasehold interest in the home but only paying for part of the market value. The length of the lease is stated in the ‘Key information about the home’ document.
2.3 Information included within your lease:
- 2.3.1 A description of the home, including its boundaries.
2.3.2 Your responsibilities as a leaseholder, such as repairs and maintenance, and your landlord's responsibilities, such as buildings insurance. For more information on repairs, see section 5, ‘Maintaining and living in the home’.2.3.3 Details of any restrictions or obligations, such as decoration and alterations.2.3.4 The lease start date.2.3.5 The share that you have bought.2.3.6 The amount of rent you must pay, together with any other amounts due under the lease.2.3.7 How the landlord will review your rent.2.3.8 The method by which you can buy additional shares to own more of your home in the future (staircasing).2.3.9 The method by which you can move home, either by selling your share or selling the whole home.
2.4 As the lease is a legally binding contract, review it carefully with your legal adviser. It's important that you make sure that you understand the lease before you sign it. Your legal adviser will provide you with a copy of the lease.
2.5 Lease extensions
- 2.5.1 Shared owners who own less than 100% of their home do not currently have a legal right to extend their lease term.
- 2.5.2 You'll need to contact your landlord before you buy to confirm their lease extension policy and what rules they have for shared owners who want to extend. There will be costs associated with a lease extension that you need to be aware of. The length of your lease can affect the value of your home. Usually you can extend your lease, but this can be expensive.
- 2.5.3 You may need to extend the term of your lease as a short lease can make it more difficult to sell or get a mortgage on the home. A short lease is generally considered as one with 80 years or less left on the term, although different lenders have different criteria. It can be significantly more expensive to extend a short lease.
- 2.5.4 Before you buy a property, you should ask your legal adviser about your lease and the implications that has for you now and in the future.
- 2.5.5 Your landlord may not own the freehold which may limit the lease extension length they can provide you with.
- 2.5.6 You should ask your landlord the terms on which they will allow shared owners to extend their leases. You should check how they apportion costs relating to this.
- 2.5.7 Extending a lease can be expensive. Costs to consider are:
- The “premium”. This is the amount of money charged for increasing the lease length. Some landlords may charge the full amount whilst others link this to the share owned. Where the landlord is not the freeholder, they may need to pay a “premium” to the freeholder in order to extend their own lease.
- Valuation costs. In order to find out the “premium” a specialist valuation will need to be carried out. Your landlord should be able to give you an indication of the cost but this may change in the future.
- Legal costs. You and your landlord will need to take legal advice. Your landlord may require you to pay their legal costs in addition to their own.
2.6 100% ownership
- 2.6.1 See ‘Transfer of freehold’ in the ‘Key information about the home’ document to find out what will happen once you own 100% of your home.
- 2.6.2 When you reach 100% ownership of a shared ownership house, in most cases the freehold will transfer to you, and the shared ownership lease falls away. When you reach 100% ownership of a shared ownership flat, your lease will normally continue but certain clauses will no longer apply. Your lease will set out which clauses fall away at 100% ownership.
- 2.6.3 Your landlord will not charge you for the transfers described above, but there may be charges payable to third parties on reaching 100% ownership. For example, Land Registry fees to register the change in ownership or notice fees to third parties such as estate management companies.
2.6.4 You may need to enter into direct agreements with third parties such as estate management companies on 100% ownership.2.6.5 Your legal adviser should advise you on any of the above which apply to your home.