Quick take: Shared ownership lets you buy a share (typically 25% to 75%) of a property and pay rent on the rest. It makes homeownership accessible for people who cannot afford a full deposit. But the lease is more complex than a standard leasehold purchase, and the financial implications of staircasing, selling, and repairs are not always obvious.

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How Shared Ownership Works

You buy a share of the property with a mortgage, and pay rent to a housing association on the remaining share. Over time, you can buy additional shares ("staircasing") until you own it outright.

On a 250,000 pound new-build flat in Nottingham with a 25% share:

• Your share: 62,500 pounds

• Your deposit (typically 5% of your share): 3,125 pounds

• Your mortgage: approximately 59,375 pounds

• Rent on the remaining 75%: typically 2.75% of the housing association's share per year, so approximately 430 pounds per month

Your total monthly cost is mortgage repayment plus rent plus service charge. It is not always cheaper than renting, particularly in the early years with a small share.

1. The Lease Is Different

A standard leasehold purchase is relatively straightforward. A shared ownership lease has additional layers:

• Rent review clauses: The rent on the housing association's share is typically reviewed annually, usually increasing by RPI plus 0.5% or 1%. Over a decade, this can result in significant increases

• Repair obligations: Even though you only own a share, you are typically responsible for 100% of the maintenance and repair costs. The housing association does not share repair bills proportionally

• Restrictions on subletting: Most shared ownership leases prohibit subletting entirely

2. Staircasing: Buying More Shares

You can usually staircase in increments of 10% or more. Each time, the property is revalued and you buy at the current market price for that additional share. If property values have increased, staircasing becomes more expensive. If they have fallen, you are buying additional shares in a depreciating asset.

Some leases allow you to staircase to 100% ownership. Others cap it at 80%, particularly on rural exception sites. Check the lease before assuming you can eventually own it outright.

3. Selling Is Not Straightforward

If you want to sell, the housing association typically has a "nomination period" - a window (usually 6 to 12 weeks) during which they have the right to find a buyer from their waiting list. You can only sell on the open market if the housing association does not find a buyer within this period.

This can slow down the selling process significantly and limit your ability to time a sale.

4. Recent Reforms

The government has announced reforms to shared ownership, including:

• A 10-year initial period during which the housing association is responsible for major repairs (for new shared ownership leases from April 2024)

• Staircasing in 1% increments for the first 15 years (for new leases)

These changes apply to new shared ownership properties. If you are buying a resale shared ownership property, the original lease terms apply.

FAQ

Is shared ownership only for first-time buyers?

Not always. Priority is given to first-time buyers, but existing homeowners can apply if they are downsizing or cannot afford to buy on the open market in their area. Military personnel also receive priority. Each housing association sets its own eligibility criteria.

Can I review the lease before committing?

Yes, and you should. Your solicitor will review the lease as part of the conveyancing process. You can also upload the lease to an AI tool like Unwildered as a PDF or Word document to get a plain-English summary of the key financial terms before your solicitor appointment. This helps you arrive with specific questions.

What happens if I fall behind on rent?

The housing association can take action, including seeking possession. The shared ownership lease creates obligations to both your mortgage lender and the housing association. Missing payments to either can put your home at risk.

Disclaimer: This article is general information, not financial, tax, or legal advice.