Selling A Shared Ownership Property

The popularity of shared ownership continues to grow; there are now over quarter of a million shared ownership homes in the country. The appeal is understandable; it bridges the gap between renting and outright ownership and has helped many take a first step onto the property ladder. However, it differs significantly from more conventional forms of ownership.

‘Shared ownership could be a great way of buying a home you may not otherwise be able to afford,’ says Edward Sharpe, Head of our Residential Property Team. ‘On a day-to-day basis, apart from the rent element, you may notice few differences from conventional leasehold ownership. However, this is likely to change when you come to sell. With shared ownership, there are certain procedures you must follow, and these can be complicated.’

Edward answers some common questions about selling a shared ownership home.

Why is selling a shared ownership home different?

Shared ownership is an affordable housing scheme. Instead of owning a property outright, you buy a percentage share in it and pay rent on the share you do not own. Your landlord will often be a housing association. The terms of your agreement, which regulates your ownership and occupation of the property, are set out in a document called the shared ownership lease.

Like most leases your shared ownership lease will contain certain restrictions, for example against causing a nuisance or making alterations to the property. However, unlike a conventional lease, the shared ownership lease contains some additional special provisions. It will, for example, cover your right to buy additional shares in your home (a process called staircasing) and what must happen if you want to sell your property and do not own 100 per cent of the shares. These provisions can be extremely detailed, and you will have to comply with them before you can sell your home.

Will I be able to sell my home on the open market?

Most shared ownership leases require you to obtain a surveyor’s valuation of your home. You must give this to your landlord together with formal notice of your intention to sell. Your landlord then has a period in which they can tell you if they want to buy your share back or nominate a purchaser. You sometimes see this referred to as the landlord’s right of pre-emption. The lease will also set out a procedure to determine the price, which will be no more than the current market value of your share.

The length of the nomination period will depend on the lease, but is typically four, eight or twelve weeks. If, at the end of that period, your landlord has not exercised their right of pre-emption, you should be free to sell your home on the open market. However, your landlord will still need to consent to the sale, and they may require any buyer to meet certain conditions, including showing they can afford the ongoing housing costs. A few leases contain more stringent restrictions, for example, that the buyer must have a proven local connection to the area. Finding a buyer therefore can sometimes be more challenging than with a conventional sale.

How do I know which restrictions apply to me?

If you are considering selling your home, you should talk to your landlord. They can often give guidance and may indicate whether they are likely to exercise their right of pre-emption. If your shared ownership lease is recent, it should be accompanied by a key information document. This should set out details of the nomination period and any additional restrictions.

It is also prudent to discuss your plans with your solicitor early on. Unlike your landlord who will have their own objectives, your solicitor will always put your interests first. They will be able to review the terms of your specific lease. They will also understand your individual circumstances and can advise on the potential impact of the lease terms on your plans.

What happens if my landlord nominates a buyer?

This will depend upon the terms of your lease. Typically, you will have to make an unconditional offer of sale to your landlord’s nominated buyer. The sale price will be based on the surveyor’s valuation of the property but will reflect the percentage share you own. The nominated buyer has six weeks to accept your offer. If they accept completion will then take place four weeks later or, if you all agree, at some later date.

If your landlord’s nominated buyer does not accept your offer in the stipulated period, then you should be free to sell your home on the open market.

Should I buy additional shares before selling my home?

In most cases, owning 100 per cent of the shares of your property will give you more flexibility when you sell. Generally, there will be no obligation to offer your property to your landlord first, nor will your landlord have a right to nominate a buyer. Any restrictions on whom you can sell to will no longer apply. You can sell on the open market, without having to wait for the nomination period to expire.

If you can afford it, staircasing to 100 per cent could be a good option. You should discuss this with your professional advisors first. Depending on the structure, this could result in you having to pay additional stamp duty land tax. If you are short of funds, you could explore the possibility of back-to-back staircasing. This is a process which lets you acquire the remaining shares in your home leveraging your prospective sale proceeds. This can be a complicated procedure, and you may need to agree a further advance with your lender or remortgage. So, specialist advice is essential.

How much will selling a shared ownership property cost?

It depends. Selling your shared ownership home will involve lots of variables. For example, whether your landlord exercises their pre-emption right. In this case, you may not have to pay estate agent’s commission. Your costs will also depend on your personal circumstances and the decisions you make, for example if you staircase to 100 per cent.

As well as the usual costs associated with selling your home, you will need to factor in some additional expenses. For example, the cost of the valuation of your property. If your sale fails to complete within a year of your original valuation, you may also have to pay for a fresh valuation. It is important to budget carefully, and to make provision for these eventualities.

How we can help

We are well-acquainted with all aspects of shared ownership. While these types of property can present some challenges, you can be sure that with us your sale will be in safe hands.

For further information, please contact our Residential Property Team on 0800 542 4245 or email info@sillslegal.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Photo by James Feaver on Unsplash.