Conventional shared ownership

Applicants for shared ownership housing must be able to afford to purchase at least 25 per cent of the property, and be in a position to raise a mortgage and meet other costs such as stamp duty, solicitors' fees, buildings and contents insurance, and a service charge if payable. Associations will often require a minimum income level. However, if an applicant can afford to buy a house on the open market, they will not be eligible.

Priority is usually given to tenants of registered social landlords and local authorities. Applicants who have not owned a home previously will also be given priority, although people who have owned a home previously may be given priority depending on their circumstances, for example, if they lost their home following relationship breakdown.

Housing associations may also have other criteria, for example, some may only offer properties to particular groups such as disabled people or families.

Most properties available for shared ownership will be new-build properties owned by a housing association, although there are some new-build shared ownership properties available from private builders.

Applicants decide whether to buy a 25, 50 or 75 per cent share of the property. They will usually need to arrange a conventional mortgage for their share of the property. They then pay an 'occupancy payment' to the housing association on the remainder of the property. Applicants can receive Housing Benefit towards the occupancy payment provided they are eligible. [1] For more information, please see the section on Housing Benefit. Applicants buying a share of a flat may also have to pay a service charge to cover maintenance of communal areas such as stairs and gardens.

After a year, the applicant can choose to buy further 25 per cent shares in the property, based on the market value at the time the share is purchased. This is known as 'staircasing'. The occupancy payment will decrease when the applicant buys a greater share of the property. Applicants can only 'staircase' once a year. Eventually, they can own the property outright.

Applicants cannot 'staircase down' and reduce the share of the home that they own.

Shared ownership is a form of owner-occupation - shared owners cannot have an assured tenancy or a Scottish secure tenancy even if it otherwise meets the necessary requirements.[2]

Shared owners will be required to sign an occupancy agreement setting out their rights and obligations in relation to the remaining share of the property (i.e. the share that they do not own). This is, in effect, a rental agreement, the terms and conditions of which are drafted by solicitors and revised as part of the legal transaction. If any dispute arises at a later stage, the occupancy agreement will be the document which is relied upon in the first instance. Occupancy agreements are legal contracts in their own right, as opposed to a specific form of lease. The legal status of occupancy agreements as regards tenancies is unclear at present. Any challenge to an occupancy agreement could possibly be made in relation to breach of contract, depending on the circumstances.

Occupiers who fall behind on their mortgage payments are at risk of their lender taking action to repossess the property in the usual way. For more information, please see the section on mortgage arrears - payment problems. If occupiers fall into arrears on their occupancy payment, then the housing association cannot evict them in the same way as they can evict a tenant. However, they may be able to obtain a court order to force payment or sale of the occupier's share of the home.

Shared owners will usually be responsible for all repairs to the property, both internal and external, unless they are buying a flat, when they will usually pay a service charge that covers maintenance of the exterior of the building.

The shared ownership agreement will usually state whether the occupier can rent out a room to a lodger.

Subletting the whole of the property is usually prohibited in the shared ownership agreement, although the landlord may consider a request to sublet in certain circumstances, for example, if the shared owner needs to move temporarily to another area for employment reasons and is not subletting for speculation or gain. The shared owner will also need the consent of the mortgage company before subletting the whole of the property.

If a shared owner wishes to sell their share of the property, the new owner will need to pass the housing association's criteria for shared ownership (for example, they will not be able to buy the shared ownership property if they can afford to buy a home on the open market). For the first 28 days, the shared owner can only offer the property to another shared ownership purchaser who has been approved by the housing association. The housing association should help the shared owner to find a buyer. Priority will usually be given to applicants who meet the criteria listed under 'Who can apply?', above. The housing association will usually also have to consent to the sale before it goes ahead.

After the 28-day period, if the property has not been sold, the occupier can offer their share on the open market. They can also sell the entire property outright on the open market. In this case, the proceeds of the sale, less any legal costs, will be split between the occupier and the housing association according to the share in the property that each party holds. The legal contract to sell the share in the property will involve three parties, namely, the housing association, the shared owner and the proposed buyer. Negotiations will take the form of a normal contract (or 'missives') to sell apart from the fact that three parties are involved instead of two. This is known as 'tripartite missives'.

Occupiers who have 'staircased' to own a 100 per cent share of the property are not subject to the above rules as the property is no longer a shared ownership property. They can sell their property on the open market in the usual way.

Access Ownership is a new shared ownership scheme set up by Ownership Options and Link Housing, to enable disabled people to access a wider range of housing options. The scheme is open to people with any form of disability, who are looking to buy a more suitable home or who already own a property but are seeking to reduce their financial commitments. Contact Ownership Options for further details.