Shared ownership is a popular scheme in the UK designed to help people who cannot afford to buy a home outright. It allows buyers to purchase a share of a property and pay rent on the remaining portion. While this scheme offers an affordable route to homeownership, selling a shared ownership property can be more complex than selling a traditional home. This guide aims to provide a thorough understanding of the process, considerations, and steps involved in selling a shared ownership property in the UK.
Understanding Shared Ownership
What is Shared Ownership?
Shared ownership is a part-buy, part-rent scheme aimed at making homeownership more accessible. Typically, buyers purchase between 25% and 75% of a property’s value and pay rent on the remaining share, which is owned by a housing association or private developer. Over time, owners can buy additional shares (a process known as “staircasing”) to increase their ownership stake.
Benefits of Shared Ownership
- Affordability: Lower deposit and mortgage requirements make it easier to get on the property ladder.
- Staircasing: Owners can increase their equity in the property over time.
- Security: Unlike renting, shared ownership offers long-term security of tenure.
Selling a Shared Ownership Property
Selling a shared ownership property involves several unique steps and considerations compared to selling a fully owned home. This section will cover the process, from initial considerations to finalizing the sale.
Step 1: Reviewing Your Lease Agreement
Before initiating the sale process, review your shared ownership lease agreement. This document contains crucial information about your rights and obligations, including:
- Pre-emption clause: Many leases include a pre-emption clause, giving the housing association the right to find a buyer before you can sell on the open market.
- Staircasing: If you’ve staircased to 100%, different rules may apply.
- Maintenance and Service Charges: Ensure all charges are up to date.
Step 2: Notify Your Housing Association
Inform your housing association of your intention to sell. They will guide you through their specific process, which typically includes:
- Valuation: The housing association will require an independent RICS (Royal Institution of Chartered Surveyors) valuation to determine the current market value of your share.
- Marketing Period: The association may have a set period (usually 8-12 weeks) to market the property to eligible buyers on their waiting list.
Step 3: Getting a Valuation
An independent RICS valuation is crucial for determining the sale price of your share. This valuation must be paid for by the seller and is typically valid for three months. If the property does not sell within this period, a new valuation may be required.
Choosing a Surveyor
Choose a RICS-certified surveyor with experience in shared ownership properties. The housing association may provide a list of approved surveyors, but you can also find one independently.
Understanding the Valuation
The surveyor will assess factors such as the property’s location, size, condition, and market trends to determine its value. Ensure you understand the valuation report, as it will be the basis for your sale price.
Step 4: Marketing Your Property
If the housing association is unable to find a buyer within the stipulated period, you may then market the property on the open market.
Housing Association’s Marketing Efforts
During the pre-emption period, the housing association will market your property to their list of eligible buyers. They may use their website, mailing lists, and other channels to attract potential buyers.
Open Market
If the association is unable to find a buyer, you can list the property with an estate agent. Choose an agent experienced in selling shared ownership properties to ensure they understand the unique aspects of the sale.
Advertising Tips
- Highlight Benefits: Emphasize the benefits of shared ownership, such as affordability and the opportunity to staircase.
- Clear Information: Provide clear details about the share being sold, rent, service charges, and any specific conditions.
- Professional Photos: Use high-quality photos to showcase the property.
Step 5: Conducting Viewings
Arrange viewings for potential buyers. Both the housing association and estate agent (if involved) can assist in coordinating these. Be prepared to answer questions about the property, the shared ownership scheme, and any additional costs.
Preparing for Viewings
- Clean and Declutter: Ensure the property is clean and clutter-free to make a good impression.
- Repairs and Maintenance: Address any minor repairs or maintenance issues beforehand.
- Information Pack: Have an information pack ready for potential buyers, including details about the lease, costs, and the shared ownership process.
Step 6: Accepting an Offer
Once an offer is made, the housing association must approve the buyer to ensure they meet the eligibility criteria for shared ownership. This process may include financial checks and confirmation that the buyer does not own another property.
Negotiation
You may need to negotiate the final price with the buyer. Keep in mind that the housing association’s valuation sets the minimum price, and the final sale price cannot be lower than this valuation without their approval.
Sales Memorandum
Once an offer is accepted, a sales memorandum will be issued, outlining the agreed terms of the sale. This document is not legally binding but formalizes the agreement between buyer and seller.
Step 7: Instructing Solicitors
Both parties will need to instruct solicitors to handle the legal aspects of the sale. Choose a solicitor experienced in shared ownership transactions to ensure a smooth process.
Conveyancing Process
- Draft Contract: Your solicitor will draft the contract of sale and send it to the buyer’s solicitor.
- Enquiries: The buyer’s solicitor will raise enquiries about the property, lease, and any other relevant matters.
- Exchange of Contracts: Once all enquiries are satisfied, contracts are exchanged, and the sale becomes legally binding.
- Completion: On completion day, the buyer pays the remaining balance, and ownership is transferred.
Step 8: Finalizing the Sale
The final steps involve the formal transfer of ownership and the settlement of any outstanding charges.
Transfer of Ownership
On completion day, the legal ownership of the property is transferred to the buyer. The buyer’s solicitor will register the change of ownership with the Land Registry.
Settling Charges
Ensure all outstanding rent, service charges, and other fees are settled before completion. Your solicitor will handle the final financial settlement.
Considerations and Challenges
Restrictions and Eligibility
Shared ownership properties come with restrictions on eligibility. Buyers typically need to meet specific criteria, such as:
- Income Limits: There are maximum income limits for eligibility, which can vary by region.
- First-Time Buyers: Priority is often given to first-time buyers or those who cannot afford to buy outright.
Leasehold Considerations
Shared ownership properties are usually leasehold, meaning you own the property for a fixed term (e.g., 99 or 125 years) but not the land it’s built on. Understand your rights and responsibilities as a leaseholder, including:
- Ground Rent: An annual fee paid to the freeholder.
- Service Charges: Fees for the maintenance and repair of communal areas.
Staircasing
If you’ve staircased to 100% ownership, you may sell the property on the open market like any other freehold property. However, if you still own a share, the process will follow the shared ownership sale rules.
Benefits and Drawbacks of Selling a Shared Ownership Property
Benefits
- Access to a Broader Market: Shared ownership properties attract buyers who may not afford full ownership.
- Support from Housing Associations: They assist in finding eligible buyers, potentially reducing the time the property is on the market.
Drawbacks
- Pre-emption Rights: Housing associations have the first right to find a buyer, which can delay the sale.
- Valuation Costs: Sellers must pay for the RICS valuation, which can be a financial burden.
- Limited Market: Shared ownership schemes have eligibility criteria, potentially limiting the pool of potential buyers.
Tips for a Smooth Sale
- Prepare Early: Start the process early to allow sufficient time for the housing association’s marketing period.
- Stay Informed: Understand your lease agreement and the shared ownership sale process.
- Choose the Right Professionals: Select an experienced estate agent and solicitor to navigate the complexities of the sale.
- Communicate Effectively: Maintain clear communication with all parties involved, including the housing association, estate agent, and solicitors.
Conclusion
Selling a shared ownership property in the UK involves several unique steps and considerations, from understanding your lease agreement and notifying your housing association to getting a valuation and marketing the property. While the process can be more complex than selling a fully owned home, it offers a structured and supported route for finding a buyer. By following the steps outlined in this guide and seeking professional advice, you can navigate the sale of your shared ownership property successfully, ensuring a smooth and efficient transaction.
