Shared ownership schemes have become an increasingly popular way for first-time buyers and those with lower incomes to take a step onto the property ladder. Despite the advantages of affordability and lower initial investment, circumstances often change, and homeowners may find themselves needing or wanting to move on. Exiting a shared ownership property involves a complex set of procedures, rules, and considerations that differ significantly from a fully owned home. It is crucial to understand your rights, obligations, and the correct process to ensure a smooth transition.
Shared ownership typically involves purchasing a leasehold share of a property—usually between 25% and 75%—from a housing association. The buyer pays a mortgage on their share and a subsidised rent on the portion still owned by the housing association. This model allows individuals to become part-owners, rather than full owners, of the property, providing a viable alternative to traditional home buying, especially in high-demand urban areas.
Over time, owners may choose to increase their share through a process known as “staircasing,” eventually enabling them to own 100% of the property. Despite offering greater flexibility, shared ownership is still governed by leasehold law and the specific terms laid out in the shared ownership lease, creating certain complexities when it comes time to exit the arrangement.
People leave shared ownership homes for a variety of reasons, including relocation for work, changes in personal circumstances such as marriage or divorce, financial difficulties, the desire for a fully owned home, or simply to upsize or downsize. Whatever the motivation, it’s important to start with a clear understanding of the contractual requirements and legal implications of your shared ownership agreement.
Not reviewing these matters thoroughly can lead to unexpected delays, additional costs, or even legal complications down the line. Therefore, engaging with professional advisers early in the process can make a significant difference to the outcome.
The shared ownership lease is the definitive document outlining all rights and responsibilities associated with the property. It specifies procedures for selling, including any restrictions imposed by the housing association. Most leases follow a standard model approved by the Homes and Communities Agency, but variations do exist.
Typically, the lease will dictate:
– Whether and when you can staircase before selling
– The method for valuing the property
– The process for notifying the housing association of your intent to sell
– Timeframes for resale
– Provisions for offering the housing association first refusal or a right to nominate a buyer
Understanding all these elements is essential before taking any steps towards marketing your share.
The first formal step is usually notifying your housing association that you wish to sell your share. This notification triggers a prescribed process involving valuation, finding a buyer, and securing approvals. Most housing associations include a period—often eight to twelve weeks—during which they retain the exclusive right to find a buyer for your share. This nomination period is designed to ensure that the property remains within the affordable housing pool and is offered first to eligible buyers.
During this time, the association may advertise your property via its own networks, local housing registers, and online platforms. They may also host viewings and liaise directly with interested parties. If they do not successfully find a buyer within the nomination period, you are typically free to market the property on the open market through an estate agent.
A key stage in the process is obtaining a valuation. Shared ownership leases stipulate that this must be conducted by a RICS (Royal Institution of Chartered Surveyors) accredited surveyor to ensure an independent and robust market valuation of the whole property. Your share is then derived as a fixed percentage of this valuation.
The cost of the valuation is usually borne by the homeowner. It’s important to commission a fresh valuation as most housing associations require that it be no older than three months at the start and completion stages of the sale. If the sale takes longer than expected, you may need to pay for updated valuations, adding to your overall costs.
Setting the asking price is not as flexible as in a traditional sale. Even if you believe the value of your home is higher based on improvements or market trends, the RICS valuation governs the maximum asking price you can set. Some leases may allow for an upward adjustment for additions and enhancements you have made, such as a conservatory or kitchen upgrade, but this must be evidenced and approved.
Transitioning out of a shared ownership property isn’t just about receiving proceeds from your share; there are also costs to consider. These can include:
– RICS valuation fees
– Energy Performance Certificate (EPC) costs if your existing certificate is outdated
– Administration charges by the housing association
– Legal fees for your solicitor
– Estate agent fees if the home is marketed openly
– Removal and relocation expenses
These fees can quickly mount up, and it’s prudent to budget several thousand pounds to cover them all. If you are strapped for cash, it is worth consulting your housing association about any schemes or supports available.
One strategy that may improve your sale prospects or provide more flexibility in terms of pricing and marketing is staircasing. This involves purchasing additional shares in the property—potentially up to 100%—prior to sale. Complete or final staircasing turns the home into a fully owned property, which you can then sell on the open market without any nomination period or housing association involvement.
However, staircasing comes with its own set of costs, including valuation, legal and mortgage fees. Whether it makes financial sense depends on the value of the additional shares, the differential in selling price between shared and full ownership, and whether staircasing creates greater buyer interest in the property. Consulting a financial adviser can help determine if this route is beneficial in your individual case.
Once the housing association’s nomination period has expired (or if a buyer has been found during this window), the next step involves marketing the property. If going to open market, you’ll need to instruct an estate agent experienced in shared ownership sales. These transactions have specific requirements, and a knowledgeable agent can help avoid pitfalls by pre-screening buyers for affordability and eligibility.
Remember, buyers of shared ownership properties must meet certain criteria, typically related to income thresholds and first-time buyer status. These requirements, although less stringent when selling on the open market, still play a role as the housing association reserves the right to approve the new buyer.
The legal process when exiting a shared ownership property is similar in structure to a standard sale but comes with a few added layers of complexity. It’s critical to appoint a solicitor familiar with shared ownership transactions. Your solicitor will coordinate with the buyer’s solicitor and the housing association to ensure that all protocols are met, including:
– Sales memorandum confirmations
– Lease assignments or modifications
– Final staircasing agreements (if applicable)
– Consents from the housing association
– Completion statements reflecting rents, service charges, and share values
Delays can occur if documentation is incomplete or if buyers are slow to provide financial evidence, so ensuring all papers are in good order, and timelines are monitored, is fundamental to facilitating a smooth exchange and completion.
If you have a mortgage on your share, the sale proceeds must first go towards settling the outstanding loan. This is coordinated by your solicitor in liaison with your lender. Any surplus is yours once legal costs and other obligations have been met.
Be aware that if your property has fallen in value, you could be in a negative equity situation, requiring you to cover the shortfall to satisfy your mortgage lender’s conditions. Seeking advice from your mortgage provider and financial adviser early in the process is recommended to avoid surprises.
In some areas or market conditions, it can be challenging to find a buyer for a shared ownership property, particularly if the share for sale is small or if affordability criteria exclude many prospective purchasers. Strategies to boost appeal could include:
– Investing in minor enhancements or repairs
– Offering a staged or discounted staircasing option
– Partnering more actively with the housing association to cross-promote
– Seeking consent to rent the property temporarily while continuing to market it
Each of these options has implications and may require formal approval, so always liaise closely with your housing association before making any commitments.
After your sale is finalised, there are a few closing responsibilities. These include:
– Informing utility providers of the change in occupancy
– Settling any final service charges or ground rent obligations
– Cancelling relevant insurance policies
– Retaining documentation for tax or legal purposes
It’s also wise to review your financial position post-sale, including any tax implications arising—though most primary home sales are exempt from capital gains tax in the UK under private residence relief.
Navigating the exit from a shared ownership property can be daunting, particularly for first-time sellers. There is support available at various stages. Housing associations often have dedicated resale teams to guide you. Additionally, citizen advice services, property law solicitors, and independent financial advisers can offer more nuanced assistance based on your personal circumstances.
Web-based resources, including the GOV.UK site and bodies like Share to Buy, also provide excellent overviews, eligibility tools, and contact directories to assist with planning and decision-making.
Exiting a shared ownership agreement is a structured legal and financial process, not merely a property transaction. It requires careful preparation, open communication with involved parties, and a clear understanding of rights and responsibilities. While more complex than selling a conventional home, with the right support and thorough understanding, the process can be managed efficiently and successfully. Whether you are selling to upsize, downsize, relocate or release equity being well-informed can make all the difference.
In conclusion, leaving a shared ownership property involves more steps and oversight than a standard home sale, but it also offers the opportunity to move forward with greater financial freedom or lifestyle flexibility. By reviewing your lease, planning for the costs, and working closely with experienced professionals, you can navigate the process smoothly and make the most of your investment in shared homeownership.
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