The government has launched a new model for shared ownership properties for aspiring homeowners. There are a number of significant changes which take effect from April 2021 including:
- Reducing the minimum initial stake for shared ownership properties from 25% to 10%, meaning buyers can benefit from a lower deposit and, in many cases, it will mean that their combined rent and mortgage costs will be lower.
- The introduction of a new 1% gradual staircasing process (investing by re-mortgaging/using savings to buy further shares in a property) with reduced fees and minimum staircasing down to 5%, enabling shared owners to buy in smaller increments. Previously, shared owners wanting to staircase and progress to full ownership could only do so by buying at least 10% at a time.
- The introduction of a new 10-year period during which the landlord will support the shared owner with the cost of repairs and maintenance in new build homes. Previously shared owners were responsible for the full cost of repairs and maintenance from day one.
- Shared owners will be able to claim a maximum of £500 per year to cover certain repairs, and any unspent expenditure can be carried over for one year. Allowed repairs would include bathroom fittings, appliances for making or supplying water, gas, electricity, heating, pipes and drainage.
- The old model gave landlords an 8-week period during which they had the exclusive right to market the property for sale. Only if the landlord did not find a new buyer during this period could the property then be placed on the open market and sold either through shared ownership or outright. The new model reduces this period to 4 weeks, speeding up the process and giving shared owners greater power and influence over the resale of their property.
- All new homes built under the new model for shared ownership will be issued with a minimum 990-year lease term. Under the previous model, shared owners could be issued with a minimum lease of 99 years. A lease with less than 80 years is generally the point at which estate agents and mortgage lenders consider it will adversely affect the value of a property and its ‘mortgageability’.
- Current shared owners will be given the statutory right to extend their lease by 990 years where the shared ownership landlord is also the freeholder. The government is also exploring options on how shared owners can extend their lease by 990 years when their landlord does not have sufficient leasehold interest to issue a 990-year lease extension. These new changes will give shared owners the added value and security of longer leases or the ability to extend them.
The new shared ownership model will apply to all homes that receive grant funding via the Affordable Homes Programme and homes funded via section 106 contributions, however the government has said there will be a transition period to ensure developments already progressing through the planning process are not adversely affected by the new rules.