Shared Ownership Conveyancing.
Shared ownership conveyancing presents unique challenges, and must follow a distinct process that differs from standard property purchase conveyancing. In this article we explain what sets shared ownership apart, clarifying the process for buyers. We cover eligibility, the purchase process, staircasing and the potential for full ownership.
What is shared ownership?
Shared Ownership (also known as 'part-buy part-rent') is a scheme that offers homebuyers an opportunity to buy a part share in a property. Shared ownership is operated by housing associations and local authorities.
As a buyer, you can purchase a share in a residential property. You will be able to obtain a mortgage on the share in the property in much the same way as you would if buying the property outright.
As a part-owner of the property, you would then pay a favourable below-market rent on the share that you don't own. Typically you might initially buy a share of between 25% and 75% of the property, and you can increase your share over time through the process called 'staircasing'.
With most shared ownership properties (some have restrictions), you can ultimately buy 100% of the property, at which point you would no longer be required to pay any rent.
Why is shared ownership conveyancing more complicated?
Conveyancing is the legal process of transferring the legal ownership of a house or flat from a seller to the buyer. If you are buying property, you will need a conveyancing solicitor to carry out this legal work to complete your purchase.
Shared ownership conveyancing is more complicated than conveyancing on a standard property as it involves both ownership and rental agreements. Solicitors must be experienced with additional legal complexities, such as eligibility criteria, rent agreements on the non-owned share, and specific provisions for staircasing which allows you to buy further shares in the future.
There are further complexities around shared ownership mortgages, lease terms, and restrictions and obligations.
What is the shared ownership conveyancing process for buyers?
When buying a home your solicitor will carry out comprehensive due diligence into the legal title of the property. This process safeguards your interests, ensuring there are no legal claims against the property, outstanding debts, or planning restrictions.
Conveyancing is a critical part of the home-buying process that protects you against buying a property with unresolved legal problems or financial liabilities. The process is as follows:
Instruct a solicitor
Once your offer has been accepted by the housing association, you’ll need to instruct a conveyancing solicitor.
Your solicitor will send you a starter pack containing their terms of engagement, a formal instruction form, a verification of ID form and a copy of their conveyancing quote. Complete and return these as soon as possible to avoid delays.
Before you instruct, check that the solicitor can act for your chosen mortgage lender.
See also:
Get an instant conveyancing quote
Give the housing association your solicitor’s details
Once your offer is accepted, forward your solicitor's contact information to the housing association. The housing association will then send the memorandum of sale to your solicitor.
Contract pack sent
The solicitors representing the housing association will prepare and send the contract pack to your solicitor. This pack will include a completed Property Information Form (TA6), Fittings and Contents Form (TA10), Leasehold Information Form (TA7), draft contract. and a copy of the lease.
Upon receipt, your solicitor will review the contract pack documents. Your solicitor will also ask you to read through them and raise any questions or concerns.
Searches
Your solicitor will apply for property searches, which usually include a local authority search, Land Registry search, drainage and water search, environmental search, chancel repair search and an HS2 search.
Searches usually take around 2 weeks to obtain, but they can take much longer if there is a local authority backlog. Your solicitor may recommend personal searches which may be significantly faster.
See also:
What are conveyancing searches when buying a home?
Additional enquiries
Once the contract documents have been reviewed, your solicitor will raise additional enquiries about the property. These might, for example, be further questions about issues in the lease or rental agreement.
Report on title
Your solicitor will send you a comprehensive report on the legal title of the property. It outlines any legal issues, ground rent and service charges, restrictions, or obligations associated with the property, such as easements, covenants, or planning conditions. You should read the report and ask your solicitor any question you may have to ensure you are fully informed before you proceed with the purchase.
Mortgage conveyancing
To avoid delays it is recommended that you get a mortgage offer as early on as possible, as the housing association will also have to check and approve the mortgage offer.
Your solicitor must also complete the legal work for your lender and in order to do so, your solicitor must be an approved member of your lender's solicitor panel. If your solicitor is not on the lender’s panel, your purchase could take weeks longer to complete and increase your legal fees.
You should therefore check whether your solicitor can act for your lender before you instruct. You can check our panel's mortgage lender status.
Our solicitor panel can work with 99% of UK lenders, including major lenders like the Halifax and Nationwide Building Society, to smaller niche lenders like KRBS, so you can complete your purchase without delay.
Find out if our panel solicitors can act for your mortgage lender
Approved by over 100 more
Exchange of contracts
Once you have decided to proceed with the purchase and you have been formally approved by the housing association, you will exchange contracts. This is the point when the sale agreement becomes legally binding.
At the point of exchange the contract of sale is signed by both parties and the deposit (usually 10%) is paid to the housing association. A completion date is then agreed.
Completion
Completion is when you take full ownership of the property. On the day of completion:
- Your solicitor sends the balance of funds required to complete to the housing association’s solicitor
- The housing association’s solicitor sends the title deeds and transfer deeds to the your solicitor
- You collect and can move in
Post completion
After completion, your solicitor will file a Stamp Duty Land Tax (SDLT) return form (even if no Stamp Duty is due)
Your solicitor then registers you as the new part-owner at HM Land Registry, as well as registering charges to protect the interests of the mortgage lender and the housing association.
Do I have to pay Stamp Duty on a shared ownership purchase?
When buying a shared ownership property, you have the choice to either pay Stamp Duty on the full market value of the property, or in stages.
If you paid Stamp Duty on the full market value at the time of purchase, there will be no additional Stamp Duty to pay when you buy additional shares.
If you pay Stamp Duty on just the share you purchased, you will only need to pay additional Stamp Duty if your total share reaches or exceeds 80%. Stamp Duty will be calculated on the transaction that took you to or above 80% ownership, and you will have to pay Stamp Duty on any additional staircasing above 80%.
See more:
Can I buy additional shares at a later date?
Yes. "Staircasing" is the process by which an owner of a shared ownership property can buy additional shares in their property from the housing association.
Under a shared ownership scheme, a homeowner initially buys a share in the property (e.g. 25%), and then pays rent on the share owned by the housing association.
Homeowners can then buy additional shares in their property, in increments (interim staircasing), until they potentially own the property outright (final staircasing).
See more:
What if I want to sell my shared ownership property?
You can sell your shared ownership property as either a part or full owner.
One strategy sometimes used by sellers is when the seller staircases to 100% ownership at the same time as selling the property.
This approach (known as a "simultaneous sale" or "back-to-back staircasing") is often used by owners to facilitate a smoother sale process, or to maximise the property's value. It also allows the owner to avoid the complexities and restrictions sometimes associated with selling a shared ownership property.
Contacting an estate agent is not the first step when selling a shared ownership property. Instead, your lease will detail the specific procedure you will need to follow.
You'll need to order a RICS property valuation and send it to the housing association. The housing association will then attempt to find a buyer from their waiting list. If, after a set period (e.g. 3 months) as set out in the lease, a buyer cannot be found, you will then be able to sell your property on the open market through an estate agent.
Once you have found a buyer the conveyancing process is similar to a standard sale transaction.
See also:
