The shared ownership scheme has been around for some time now but there is often a common misconception in the marketplace as to what is involved in a shared ownership lease.
Shared Ownership is an affordable home ownership scheme which aims to make getting onto the property ladder much more achievable.
It is an arrangement whereby those who, due to low income or limited deposit funds, do not have the resources available to purchase in the usual way, get the opportunity to purchase a property on the open market. It is often targeted at first time buyers and enables them to part-own and part-rent their new home. Buyers purchase a share of the value (between 25%-75%) of the property whilst paying rent on the remaining share, which is owned by the landlord. The buyer is granted a lease of the property.
The percentage you purchase all depends on how much you can afford. The landlord (usually a housing association) will usually look at the money you have coming in, balanced against all of your expected outgoings (including rent, utility bills and mortgage payments etc). This allows them to assess the percentage share that would be affordable and most appropriate for you.
After becoming a shared-owner, you can purchase more of your home (for example increasing your percentage share from 25% to 40%), in turn reducing the percentage that you pay rent on (e.g. 75% to 60%). This is known as staircasing. The amount that you pay for the additional percentage is based upon the value of the property at the time you staircase. Depending on the provisions of the lease, you may also have the opportunity to staircase to 100% so that you own the property outright and no longer have to pay any rent.
If and when you come to sell the property, the landlord tends to have a right of first refusal. This means that the landlord may agree to buy the property back from you. Alternatively, they may find a buyer for you. If you own 100% of the property before you come to sell, you can sell it yourself in the usual way.