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Is shared ownership right for you? Pros and cons of partial property ownership

Shared ownership arrangements allow individuals to purchase a share of a property and rent the remaining portion, making the dream of homeownership more accessible.

However, like any significant financial decision, it’s essential to weigh the benefits and drawbacks before proceeding.

How does shared ownership work?

Shared ownership allows you to purchase a share of a home (typically between 25 and 75 per cent) and pay rent on the remainder to a landlord or housing association.

This scheme is designed for first-time buyers or those who cannot afford to buy a home outright, offering a lower initial deposit and the opportunity to increase your ownership over time through a process known as staircasing.

If your financial situation improves, you can buy additional shares in your home (subject to the terms and contracts of the other shared owner) potentially leading to full ownership.

Monthly payments include a mortgage for the share you own to your lender and rent for the share you don’t own to the other owner, plus any service charges and maintenance fees that may apply.

Rents and service charges can increase over time and are often linked to inflation or specific rules that will be laid out as part of the sale.

Shared ownership properties are typically leasehold, setting out rights and responsibilities, and can include restrictions on alterations and subletting.

Shared ownership requires careful budgeting and consideration of the long-term affordability and the process of selling your share in the future.

To help you decide if shared ownership is the right path for you, here are the key advantages and disadvantages to consider:

Pros of shared ownership

  • Lower initial deposit: One of the most appealing aspects of shared ownership is the reduced initial deposit requirement. Because you are buying a portion of the property, the deposit necessary is significantly less than what’s needed for a traditional home purchase. This lower upfront cost can make homeownership attainable much sooner for many.
  • Gradual ownership increase: Shared ownership schemes often offer the flexibility to “staircase”, or gradually increase your share in the property over time. This means you can start with what you can afford and buy more shares, typically by extending your mortgage, as your financial situation changes, eventually owning 100 per cent of your home (in most instances).
  • Accessibility: For those who find the property ladder out of reach due to high market prices, shared ownership opens the door to homeownership. It provides an opportunity to live in areas that might otherwise be unaffordable, making it an excellent option for those with limited savings or first-time buyers.

Cons of shared ownership

  • Limited control: As you do not own the property outright, your control of it is limited. Restrictions often apply to major renovations or modifications. You will need to navigate these limitations and work within the framework of the shared ownership agreement. It is important to note, this may vary depending on your landlord.
  • Additional monthly costs: While the initial costs are generally lower, monthly costs can be higher than expected. You will need to budget for your mortgage, rent on the remaining share, maintenance fees, and possibly service charges. These expenses can add up, potentially stretching your finances.
  • Resale challenges: Selling a shared ownership property can present challenges. The housing association or the landlord has the right to find a buyer before you can put the property on the open market, a process known as “first refusal”. This can limit your options and potentially delay the sale process.

Why should you seek the help of a residential property solicitor?

Engaging a residential property solicitor is crucial when deciding whether shared ownership is right for you.

Property solicitors can guide you through the buying process, ensuring all legal requirements are met.

They will also:

  • Search for any legal issues with the property
  • Advise on the lease terms
  • Advise on any restrictions on use of the property
  • Clarify your rights and responsibilities
  • Help with the staircasing process to increase your ownership share

Their expertise ensures a smooth transaction and protects your interests throughout the purchase.

Do you need expert advice about purchasing a shared ownership property? Get in touch with our team today to learn more.

Elizabeth Jennings

Director - Commercial Property & Charities

I joined Mander Hadley in 2004, qualified as a solicitor in 2006 and have focussed on commercial law throughout. I am also a member of Coventry and Warwickshire First and Warwickshire Law Society.