New model shared ownership - homes built after 2021 grant funded

Back in September 2021, the government announced a new Affordable Homes Programme (AHP) which should provide up to 180,000 new homes across the country.

As part of this, some changes were introduced to the Shared Ownership scheme to help more people get onto the property ladder. These changes included:

• The minimum initial share reduced from 25% to 10%.
• The introduction of a 10year repair warranty during which the shared owner will receive support from their housing provider to pay for essential repairs.
• The introduction of a new 1% gradual staircasing model enabling shared owners to buy more shares in smaller instalments compare to the previous 10%, with heavily reduced fees.
• Shared owners will be able to take control of the resales process from the landlord at an earlier point, giving them greater influence over the sale of their home.

Key information about shared ownership – for homes built after 2021 with Grant Funding

• When you buy a home through shared ownership, you enter into a shared ownership lease. The lease is a legal agreement between you (the ‘leaseholder’) and the landlord. It sets out the rights and responsibilities of both parties.
• Before committing to buy a shared ownership home, it's very important that you take independent legal and financial advice.
• The key information below is to help you decide if shared ownership is right for you. Please read this carefully so that you fully understand what you're buying.
• It does not form part of the lease. Please carefully consider the information and the accompanying lease, and discuss any issues with your solicitor before signing the lease.
• Failure to pay your rent or service charge or your mortgage could mean your house is at risk of repossession.

You pay for a percentage share of the market value of a home.

You enter into a lease agreement with the landlord, and agree to pay rent to the landlord on the remaining share

• You can buy more shares in your home, which is known as ‘staircasing’. This is covered in section 6, ‘Buying more shares’.
• When you buy more shares in your home, the rent you pay goes down in proportion to the landlord's remaining share.
• You can rent out a room in the home at any time, but you must live there at the same time.
• You cannot sublet (rent out) your entire home unless either:
  - you have your landlord's permission, which they will only give in exceptional circumstances, or
  - if you're a serving member of the armed forces, and you're required to serve away from the area where you live for a fixed period, you may sublet the entire home subject to the landlord's permission.

All shared ownership homes are sold as leasehold, even houses.

• This is because you only pay for part of the market value up front, and the landlord has an interest in the remaining share.
• For the majority of our shared ownership properties, you can only purchase up to a maximum of 80% ownership.
• In cases where you can buy 100% ownership, where possible, for most houses the freehold will transfer to you (please check the lease as there are some instances where the freehold will remain with the landlord), and the shared ownership lease falls away.
• For most flats, the lease will remain in place, but the shared ownership obligations will fall away.
• If there is a service charge on the scheme, you will have to pay this, even if you own the freehold.
  
  For more information – please contact the Housing Management Team on 0300 1234 009 or at enquiries@midlandsrural.org.uk
• You are buying a long leasehold interest in the home but only paying for part of the market value.
• The length of the lease varies – so please contact the Housing Management Team for specific information about a property you're interested in.
• When you decide to proceed with the purchase of a shared ownership property, you will be given a Key information document about the home, and a summary of costs document.

Information included within your lease:

• A description of the home, including its boundaries.
• Your responsibilities as a leaseholder, such as repairs and maintenance, and your landlord's responsibilities, such as buildings insurance. For more information on repairs, see section 5, ‘Maintaining and living in the home’.
• Details of any restrictions or obligations, such as decoration and alterations.
• The lease start date.
• The share that you have bought.
• The amount of rent you must pay, together with any other amounts due under the lease.
• How the landlord will review your rent.
• The method by which you can buy additional shares to own more of your home in the future (known as 'staircasing').
• The method by which you can move home, either by selling your share or selling the whole home.
• As the lease is a legally binding contract, please review it carefully with your solicitor. It's important that you make sure that you understand the lease before you sign it. Your solicitor will provide you with a copy of the lease.
• You'll need to contact us to confirm our lease extension policy.

Under a shared ownership lease, you only pay for part of the market value up front, and you agree to pay rent on the remaining share to the landlord.

• The total rent to pay in the first year is a percentage of the remaining share of the market value you did not pay for. This percentage is in the ‘Key information about the home’ document. If you buy more shares in your home, the rent will go down.
• The landlord will review your rent periodically at the times set out in the lease. Typically, they review the rent every year.
• Your rent will go up when it is reviewed. It will not go down.
• The maximum amount your rent can go up by is the same as the percentage increase in the Retail Prices Index (RPI) for the previous 12 months plus 0.5%. This means that where the RPI increase for the 12 month period is 0% or negative, the most the rent can go up by is 0.5%.
• This example shows how the rent might go up:

A worked example demonstrating how the rent is calculated at review is in Appendix 2 of the lease.

Your landlord may be entitled to terminate the lease if you:

• do not pay the rent
• do not observe and perform your obligations in the lease
  
  
• The landlord will need a court order to terminate the lease.
• If the landlord terminates the lease, you may lose any equity in the home you had bought. You could also lose any deposit or monies you have contributed towards the purchase of your home.
  
  
• If action is needed for non-payment of rent or breach of another obligation in the lease, the landlord will be obliged to make your mortgage lender aware of this.
• The mortgage lender may take their own action as they feel is appropriate.

When you complete (the day you buy your home), you will need to pay these costs for the rest of the month and possibly for the following month:

• rent
• service charge (where applicable)
• estate charge (where applicable)
• buildings insurance
• reserve fund (also known as ‘sinking fund’) payment (where applicable)
• management fee (where applicable).

Remember to plan for these amounts when you work out how much money you need for completion. You will receive a completion statement that explains what you need to do. Your solicitor will go through it with you.

You'll need to make monthly payments to the landlord for the:

• rent
• service charge (where applicable)
• estate charge (where applicable)
• buildings insurance
• reserve fund (also known as ‘sinking fund’) payment (where applicable)
• management fee (where applicable).

There is more information on the GOV.UK website about service charges and other expenses.

You'll need to budget for your other monthly costs, which may include:

• mortgage repayment
• contents insurance
• Council Tax
• gas and electricity
• water.

If you are purchasing the property with a mortgage, your mortgage lender will require a deposit:

• check with your solicitor when you need to pay the deposit
• ensure your mortgage lender or broker is aware of what type of lease you have, this may include a restricted staircasing lease
• check with your mortgage adviser when your first mortgage payment is due after completion

You'll need to arrange and pay for your contents insurance before completion.

Buildings insurance

• The landlord is responsible for the buildings insurance while you are a shared owner. This applies to both houses and flats.
• If you reach 100% ownership and remain a leaseholder, you'll continue to pay the landlord for buildings insurance.
• If you reach 100% ownership and become the freeholder, you'll need to arrange buildings insurance yourself.

To find out which of these apply, see the ‘Maximum share you can own’ section in the ‘Key information about the home’ document.

You'll need to pay your own solicitors' fees and any associated purchase costs. You can expect to pay fees including:

• legal services fee
• search costs
• banking charges
• Land Registry fee
• document pack fee
• management agent consent fee - subject to development and terms of the management company.

Solicitors' fees can vary. Your solicitor should confirm what the fees cover and the cost when you instruct them to act on your behalf.

Stamp Duty

You may have to pay Stamp Duty Land Tax (SDLT) depending on your circumstances and the home's market value. Discuss this with your solicitor. There is more guidance on the GOV.UK website:

• Stamp Duty Land Tax and shared ownership property
• Calculate Stamp Duty Land Tax (SDLT)

Remember to plan for these amounts when you work out how much money you need for completion. You will receive the following documents from your solicitor:

• an initial quote for the costs involved, and
• a completion statement after exchange of contracts, which describes the actual costs.

Your solicitor will go through these documents with you.

This section describes the responsibilities for repairs and maintenance and who pays the costs.

• As the leaseholder, you're responsible for keeping your home in good condition.
• You are responsible for the cost of repairs and maintenance of your home. For information on help from the landlord with the cost of essential repairs in the first 10 years of the lease, please read the section ‘Initial repair period’.
• The association is not responsible for carrying out refurbishment or decorations. For example, replacing kitchens or bathrooms.
• You are responsible for arranging and paying for a boiler service every year. The service must be carried out by an engineer on the Gas Safe Register.

• You can paint, decorate and refurbish your home as you wish. For new-build homes, it's better to not decorate for the first year though. This gives building materials like timber and plaster time to dry out and settle.
• If you want to make any structural changes to your home, you will require our consent. Please refer to your lease for further restrictions and information, as in most cases structural alterations are not permitted.
• You'll need to check us what counts as a home improvement and get permission before you carry out these works.
• Home improvements may increase or decrease the market value of your home. How this affects you is covered in more detail in section 6, ‘Buying more shares’.

• For new-build homes, the building warranty will cover the cost of structural repairs (typically for the first 10 or 12 years). We can let you know who the building warranty provider is.
• New-build homes have a defects liability period. This usually lasts for around 12 months after build completion, but it can vary depending on the contract. During this period, the contractor must put right at their own expense any defects or faults which arise. For example, from defective materials or faulty workmanship.
• If you buy a home through a shared ownership resale, any remaining period on the building warranty will transfer to you.

If there's a reserve fund (also known as ‘sinking fund’), you'll need to pay into the fund.

• The fund covers major works, like repairing unadopted roads.
• There are rules about how landlords must manage these funds.
• You will not usually be able to get back any money you pay into them. For example, if you move home.
• Repairs which are the association's responsibility during the initial repair period will not be paid for using the reserve fund. Please refer to your ‘Summary of costs’ document to check if there's a reserve fund payment.

For homes on this shared ownership model, there's a 10 year ‘initial repair period’. This starts from the lease start date, which applies while you own less than a 100% share in the home.

• Any work that is covered by a warranty or guarantee must be claimed through the policy by the policyholder.
• Repairs which are the association's responsibility during the initial repair period will not be recharged through the service charge.

For more information on what's covered in the 10 year repair period, please take a look at the 'External and structural repairs' and 'General repairs and maintenance' sections below.

And for details on how to claim during the 10 year repair period, please take a look at the 'Claiming the repairs allowance' section below.

In the initial repair period, we are responsible for the cost of essential repairs to:

• the external fabric of the building
• structural repairs to walls, floors, ceiling and stairs inside the home.

These are limited to repairs NOT covered by the building warranty or any other guarantee. You must notify us that the repair is required before any work begins.

In the initial repair period, you'll be able to claim costs up to £500 a year from the association to help with essential repairs or replacement (if faulty) of:

• installations in the home for the supply of water, gas and electricity (including basins, sinks, baths and sanitary devices but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity such as ovens or washing machines), pipes and drainage
• installations in the home for space heating and water heating.

The amount you can claim each year and the number of years remaining in the initial repair period is in the ‘Key information about the home’ document.

Repairs and maintenance costs over the allowance amount stated in the ‘Key information about the home’ document, or after the initial repair period ends, are your responsibility.

If you do not claim the full repairs allowance in one year, a maximum of one year's allowance will roll over to the following year.

The following example shows how the repairs allowance works if you claim in years two and three.

The quickest way to claim the repairs allowance is to complete our online form.

• We're responsible for deciding whether repairs are essential. We have the right to inspect your home when making this decision.
• When you claim for the cost of essential repairs, we will approve or reject claims in a fair and consistent manner.

If we decline a claim, we must:

• tell you why in writing within seven days of receiving your information supporting the claim
• advise you of your right to dispute the decision
• set out the complaints handling process.

If we agree to a claim, you must:

• must use a Trustmark approved tradesperson or professionals approved by us. Find a local tradesperson on the Trustmark website.

Transferring the allowance to a new owner

• The repairs allowance will transfer to a new owner if you sell your home.
• However, if the new owner buys a 100% share, the repairs allowance will not transfer to them.

You can buy more shares in your home. This is known as 'staircasing'.

• If you buy more shares in your home, the rent will go down.
• Where you require legal advice when buying more shares, you are responsible for paying your own legal fees.
• Your mortgage lender will require you to instruct a solicitor if you are borrowing money to fund any purchase of additional shares.
• The landlord is responsible for paying their own legal fees related to share purchase transactions.

You can buy additional shares of 5% or more at any time.

• You’ll need to know your home’s market value. You’ll need to pay for a valuation by a surveyor who is registered with the Royal Institution of Chartered Surveyors (RICS).
• The responsibility for who arranges the valuation (you or the landlord) is in the ‘Home valuation’ section of the ‘Summary of costs’ document. You can find a registered surveyor on the RICS website.
• The landlord may charge an administration fee each time you buy a share of 5% or more. The fee is stated in the ‘Summary of costs’ document.

You will need to have your landlord's permission to make home improvements.  If you have made home improvements, then your home valuation must show two amounts:

• the current market value - this is the home's value including any increase because of home improvements
• the unimproved value - this is the home's value ignoring the value added by
  any home improvements carried out.

The price of additional shares of 5% or more is based on the unimproved value.

You have the option to buy a 1% share each year for the first 15 years that you own the home.

• The price of the 1% share is based on the original full market value adjusted up or down each year in line with the House Price Index (HPI). The HPI is a national statistic that shows changes in the value of residential properties.
• The landlord will give you an up-to-date HPI valuation at least once a year and again when you request to buy a 1% share.

You or the landlord can choose to use a RICS valuation instead of HPI.

• The party who chooses to instruct a RICS surveyor pays for the cost of the valuation.
• Any time a RICS valuation is obtained in relation to your home, the valuation figure will be used as the basis for future HPI valuations.

• You cannot roll over unused options to buy 1% shares to future years. The offer is limited to a maximum of 1% each year.
• The landlord will not charge an administration fee when you buy a 1% share. If you buy larger shares, they may charge a fee.
• You cannot buy shares of 2%, 3% or 4%

You can sell your home at any time.

• If you do not own the freehold, or there is a mandatory buy-back clause, you must inform your landlord when you intend to sell your share.
• If you do own 100% of your home, you can sell it on the open market. For example, through an estate agent, but you must inform us if you have a service charge.

When you give the landlord notice that you intend to sell your share in your home, the landlord has a period of time to nominate a buyer. This means the landlord has a period of time to find a buyer.

• If the landlord does not find a buyer within the specified period, you can sell your share yourself on the open market. For example, through an estate agent. The landlord still has to approve the sale and ensure that any local connection criteria has been adhered to.
• There are certain limited circumstances where the landlord's first option to buy does not apply. These include the death of a leaseholder or if a court order requires you to transfer your ownership. You should ask your solicitor if you think these circumstances may apply.

Please check the lease for specific timescales or contact a member of the Leasehold Management Team on 0300 1234 009 or enquiries@midlandsrural.org.uk

• The landlord may charge you an administration fee when you sell your home.
• You are responsible for seeking legal advice when you sell your home.
• You will need to pay your legal fees.

• The sale price of your home is based on an RICS valuation.
• You will be responsible for paying and obtaining a RICS valuation.

• Service charges and other expenses (GOV.UK)
• Service charges and other issues (Leasehold Advisory Service)
• A guide to mortgage fees and costs (Money Advice Service)
• UK House Price Index (Land Registry)
• Retail Prices Index percentage change over 12 month (Office for National Statistics)