Conveyancing When Buying a Shared Ownership Property
Legal Support for Your Shared Ownership Purchase
Buying a shared ownership property involves additional legal arrangements compared with a standard property purchase.
Your conveyancer will deal with the usual legal work while also considering the shared ownership lease, rent on the remaining share, service charges, mortgage requirements and the requirements of the housing association or provider.
Whether you’re buying a new-build or resale shared ownership property, we’ll help you find a carefully selected conveyancer with relevant experience.
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What Is Shared Ownership?
Shared ownership allows you to purchase a percentage of a property rather than buying it outright.
You normally take out a mortgage, use savings or combine the two to purchase your share. You then pay rent to the housing association or other shared ownership provider on the share you don’t own.
For example, if you purchase a 40% share of a property, the provider retains the remaining 60% and you normally pay rent on that portion.
Depending on the scheme and property, you may have the opportunity to purchase additional shares later. This is known as staircasing.
Shared ownership properties are normally leasehold, which means the lease is a particularly important part of the transaction.
What Does a Conveyancer Do When You Buy Shared Ownership?
Your conveyancer handles the legal work required to complete your purchase and investigates the legal arrangements affecting the property.
As well as the usual conveyancing work involved in buying a property, they may need to consider:
- The shared ownership lease – including your rights and responsibilities as the leaseholder.
- The share you are purchasing – making sure the legal documentation reflects the percentage being acquired.
- Rent on the remaining share – including how it is calculated and when it can change.
- Service charges – what you will be expected to contribute towards the property or development.
- Mortgage requirements – ensuring the legal arrangements meet your lender’s requirements.
- Housing association requirements – dealing with any legal conditions imposed by the shared ownership provider.
- Restrictions in the lease – including provisions affecting alterations, subletting and future sale.
- Staircasing provisions – explaining how the lease deals with purchasing additional shares in the future.
Your conveyancer should explain the important legal terms before you exchange contracts so that you understand both what you’re buying and the continuing obligations that come with it.
For a broader overview of the legal process involved in purchasing property, visit our Buying Conveyancing guide.
The Shared Ownership Conveyancing Process
Stage |
What Happens |
|---|---|
|
Conveyancer Instructed |
You provide identification, funding information and details of the shared ownership property you’re buying. |
|
Contract Documents Received |
Your conveyancer receives the legal documentation from the seller’s or provider’s conveyancer. |
|
Title & Lease Investigated |
The legal title and shared ownership lease are reviewed. |
|
Property Searches |
Relevant searches are ordered and the results considered. |
|
Legal Enquiries |
Your conveyancer raises questions about the property, lease and transaction. |
|
Mortgage Reviewed |
Your mortgage offer and relevant lender requirements are considered. |
|
Provider Requirements |
Any legal requirements of the housing association or shared ownership provider are dealt with. |
|
Report to You |
Your conveyancer explains the legal position, lease and important financial obligations. |
|
Contract Signed |
You sign the necessary documentation in readiness for exchange. |
|
Exchange of Contracts |
The purchase normally becomes legally binding and the completion date is agreed. |
|
Completion |
The purchase money is transferred and you become the owner of your share. |
|
After Completion |
Relevant property tax, provider and HM Land Registry requirements are dealt with. |
Learn More: Conveyancing Explained →
How Is Shared Ownership Conveyancing Different?
A shared ownership purchase has many of the same stages as an ordinary property purchase, but the ownership structure is different.
You’re purchasing a share of the property while another organisation retains an interest in the remaining share.
This means your conveyancer isn’t simply investigating the property itself. They also need to understand the legal relationship between you, the shared ownership provider and, where applicable, your mortgage lender.
There can therefore be additional documentation, enquiries and requirements to deal with before the purchase is ready to proceed.
Buying a Property Outright |
Buying Through Shared Ownership |
|---|---|
|
You purchase the whole property |
You initially purchase a share |
|
No rent is normally payable on an unowned share |
Rent is normally payable on the provider’s remaining share |
|
Freehold or leasehold ownership may apply |
Shared ownership is normally leasehold |
|
Standard mortgage arrangements may apply |
A mortgage suitable for shared ownership may be required |
|
No shared ownership provider |
Housing association or another provider is involved |
|
Ordinary sale arrangements |
Additional requirements may apply when selling |
|
No staircasing process |
You may be able to purchase further shares |
Shared ownership isn’t necessarily problematic or difficult. It simply means there are additional legal and financial arrangements to understand.
If this is your first property purchase, our First-Time Buyer Conveyancing guide explains the wider buying process, from instructing a conveyancer and arranging searches through to exchange and completion.
Understanding the Shared Ownership Lease
The lease is one of the most important documents your conveyancer will investigate.
It sets out the legal relationship between you and the shared ownership provider and explains many of the rights and responsibilities attached to the property.
Depending on the property, the lease may contain information about:
- The share you are purchasing
- Rent payable on the remaining share
- How and when the rent can change
- Service charges and other payments
- Repair and maintenance responsibilities
- Buildings insurance
- Restrictions on alterations
- Restrictions on subletting
- How additional shares can be purchased
- What happens when you want to sell
- Requirements for transferring ownership
Your conveyancer should explain any particularly important provisions before you become legally committed to the purchase.
How Much of the Property Do You Actually Own?
This is an area where the terminology can sometimes cause confusion.
If you’re purchasing a 40% share, for example, this doesn’t normally mean that you physically own 40% of the rooms, garden or floor area.
You have a legal interest in the property under the shared ownership arrangements, while the provider retains the remaining financial interest.
You will normally occupy the property as your home subject to the terms of the lease.
The precise legal structure is set out in the documentation for the particular property, which is why understanding the lease is so important.
Rent on the Share You Don’t Own
In addition to your mortgage repayments, you’ll normally pay rent to the shared ownership provider on the portion of the property you haven’t purchased.
Your conveyancer will consider what the legal documentation says about this rent.
Important points can include:
- How much rent is initially payable
- When payments are due
- How the rent is reviewed
- How future increases are calculated
- What happens to the rent if you staircase
- What happens if payments fall into arrears
These payments form part of the continuing cost of owning the property and should be considered alongside your mortgage, service charges and other household costs.
Service Charges on Shared Ownership Properties
Shared ownership properties can also be subject to service charges.
These may contribute towards the cost of maintaining and managing communal areas, buildings, estates or services connected with the development.
Your conveyancer may need to consider information about current charges, previous accounts, planned expenditure and the provisions within the lease.
It’s important to understand that purchasing only a share of the property doesn’t necessarily mean you will pay the same percentage of every repair or service charge.
The lease and management arrangements determine what you are responsible for.
This is something to understand before exchange, rather than assuming your costs will simply correspond with the percentage share you’re buying.
Shared Ownership Mortgages and Conveyancing
If you’re borrowing to fund the purchase, you’ll normally need a mortgage that is suitable for shared ownership.
Your conveyancer will need to consider both the mortgage lender’s requirements and the shared ownership arrangements.
This can involve communication between several parties, including:
- You
- Your mortgage lender
- The seller or developer
- The housing association or shared ownership provider
- The respective conveyancers
Your lender will be taking security over your interest in the property and will therefore have requirements concerning the legal title and lease.
As with any mortgaged purchase, it’s worth establishing early that your chosen conveyancer is able to act for your particular lender.
Buying a New-Build Shared Ownership Property
Some shared ownership homes are purchased directly from a developer or housing provider as new-build properties.
That can combine two transactions with additional legal requirements: shared ownership and a new-build purchase.
Your conveyancer may therefore need to consider matters including the shared ownership lease, planning and building documentation, warranties, estate arrangements, roads and drainage, service charges and developer documentation.
New-build transactions can also involve reservation agreements and tighter deadlines for exchanging contracts.
Make sure your conveyancer knows from the outset that you’re purchasing a new-build shared ownership property so that the appropriate documentation and timescales can be considered.
We’ve covered the additional legal issues involved in purchasing newly built property separately.
Buying a Resale Shared Ownership Property
Not every shared ownership property is brand new.
You may instead purchase a share from an existing shared owner who has decided to sell.
This is generally referred to as a shared ownership resale.
The transaction can involve the existing lease as well as requirements imposed by the housing association or shared ownership provider.
The seller may have increased their ownership percentage through staircasing since they originally purchased the property, so it’s important that the legal documentation accurately reflects the share now being sold.
Information may also be required about service charges, rent payments, management arrangements and compliance with the lease.
The process can therefore differ from buying a newly created shared ownership property directly from a provider.
Can You Buy More of the Property Later?
Many shared ownership arrangements allow the owner to purchase additional shares in the property after completion.
This process is known as staircasing.
For example, you might initially purchase 40% and later increase your ownership to 60%, 75% or potentially 100%, depending on the terms applying to your property.
The process may involve:
- Obtaining a valuation of the property
- Applying to the shared ownership provider
- Arranging additional mortgage finance where required
- Paying for the additional share
- Completing further legal work
- Updating the registered ownership arrangements
The precise rules can vary between properties and schemes.
Your conveyancer can explain what the lease you’re purchasing says about staircasing, but you shouldn’t assume that every shared ownership property operates in exactly the same way.
Can You Eventually Own 100%?
Some shared owners may be able to staircase until they own the entire property, but this isn’t something to assume automatically.
The amount you’re permitted to purchase and the process involved will depend on the terms applying to the particular property and shared ownership scheme.
Some properties or schemes can be subject to restrictions on staircasing.
If eventually owning the property outright is important to you, tell your conveyancer so that the relevant provisions can be explained before you commit to the purchase.
The legal position after reaching 100% ownership can also depend on whether the property is a house or flat and the terms of the particular arrangements.
The wider legal checks can also depend on the type of property you’re purchasing. See our guides to Buying a House Conveyancing and Buying a Flat Conveyancing for more information about each property type.
Can You Rent Out a Shared Ownership Property?
Shared ownership is generally intended to help people purchase a home to occupy themselves rather than acquire an investment property.
The lease or provider’s requirements may therefore restrict subletting.
There can be circumstances in which permission is available, but you shouldn’t purchase a shared ownership property on the assumption that you’ll automatically be able to rent it out later.
If you have any particular plans concerning occupation or letting, tell your conveyancer.
They can review the relevant lease provisions and explain the legal restrictions affecting the property.
Alterations to a Shared Ownership Property
The fact that you occupy the property as your home doesn’t necessarily mean you can make any alteration you choose.
The lease may require consent before particular works are carried out.
This can be especially relevant for:
- Structural alterations
- Changing the layout
- Extensions
- Replacing windows or external doors
- Significant plumbing or electrical alterations
- Changes affecting the exterior of the property
Different rules may apply to ordinary decoration or minor improvements.
If you already know that you intend to make substantial alterations after buying, mention your plans to your conveyancer before exchange of contracts.
They can check whether the lease contains provisions that could affect what you want to do.
Property Searches for Shared Ownership
Shared ownership doesn’t remove the need to investigate the property itself.
Depending on the transaction and location, your conveyancer may recommend searches dealing with matters such as:
- Planning and building regulations
- Roads and access
- Drainage and water
- Environmental matters
- Flood risk
- Mining or other location-specific issues
Your mortgage lender may also have requirements concerning searches.
These are essentially the same kinds of considerations that arise with other property purchases, so there’s no need to reproduce our complete guide here.
Stamp Duty Land Tax and Shared Ownership
Stamp Duty Land Tax (SDLT) can work differently when you’re buying a shared ownership property.
For qualifying shared ownership purchases, there are generally two ways SDLT can be dealt with:
- Market value election – you choose to calculate SDLT based on the full market value of the property at the time of the initial purchase, rather than simply the share you’re buying.
- Paying SDLT in stages – SDLT is initially dealt with based on the relevant amounts connected with your first purchase. Further SDLT may become payable if you later increase your ownership through staircasing.
If you make a market value election and pay any SDLT due, you won’t normally pay further SDLT when purchasing additional shares later.
If you choose to pay in stages, further staircasing can have SDLT consequences once your ownership increases beyond 80%.
The most appropriate option will depend on your circumstances, the property and your future plans.
Your conveyancer will normally deal with the SDLT return and payment where required and can explain how the rules apply to your particular transaction. If your tax position is complicated, specialist tax advice may also be appropriate.
Learn More: Stamp Duty Land Tax on Shared Ownership Property – GOV.UK →
If you’re buying in Wales, Stamp Duty Land Tax does not apply. Welsh property transactions are instead subject to Land Transaction Tax (LTT).
What Happens When You Eventually Sell?
You can sell a shared ownership property, but the process may differ from selling a property you own outright.
The lease and shared ownership arrangements may give the housing association or provider particular rights or impose procedures that must be followed.
Depending on the property and scheme, this can involve notifying the provider, obtaining a valuation and allowing a period in which the provider can help find or nominate a buyer.
If a buyer isn’t found through that process, the property may subsequently be marketed more widely, subject to the terms applying to the property.
The position can also be affected by how much of the property you own at the time.
You don’t need to understand every detail of a future sale before buying, but you should understand any important restrictions or procedures contained in the lease.
Exchange of Contracts on a Shared Ownership Purchase
Once your conveyancer has completed the necessary legal work, your mortgage arrangements are ready and the relevant provider requirements have been satisfied, the transaction can move towards exchange.
You may sign the contract before this happens, but signing a contract isn’t the same as exchanging contracts.
Exchange is normally the point at which your purchase becomes legally binding and a completion date is fixed.
Before exchange, your conveyancer should report to you on the legal position and explain the important terms of the shared ownership arrangements.
Make sure you raise anything you don’t understand before authorising exchange.
What Happens on Completion?
On completion day, your conveyancer sends the required purchase funds to the seller’s or provider’s conveyancer.
Once completion has taken place, you become the owner of the share you’re purchasing and can normally take possession of the property.
Your mortgage will take effect where applicable, and your obligations under the shared ownership lease will begin.
These can include payments such as rent on the remaining share and any applicable service charges.
After completion, your conveyancer will deal with the relevant property tax requirements, registration at HM Land Registry and any necessary formalities required by the shared ownership provider.
Why Can Shared Ownership Conveyancing Take Longer?
A shared ownership purchase doesn’t automatically take longer than another property transaction, but there can be more parties and additional requirements involved.
Potential Delay |
Why It Can Happen |
|---|---|
|
Housing Association Requirements |
Additional documentation or approval may be required from the shared ownership provider. |
|
Mortgage Requirements |
The lender needs to be satisfied with the shared ownership arrangements and legal title. |
|
Lease Enquiries |
Additional questions may arise from the shared ownership lease. |
|
Service Charge Information |
Accounts, budgets or other management information may need to be obtained. |
|
New-Build Deadlines |
Developers may impose particular reservation or exchange timescales. |
|
Resale Requirements |
A resale may involve additional requirements from the housing association or provider. |
|
Multiple Parties |
Information may need to pass between the buyer, seller, lender, provider and their representatives. |
|
Property Chain |
Where a resale is involved, linked transactions can affect progress. |
Good communication and early preparation can make a significant difference, but your conveyancer cannot always control how quickly other organisations respond.
How Can You Help Your Shared Ownership Purchase Progress Smoothly?
Tell Your Conveyancer It’s Shared Ownership
Make this clear from the outset and provide details of the housing association or shared ownership provider.
Provide Your Mortgage Information
Give your conveyancer your lender and mortgage details as soon as they’re available.
Deal With Requests Promptly
Identification, source-of-funds and other information may be needed before the transaction can progress.
Read Your Conveyancer’s Report
Shared ownership involves continuing obligations after completion. Don’t concentrate solely on getting the keys — make sure you understand the lease and financial arrangements.
Ask About Anything You Don’t Understand
Terms such as staircasing, rent reviews and nomination rights may be unfamiliar. Ask questions before exchange rather than discovering what they mean afterwards.
Explain Your Future Plans
If you intend to staircase, make substantial alterations or have other particular plans for the property, tell your conveyancer so they can highlight relevant provisions in the lease.
Common Shared Ownership Conveyancing Mistakes
Common Mistake |
Why It Matters |
|---|---|
|
Focusing Only on the Mortgage Payment |
Rent, service charges and other payments may also form part of the ongoing cost. |
|
Not Reading the Lease Carefully |
The lease contains important rights, restrictions and continuing obligations. |
|
Assuming You Can Sublet |
Shared ownership arrangements may restrict letting the property. |
|
Assuming You Can Always Buy 100% |
Staircasing rules and limits can vary between properties and schemes. |
|
Ignoring Future Rent Reviews |
The rent payable on the remaining share may change over time. |
|
Not Considering Service Charges |
Service charges can be an important continuing cost. |
|
Assuming You Can Sell Like Any Other Property |
The provider may have rights or procedures that apply when you sell. |
|
Waiting Until Exchange to Ask Questions |
Important concerns should be understood before the purchase becomes legally binding. |
Shared Ownership Conveyancing: Quick Answers
Why Choosing the Right Conveyancer Matters
Shared ownership involves more than simply transferring a property from one owner to another.
Your conveyancer may need to coordinate with your mortgage lender, the seller or developer, the housing association or shared ownership provider and other conveyancers, while making sure you understand the lease and the continuing obligations attached to the property.
Relevant experience can therefore be particularly valuable.
At Trusted Conveyancers, we’ve done the hard work, so you don’t have to. Rather than spending hours comparing firms yourself, we’ve carefully assessed the conveyancing firms we recommend based on communication, service standards, transparency and professionalism, so you can choose with confidence.
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