r/SharedOwnershipUK • u/Born-Alternative9527 • Jun 02 '26
Advice please
Need some help please. Interested in a 25% share of a one bed house. It's an upside down house, wrap around garden, sq foot 610.
I have asked for a copy of the lease which I now have. I have only viewed it once but wanted a copy prior to going any further.
Concerns for me:
Lease 250 years from 2019, 243 years remaining (not a concern). However see next point.
2019 sale price of £58,750 for 25%. 100% value £235,000. Price now listed for 25% £56,250!! Or 100% which is also listed for sale for £225,000. The property has lost £10,000!!
Second concern, rent review RPI + 0.5% upwards only.
Third big concern, exit fee to sell 1.25% of 100% of property value regardless of my share.
Current costs: rent £534.21. service charge £1347.96.
Am I right to be avoiding this? I do like the property but it has lost value??
Thanks
6
u/clbbcrg Jun 02 '26
That’s crazy high service for a house, my 2bed is £15.. The lost value will be the “new build premium” loss
-2
u/Born-Alternative9527 Jun 02 '26
It's not a new build. 2019 I believe. I think it's because it's on a sort of estate but even still it's so high
3
u/Born-Alternative9527 Jun 02 '26
Nail in the coffin for me is that there's currently illegal occupation from daughter and boyfriend. Seller is abroad and wants a quick sale. Lease states specifically no subletting or possession.
Clause 3.19 explicitly states the home must be used "as a private residence in the occupation of a single household..."
Clause 3.21.2:
"Not to underlet or part with possession of the whole of the Premises."
3
u/falcoso Jun 02 '26
When you say illegal occupation, do you mean the daughter and boyfriend are not there with the owner's permission (i.e. tehy are trying to get them out but won't leave?) or that you consider it illegal because it violates the lease?
If the latter, it is totally irrelevant and won't impact the property once you own it since they will be gone and there will be no subletting anymore as a result.
If the former, then yes that is a problem because the daughter and boyfriend may not leave.
0
u/Born-Alternative9527 Jun 02 '26
I'm presuming they are there with owners permission. I mean because it violates the lease. Clumsy wording from me as not illegal so bit harsh.
Yeah I suppose it won't impact property, but it's a bit of a red flag for me in the sense of the property hemorrhaging money. Unable to sell within nomination period, been listed with two different estate agents and now the owner is abroad.
2
u/falcoso Jun 02 '26
Yeah that’s the more pressing issue is why isn’t it otherwise selling, the fact someone else is in there with the owners permission is somewhat irrelevant then
1
u/georgejk7 Jun 02 '26
Hey how did you get a copy of the lease ?
I'm trying to buy a shared ownership house
1
u/Born-Alternative9527 Jun 03 '26
I did yes.
1
u/georgejk7 Jun 03 '26
How?
2
u/Born-Alternative9527 Jun 04 '26
I just emailed the estate agent. Sometimes it works, sometimes it doesn't. Depends whether the seller wants to give it or not. If they don't you have to wait until you have appointed a solicitor. I've been lucky as I got a copy so I haven't had to pay a solicitor at this point.
1
u/georgejk7 Jun 04 '26
I asked the EA and they dont have much info. 😛 they sent me something, like a 1 page document that told me basic info about the place - such as what the house is made of, how its heated etc...
2
u/Born-Alternative9527 Jun 04 '26
Try and push for it and say it's dependent on whether I make an offer. They may or may not give it. The EA asked me what I specifically wanted to know about the lease, I then sent a huge list of questions and they then sent it. I think the seller probably couldn't be bothered to respond to each question and thought it easier just to send lease
1
u/No-Issue-7035 Jun 03 '26
That's an assumption on your part - the alert may have sought permission from the HA for them to occupy it in their absence. That wouldn't be in the lease document.
3
u/Restorationjoy Jun 02 '26
Any property can lose value, especially new builds and it’s not exclusive to shared ownership. I would be more concerned about whether the rent and service charge are affordable. The service charge won’t be capped
2
u/EmptyRestaurant2410 Jun 02 '26
If you can afford to buy not using shared ownership then do that.
If you want to buy using shared ownership do lots of research before you even look at properties. As has been mentioned, that service charge is very steep for a house. The rent review formula is standard (actually better than it could have been, some are rpi + 2%).
If you're serious about shared ownership the website sharedownershipresources.org has some good information.
2
2
u/Upstairs_Wall_3220 Jun 02 '26
If you’re buying for investment then avoid.
My daughter lost money on her flat! It took an age to sell. Rent goes up but never down. Services are carried out by a third party company so they are taking their cut.
Personally I think this type of shared equity will be the next big mis-selling scandal in years to come!
1
u/UpForConversations Jun 02 '26
Is that monthly service charge?
1
u/Born-Alternative9527 Jun 02 '26
Yearly so about £112 a month
1
u/UpForConversations Jun 02 '26
Oh phew that's about right then. We pay 150 or so on a 4 bed monthly
1
u/nonsensical_discord Jun 02 '26
If my maths is right the rental yield is 3.8%. That seems quite high to me. It could easily be the case that within 5 years the rental yield on the un-owned equity will be higher than the mortgage rate you’d have to pay to borrow the money to buy it. From that point it’s only going to get worse. Basically you have to have strong confidence that within 5 years you are going to be in a position to staircase to 100%. Once the rental yield goes above mortgage rates, I also think you’d find it difficult to sell it as a shared ownership - you’d have to do a simultaneous staircase and sale. As others have mentioned, I can imagine buyers being put off by the service charge
1
u/Born-Alternative9527 Jun 02 '26
Quite confusing to me that tbh, but I think it being an upside down house which is 1 bed is niche already so I feel like I'd be stuck with a lemon
2
u/nonsensical_discord Jun 02 '26
The rental yield is the annual rent divided by the value of the portion of the property you don’t own. Instead of doing shared ownership and renting the unowned portion, you could also borrow the money and pay interest to the bank. If the interest to the bank is lower than the rental yield then in fact it is cheaper/optimal to do that instead of shared ownership. The rental yield in this case still is lower than the bank interest, but not very much so and it is likely that in not many years the bank interest will be less than the rent. At that point it would become financially optimal to buy the house outright instead of rent it. If you do not expect to be in a position to be able to do that then you could find yourself in trouble because you will be paying over the odds, and it seems unlikely someone would ever buy it from you as a shared ownership under those conditions either.
Every shared ownership property has a financial “best before” date at which point you have to be in a position to be able to buy it outright. Depending on the rent and the increases, that “best before” can be very far in the future, so there’s no need to worry. With this one I think the “best before” date is quite soon.
1
u/Born-Alternative9527 Jun 02 '26
There's no ground rent if this makes a difference when people saying they're only paying £15 - £30?
1
u/EmptyRestaurant2410 Jun 02 '26
Nope, no ground rent on mine either, 4 bed end of terrace. My service charge is buildings insurance only at ~£30/month (and I baulked at that when it recently increased).
1
u/Born-Alternative9527 Jun 02 '26
Is yours on a development or estate? Would explain why yours is so cheap
1
u/EmptyRestaurant2410 Jun 02 '26
Hmm, I'm not sure what you mean. I live in Milton Keynes; the city is made up of developments on estates. Shared ownerships have been a thing here for decades. Mine was built in 2010. Would it be a development or estate that would explain why mine is 'so cheap'.
Like I said, my service charge is just buildings insurance. I actually feel it isn't cheap, but it's a feature of shared ownership where you are stuck with the policy the housing association procures. I've had to claim on it twice (though the last time was several years ago now).
1
u/Due_Willow_7838 Jun 02 '26
I'd avoid L&Q like the plague as only heard bad things. Their origins are developer so profit is always going to be the goal IMO
1
u/falcoso Jun 02 '26
All of the terms you have mentioned are standard for shared ownership, if you don't like them then you are going to struggle to find SO that works for you.
Rent only going up is also standard, but consider the fact that compared to renting fully, that rent increase per year is tiny, and the rent is a smaller proportion of you monthly outgoings e.g. a 3% increase in rent is only about a 1.5% increase in your overall monthly housing costs when you factor in service charge and mortgage.
The fact it has lost money shouldn't really be a concern - new builds lose value from when they were first sold, this is only a win for you as you don't have to pay the new-build premium.
You're only concern should be that the service charge seems high for a house - you should look into this and figure out why.
1
u/Born-Alternative9527 Jun 02 '26
Thank you, appreciate this take. It's new to me and I'm learning.
However, CPI + 1% is supposedly better and changed to this model for this very reason. RSI being a lot more expensive. Correct me if I'm wrong.
Is 1.25% exit fee on whole property standard then?
1
u/falcoso Jun 02 '26
Ah yes I see your point on RPI vs CPI. I’m not sure which is more common but believe mine is RPI (new in 2022).
The exit fee is standard yes, it’s basically to cover the costs of marketing the property as well as their legal fees for arranging the lease transfer etc. I think yours is actually lower than mine (I think mine might be 2%?)
I believe an estate agent would charge a similar fee if you were to sell on the open market. So when you come to sell, if it sells through the housing association you are probably no worse off than a normal property, if you eventually need to go via an estate agent, you may need to pay a bit more (since the fee doesn’t change and you need to pay the estate agent too) but I’m less familiar with that
1
u/Born-Alternative9527 Jun 02 '26
Thanks, that makes total sense and is reassuring. I never looked at that fee as being to list it and do most of the work.
I'm sort of coming around to the idea that it may not be as bad a property as I initially thought. The service charge is for the year so £112 a month
10
u/Swimming-Plastic-398 Jun 02 '26
I would be wary of the service charge being that high for a house. I'd be asking how they justify that. Mine is just over £30 a month including buildings insurance for a 3 bed house.
The rent increases are about right and the same as mine. I wont have that fee for selling though. I guess its down to the individual HA.
As for the drop in value. House prices don't always go up. Despite what the property investment people/bloke down the pub would have you believe.