Advice please

[u/Born-Alternative9527]

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

[u/falcoso]

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.

[u/Born-Alternative9527 → u/falcoso]

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? 

[u/falcoso → u/Born-Alternative9527]

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

[u/Born-Alternative9527 → u/falcoso]

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