Shared ownership first-time buyers probably don’t pay much attention to whether the housing association owns the freehold, or whether they’re even the head leaseholder. Shared owner, Annie Amos*, explains why they should.
“I’m trying not to be defeated, and to help others to realise what shared ownership means”.
I was so proud when I bought a 30% share in a one-bedroom flat. Back in 2009, I was single and on a low income. I worked flat-out to save a large enough deposit so the monthly mortgage payment for my share would be affordable.
I knew I’d still have to budget carefully to afford my monthly mortgage repayments, rent and service charges. Not to mention all the usual costs of home ownership: council tax, electricity, water and so on. But I thought it would be worth it to have a home I could call my own.
So it was a shock when my service charges went up dramatically the year after I moved in. In 2009/10 my service charge was £108 per month (£1,299 per annum). But the following year charges increased by 69% to a massive £182 per month (£2,190 per annum). I had to undertake an affordability assessment in order to purchase my first share. But there wasn’t any mention that service charges could go up by so much, so quickly.
It’s a lovely flat. But the development doesn’t have a concierge, or a gym, or a swimming pool. I’m on the ground floor and have my own front door; I haven’t got access to any communal areas. I don’t have a car parking space. So it’s hard to understand why my service charges are so high.
Expensive service charges seem to be a problem for a lot of shared owners. I heard that shared owners can uncover lots of errors in housing association accounting records. So now I’m asking for copies of invoices via what’s known as a Section 22 under the Landlord and Tenant Act.
When I bought my initial share I didn’t realise I would be a tenant not a homeowner, despite taking out a mortgage. And, obviously, I never expected to have to learn about the law to challenge service charges. But high service charges are only the start of my problems.
I lived in my flat for twelve years before I found out about lease extension issues. My flat was sold to me with a 99-year lease, and now there are 87 years left. Unfortunately, I’ve discovered that I need to extend my lease in order to sell my flat. Most buyers won’t want to purchase a flat where they’ll need to extend the lease in the short-term. And it’s much more expensive to extend a lease once there are fewer than 80 years remaining.
However, because I’m a shared owner, I can only extend my lease under the informal route, which offers fewer protections than the statutory route. That’s the same for any shared owner.
“I’ve resigned myself to the fact that I am truly trapped. Extending my lease would cost more than I actually own. And I’m finding it hard to sell as there are only 87 years remaining on the lease.”
It took a good few months to find out that my housing association is not my freeholder. Then things took another turn for the worse….
My housing association have a short lease with the head leaseholder, so I can’t extend my own lease
It turns out there are four parties on the Land Registry title for my home: the freeholder, the head leaseholder, my housing association, and me. The head leaseholder has a 999-year interest in the lease. But my housing association only has a 125-year interest in the lease. Which means that if I go down the informal lease extension route they can only offer me an additional 25 years.
The only way I can extend my lease by more than 25 years is to staircase to 100%. Then I could extend my lease under the statutory route, which would give me the right to a 90-year extension and a peppercorn ground rent. But, because my housing association isn’t my freeholder, this is complicated and expensive.
I would have to find a huge amount of money to staircase to 100%. Then I would have to pay fees not only to extend my lease with my housing association but also the housing association’s fees to extend their own lease with the freeholder. It would probably cost more than my share of the property is worth.
” I wish I’d known what I was getting into at the beginning. It’s taken 12 years to realise that I’m trapped in a negative equity situation with no easy way out”.
A foot on the housing ladder?
It’s disgusting that shared ownership is sold to people like me who can’t afford to buy on the open market. We’re told it’s ‘affordable housing’ and ‘a foot on the property ladder’. By the time you realise it’s not, you’re in negative equity.
So I do believe I am truly screwed….. Shared ownership leasehold seems to be far worse than any other form of leasehold. But I’m trying not to be defeated, and to help others to realise what shared ownership means. Which is a very expensive way of renting.
- Name has been changed.