A shared owner describes problems selling a shared ownership property. She’s been trying to sell since 2007, but is trapped by high service charges and a short lease which make the flat unattractive to potential buyers.
“How can a housing association be complicit in trapping people in a scheme that is impossible to exit? A scheme that is designed and sold to be ‘affordable’!”
In 2006, I purchased a 35% share in a one-bedroom flat in Maidstone. The flat was valued at £130,000 so I took out a £45,000 mortgage for my share. Before that, I’d been renting a really grotty flat, and paying quite a lot as a single person. The outgoings for this brand new property were a bit less than I was paying in rent, and I’d be a ‘homeowner’. It seemed like a no-brainer. My parents helped me with the initial costs.
The shared ownership scheme was sold as a cheaper and more stable alternative to private renting, and an affordable way to get on the housing ladder. However, the rent (and more importantly the service charges) started going up quite steeply not long after I moved in.
When I moved in with my now husband, we tried to sell my flat
Not long after buying the property I met my now husband.
He owned a house and had recently had lodgers move out, so I moved in expecting that we would be able to quickly sell the flat we no longer required.
We couldn’t sell my flat at the RICS valuation, but we weren’t allowed to sublet it
The housing association, Hyde Housing, failed to find a buyer during the nomination period. And we couldn’t secure a buyer on the open market for the sale price Hyde insisted on, per a RICs valuation.
The property remained empty for something like a year and a half. During this time we were trying to sell the property and paying out £700-£800pcm for a flat we no longer lived in. But Hyde told us we could not sublet. During the time the property was empty we accrued nearly £20,000 of debt. Our costs included monthly mortgage, rent, service charges, and council tax. On top of that there were constant charges from Hyde: valuation fees, solicitor fees, homeowner pack fees and repeated RICS revaluation fees.
Eventually (and having enlisted the help of my local MP), Hyde agreed to let us sublet. There were a load of fees attached to that as well, and then we had to find a letting agent and pay their fees too.
Hyde eventually agreed to let us sublet, but we’re making an ongoing loss on the rent
Eventually (and having enlisted the help of my local MP), Hyde agreed to let us sublet.
Our plan was to recoup the debt we had accumulated and sell the property when we were in a more financially stable position. However, we have never broken even with the amount of rental income we receive in comparison to the outgoings we pay in mortgage, rent and service charges. Our rental income has been between £200 and £300 less than we pay out in costs. But having been in severe financial difficulty while the property remained vacant, any income being received was better than nothing.
We went on to have two children, which created additional financial pressure.
So, although we have considered putting the property back on the market at several junctures, we have always been worried to do so. While we have a tenant and some income we are staying afloat. If we lose the £700pm we get in rental income we will not be able to pay the mortgage and would be at risk of losing our family home.
Our lease has less than 80 years remaining: it’s another barrier to resale
Around two years ago we started to look again at the prospect of selling. What we found out through this process is that the lease has dropped to below 80 years. Therefore we need to pay for a lease extension before we are even able to consider putting the flat on the market. I have estimated the costs of the lease extension to be in the region of £20,000.
High service charges are yet another a barrier to resale
As well as the issue of the lease extension, my service charges have increased exponentially since buying my share. My service charge is now £292 per month or for a one-bedroom flat. I looked at the average service charge for one-bedroom flats within a three mile radius of mine, and the average service charge is £175 per month. This makes the property unattractive to buyers – whether through shared ownership, or on the open market – as these costs will only increase year-on-year.
| Postcode | Beds | Type | Full value | Share | Rent | Service charge |
| ME15 6YU | 1-bed | Resale | £192,000 | 40% | £359 | £129 |
| ME14 1JU | 1-bed | Resale | £170,000 | 60% | £266 | £211 |
| ME15 6GZ | 1-bed | Resale | £140,000 | 40% | £312 | £218 |
| ME14 1GZ | 1-bed | Resale | £205,000 | 30% | £463 | £143 |
| My flat | 1-bed | Resale | £140,000? | 35% | £507 | £292 |
Even if I won the lottery and could pay for the lease extension tomorrow, I have no confidence the flat will sell because of the service charges. These are considerably more expensive than others in the locality. And those aren’t moving either!
Financially we’re between a rock and a hard place
We face an absolutely huge financial risk. If we put the flat on the market our tenant will move out leaving us £700pm short. We then have to pay for the lease extension and associated costs. We would get further into debt until we find a buyer. But I have no confidence we will find a buyer given:
- Extortionate service charges
- Difficulties selling leasehold properties, particularly flats
- Lease extension being required
My ‘affordable’ shared ownership flat has cost me in ways I didn’t expect
I calculate that we have lost around £54,000 over the entire period we have been renting the flat. If you add the £20,000 debt accrued when we were trying to sell and the property was empty, that is in excess of £74,000 before we have even considered a subsequent attempt to resell.
For each year that we don’t sell, we are now £300 per month short in rental income vs outgoings, and the cost of the lease extension increases by about £1,000 per year. That’s a loss of £4,600 accruing each year.
Buyback seems to be the only way out, but I’m trapped as Hyde won’t buy my flat
We don’t want the property. In fact, we haven’t wanted the property since 2007. We are subletting not by choice, but because we can’t afford to sell. If we try and sell we will put ourselves in severe financial difficulty, but if we don’t sell we are accruing additional losses each year.
Hyde Housing have refused to buy back the property. Whilst I appreciate they don’t have a buy back policy and they are not under any obligation, I do not believe they have fully considered our situation.
Shared ownership traps people in a scheme that is impossible to exit
Hyde’s answer is to put the flat on the market and look for a cash buyer, this is an incredibly risky move and I cannot see a positive outcome. I expect that we would end up in a worse situation than we are currently in.
How can a housing association be complicit in trapping people in a scheme that is impossible to exit? A scheme that is designed and sold to be ‘affordable’!
I’ve said to Hyde that I don’t want a penny from this property. At this point, I would happily take out a loan to pay to be rid of it. I just want to walk away. At present the absolutely dire repercussions of giving the keys back to the mortgage company seems like the only option.
Featured image: yanalya on Magnific
How I’d improve shared ownership
Buyback – This needs to be an actual option in circumstances where people can’t sell or have outgrown their properties. There needs to be a clear policy in place.
Clearer information given to potential buyers and better communication – I had no clue about leasehold, the 80 years, needing a lease extension. Trying to consider my options now, regarding lease extension, is a complete minefield. My HA are being very scant with information and I can’t get a clear view of costs involved. They want nearly £1,500 upfront to start the process but I don’t know if it’s viable until I’ve got a clear view of costs.
Additional Resources
Shared Ownership Resources: Handing the keys back: Q&A with Womble Bond Dickinson
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