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The Hidden Dangers Of Shared Ownership

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Guardian: The Hidden Dangers of Shared Ownership

Shared ownership is being positioned by housing charity Shelter and others as the future of home ownership for low- and middle-income households, and as a means to encourage investment in home building. However, shared ownership currently presents some significant legal flaws for the purchaser – not the least being that there is actually no 'shared ownership' at all.
shared ownership is just a tenancy, with an expensive downpayment for an option to buy the whole property at a later date. The landlord or housing association remains the owner of the property up to the point of the 100% buyout and the tenant can be evicted for rent arrears regardless of how much of the property they supposedly own

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What about you having to do all the repairs at your own cost?

Or when you want to sell it they can veto a buyer if it suits them?

Or if the house price drops 10% you lose that 10%.

Or that 10% loss equals a 20% loss as you only own half of it.

etc.... etc.....

Edit for loose lose

Edited by XswampyX

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One of the worst ideas ever. All the bad points of renting along with all the bad points of owning.

Can't believe anyone ever thought this was a good idea.

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What puzzles me is who buys these things? And how- do you simply take over the 'tenancy' by buying out the bit the current tenant imagines they own?

My BiL had one and when it came to selling they had a nightmare - they had a buyer with the money but the housing association wouldn't accept the buyer..

Eventually he bought the housing association out and sold it to someone else but it was a painful experience.

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After 25 years you may own 25% (or less).

Shelter are pushing shared ownership simply as a means of getting a more secure rental tenancy in my view. But they ignore the vast downsides in relation to the ease of moving out.

Sure, it also puts you in a relative disadvantage to the whole market with regards getting "up the ladder". However, if you lack any imagination and want the illusion of having a stake in society.....

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Sure, it also puts you in a relative disadvantage to the whole market with regards getting "up the ladder". However, if you lack any imagination and want the illusion of having a stake in society.....

Yes. Would ideally suit those who don't mind eating a lot of organic rice to ensure they are around for the century of repayments required to pay off the debt too.

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From housing-law blog; Nearly Legal.

Shelter and shared ownership

Posted on 07/09/2013 by J

I want to put this post in context:

(a) I write this post for myself and do not necessarily speak on behalf of the other NL writers.

.....

Where we part company is the remedy. For Shelter, the answer to these problems is the creation of a “…major, mainstream shared ownership market…” with 600,000 such properties being created over a four year period. Shelter recognise that this would need to go hand-in-hand with other work (i.e. more building generally is needed), but, in their view, “…. shared ownership offers real hope for most of England’s low to middle income families…” and they seek to make it a key part of the housing debate ahead of the 2015 General Election.

Regardless of what one thinks politically about this sort of statement, as a lawyer, (whether acting for landlords or tenants), shared ownership is a disaster area and, without substantial legal reform, is not something that I could ever imaging advising an occupier to take-up (at least, not without having given them very clear advice about the dangers involved and making sure I had a detailed note of that advice).

There are three main problems with shared ownership as it stands. First, it is – if not missold – then at least misunderstood. The occupier puts down a proportion of the purchase price (between 25% and 75%) and then has an option to purchase the rest over time. This is not “ownership” in any legal sense.

In full / continues: http://nearlylegal.co.uk/blog/2013/09/shelter-and-shared-ownership/

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Shared ownership is basically legalised 'key money' where you are basically borrowing to buy a premium which gives you are secure tenancy. Key money was outlawed on residential property a while back but still exists on commercial leases of course.

But this is what the Red/Blue Rentiers (aka LabourTory) do. Outlaw something then bring it back in a slightly different form in order to fool most of the people all of the time.

This is exactly what Hitler used to do, give with one hand and take massively away with the other.

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The next misselling scandal? :D

Hope not. Misunderstood perhaps, but most buyers having the option to instruct a solicitor for advice.

If that solicitor didn't point out the risks, then maybe they have a claim, and that's fair enough. Otherwise let them take responsibility for their decisions to buy shared-ownership. It was nearly 1 in 100 households back in 2008 with a shared ownership lease. Probably somewhat over that by now.

Don't think the system could afford another 'victim money giveway compensation/refunds' at that scale of things; both the numbers involved and the partial mortgage debt on high purchase prices, from people who, 'just wanted a home'.

2008: Apparently, nearly 1 in 100 households in England has a shared ownership lease. It therefore follows that 1 in 100 households are in for a very nasty shock, when they discover that they do not necessarily own a share of the property!

...The 50% capital payment made on purchase had not bought her a half share in the property, it had merely bought her the lease – and nothing else. This decision goes to the root of shared ownership – and, frankly, drives a coach and horses through it. It is of profound significance for all shared ownership householders. But, surprisingly, it has received little publicity.

PracticalConveyancing.co.uk http://www.practical...iew/10570/1124/

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How is this any different from buying with a mortgage?

With a mortgage you can sell to anyone who can pay you enough so you can repay your loan. With shared ownership the real owner (I.e. not you) can and quite often will veto your choice of buyer making a mockery out of any theoretical market price. They can often do this even after you own 100% of the property. There's loads of other differences too but that seems to be the nastiest as it makes it really hard to get out of the deal once you're in it.

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Okay, Given the legal position outlined in that article - You are just a secure tenant that has paid a massive premium to have the option to buy - here's a scenario i'd be interested to know the legal position on:

- Someone pays £50k for 25% 'ownership' of a flat and gets a 25 year mortgage for the full £50k.

- 25 years pass, they have children and pay off the mortgage in full, but do not exercise their option to buy outright.

- They subsequently die a few years later.

Question: Given that they do not legally own 25% of the property, they presumably cannot legally leave that 25% to their children. Does the housing association just keep the £25%? (which after 25 years of inflation would presumably be more than a nominal £50k)

(Edited for clarity)

Edited by Bear Goggles

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They should abolish Shared Ownership altogether - just build rented homes. I know the Government won't do this. I get sick when the Govt plugs SO as an affordable way into home 'ownership'. :(

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With a mortgage you can sell to anyone who can pay you enough so you can repay your loan. With shared ownership the real owner (I.e. not you) can and quite often will veto your choice of buyer making a mockery out of any theoretical market price. They can often do this even after you own 100% of the property. There's loads of other differences too but that seems to be the nastiest as it makes it really hard to get out of the deal once you're in it.

Plus they get to choose if you're suitable in the first place through an opaque scoring system. I got refused a SO because the housing association decided I could afford a bigger share (which wasn't on offer). So their preferred person would be someone who was stretching themselves to the maximum extent to get that % share.

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Plus they get to choose if you're suitable in the first place through an opaque scoring system. I got refused a SO because the housing association decided I could afford a bigger share (which wasn't on offer). So their preferred person would be someone who was stretching themselves to the maximum extent to get that % share.

Even if there were not all the legal ownership issues with Shared Ownership, that's another sticking point.

For anyone seriously looking at Shared Ownership, they tend not to be as well positioned as yourself. Raising 10-25% usually a stretch, especially when the full asking price tends to be, in my opinion, at a premium above toppy prices in non-shared ownership market.

So if you did buy 50%-75%, or staircased up to it later, you might be less able to find a proceed-able buyer? To raise the purchase price for the higher amount of 'ownership' you have.

Unless the landlord was perhaps willing to buy your additional share of ownership / lease back from you. Difficult to tell what the landlord be buying back anyway. 125 year lease is still a lease whether you own 10, 25% of 75% of it. Probably they'd be buying back the rental element of it. Higher ownership position = lower rent element for the current 'shared owner'.

So very complicated. Also lower ownership position, say 10%, at least means the landlord is on the hook for more in a HPC. There is that advantage to only owning 10%, but I guess the rent element is higher for the other 90%.

Edited by Venger

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There are no "hidden dangers"! It's just a cheesy "financial product"!

It;s a 99 year tenancy, where you have to do all the maintenance! :blink:

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Telegraph 8/8/13

'Shelter's chief executive Campbell Robb was paid £120,000 last year while the number of staff there paid over £60,000 increased from five to eight. '

Without wishing to sound controversial,that's a banker size salary.

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