Shared ownership lease seeks to reassure lenders
A revised shared ownership lease has been introduced in a bid to encourage more lenders into the market.
The Homes and Communities Agency has drawn up the updated document - which covers homes sold through the New Build Homebuy product - working with the Communities and Local Government department, Council of Mortgage Lenders, and National Housing Federation.
The HCA said it will give ‘greater certainty of the rights and obligations of lenders, affordable housing providers, and customers’ as well as increasing the protection offered to mortgage lenders.
Housing associations offering homes through New Build Homebuy can adapt the lease, but there are certain ‘fundamental clauses’ that have to be included. It will come into operation from 6 April 2010.
The HCA said it will ‘simplify and speed up the home-buying process’, and ‘assure lenders of shared-ownership mortgages’. It said as economic conditions improve the lease should help encourage new lenders into the shared ownership market.
Jamie Ratcliff, head of intermediate markets for the HCA, said: ‘We have listened to the concerns of some lenders and also acted to ensure purchasers are clear about their obligations. Our revised shared ownership lease works for both lenders and purchasers by spelling out responsibilities and liabilities more clearly.’
Lucy Thornycroft, investment leader of the National Housing Federation, said: ‘We hope that these changes, combined with the very low levels of repossession of shared ownership properties, will encourage lenders to commit greater mortgage funds for this key product that has helped tens of thousands of families buy an affordable home.’
Jackie Bennett, head of policy for the Council of Mortgage Lenders, said the CML welcomed the ‘much-improved lease’.
She added: ‘The mortgage market is likely to recover only slowly, however as the flow of lending improves these recent changes to the shared ownership lease should help sustain this type of lending.’
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Readers' comments (9)
SR | 02/02/2010 2:13 pm
Look, NO ONE WANTS THESE ANYMORE. Buyers have wised up to the poor service by the HA's, the dodgy lease and that its nearly impossible to sell them.
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Leaseholder | 02/02/2010 2:40 pm
Agreed. It was initially a good idea but it's turned into a nightmare for leaseholders. Not only the service by HAs is extremely poor, the whole product is geared towards filling up HA's bank accounts more than anything, s/o leases give very little rights to leaseholders and maintenance of a new built s/o property can run into £1000s. It's not a social housing product, it's an extremely poor commercial product. The HCA should stop funding these and increase funding for intermediate rent products, this is required urgently.
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SR | 02/02/2010 4:51 pm
Yes HCA should buy them all back and return them to Social/Intermediate Rented tenure.
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Sancho | 02/02/2010 5:25 pm
What are you talking about SR? What do you mean 'buy them back' and 'return them' to rented tenures? They were never any other tenure and the HCA never owned them. Are you confusing SO with RTB?
As far as the SO product goes, it is a social housing product but only works for a fairly limited market. The fact that people go charging in out of an obsession with home ownership (as with RTB) is not the HA's fault.
As for the service you get from HAs, I agree that most leasehold departments are pretty poor but you should try private sector leasehold if you want to see how bad things can get.
I agree that low cost home ownership needs 'refreshing'. I would start first with finding a way to make it actually affordable, then working out a tenure that allows residents to manage blocks themselves so they can understand where the service charge goes.
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| 02/02/2010 7:28 pm
"then working out a tenure that allows residents to manage blocks themselves so they can understand where the service charge goes."
Actually we already have this. It's called Commonhold:
http://en.wikipedia.org/wiki/Commonhold
"Commonhold is a system of property ownership in England and Wales. It was introduced in 2004 by the Commonhold and Leasehold Reform Act 2002 as an alternative to leasehold, and is the first new type of legal estate to be introduced in English law since 1925.[1]
It involves the freehold tenure of part of a multi-occupancy building (typically a flat) with shared ownership of and responsibility for common areas and services.
It has features of the strata title and the condominium systems, which exist in Australia and the United States respectively."
Unfortunately it hasn't really gotten off the ground here. Residential leases are feudal in nature and generally toxic. S/O leases are especially bad; there is no liquid market for the resale of these and you can't sublet easily. You own a fraction of a property yet are liable for 100% of service charges including major works. Urrrgh!
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SR | 02/02/2010 11:42 pm
Sorry I was not clear. The HCA should not be bothering itself with Home Ownership at all and should concentrate on Intermediate/Social Rented properties in public ownership. It could buy back SO properties in some instances, return them to public ownership and lease them to intermediate/social tenants.
For most buying SO, there is not an 'obsession' with home ownership. There is often little choice. You will not get a council flat if you are childless, private housing is unaffordable. So where do you suggest anyone with an income of say £25k to £35k a year lives in London? Intermediate renting is the answer but not enough of this about. The home ownership 'obsession' belongs with the HA's and Government.
With Private Leasehold if you are not happy you ultimately have the option to sell and move on hopefully at a price that suits you. With SO there is a convoluted valuation and sale process and it is very difficult to move on, SO has a bad reputation now and no one wants to buy. Just google "Shared Ownership Nightmare" etc.
HA's are simply not geared up to Home Ownership.
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WATT | 03/02/2010 11:08 am
SR | Tue, 2 Feb 2010 14:13 GMT
Two good posts but me thinks your first one should have read “nearly impossible to buy them”. The cost of all these ownership schemes under this current government have been prohibitive for many and impossible for those truly at the bottom of income bracket. 300k flats which in reality, the purchaser could never fully own, salaries of 60k needed for some, Homebuy dictating size of home and discount dictating area of purchase, large cost of rental element of SO, rubbish block management by majority of HAs. No chance of those living in SO to move on or out if their circumstances change - divorce, more children, change of employment area. Responsibility of all upkeep on 'owner' yet HA wanting share of any resale profit.
Sancho - it’s a good point about private lease holding but too many times private standards are being used as some type of benchmark for the virtue of HA standards which simply aren’t good enough.
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Dean | 11/04/2010 9:12 pm
I have one that isnt bad on the surface. But !!!
VERY expensive initial cost, (higher than market value because your buying a portion)
VERY poorly built. I had holes through the concrete floor, no floor insulation anywhere.
(first floor flat)
A gutter hidden in box work used to catch and channel drips from outside leaky waste pipe.
(Got photo of site foreman from Crest the builders, revealing Crest logo on tape used at one end)
Cupboards including kitchen extractor fell off the wall. No exit for extraction (loft space).
Undersized leaky radiators. Over sized boiler.
Management company decided to number the parking bays without mine??? Took two years fighting with them, solicitors and HA to sort it, eventually 'I' had to re-number a visitor bay. Ludicrous strange 'audit costs'. Management company formerly CPM, then something else twice - now Merlin.
AND rents go up a percentage ABOVE inflation year on year.
All I can say is dont bother. Buy a caravan and park outside council offices to live.
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Anonymous | 31/10/2010 4:08 pm
This is a complete joke. It's making matters worse if anything as the Housing Associations are refusing to give the mortgagee protection clause and therefore you can't get a mortgage. Shared ownership is very dangerous to the honest. My neighbour who bought his and let it out of course is making money hand over fist but as I don't work for the council's planning department I'd lose my home if I did that.
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