Shared Ownership and Repossession

By: Louise Smith, barrister - Updated: 5 Nov 2023 | *Discuss

 

Shared ownership schemes can seem like an ideal way for first-time buyers to get onto the property ladder. By only buying a percentage of the property a smaller deposit and mortgage will be needed, making home ownership much more affordable. However, shared ownership comes with many strings attached. By only owning part of a property – and quite possibly a minority share of it – the “owner” will also be a tenant. They will have to pay both rent and mortgage repayments. This means that they could face repossession if they fall into arrears with either their rent or their mortgage.

Although the rent, mortgage and service charges on a shared ownership property may have been affordable when the share was first purchased, these could go up - making the property more expensive to maintain. If an owner is struggling to pay their bills they could end up being threatened with repossession by both the housing association, which owns the remaining share of the property, and their mortgage lender.

Shared Ownership and Repossession for Rent Arrears

The ability of the housing association to get a possession order from a court for rent arrears – and the type of possession order they can get – often depends on the level of rent arrears. The higher the arrears the more likely the housing association will be to seek, and get, a possession order. Therefore it is vital to address any problem with paying the rent as soon as it arises and not to wait until the housing association starts chasing up the arrears.

Shared Ownership and Repossession for Mortgage Arrears

Guidelines exist whereby companies who have provided shared ownership mortgages are encouraged to liaise with the housing association throughout the repossession process. The housing association may offer assistance to the borrower to try to resolve the problem before it goes to court. Some housing associations may be in a position to buy back some, or all, of the owner’s share in the property.

Selling a Shared Ownership Property

The lease for a shared ownership property may contain provisions that require the housing association which owns the rest of the property to have the first option on selling it. This could mean that the property cannot be openly marketed for a fixed period of time while the housing association decides whether or not they want to exercise their rights under the lease. Whilst some housing associations may wish to buy back the owner’s share themselves this will clearly depend on the association having sufficient funds available to buy the share.

Where a borrower is being threatened with repossession by a mortgage lender the delay caused by restrictions in the lease could easily make the difference between selling the property without having to go to court and a possession order being made by a judge. Even once the property can be openly market the housing association may have the right to veto potential purchasers found by the owner. There could be other clauses in the lease which make selling a shared ownership property more difficult, and more expensive, than selling a property which is owned outright.

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