At Broadbents Solicitors, we understand that for many people shared lease ownership is the best way to get onto the property ladder. Shared leases can be used for both houses and flats, and there is little difference between the way these two documents are drafted for either style of home in the UK.
If you are considering a shared lease ownership, it is vital that you firstly understand what is it, ensuring you are given the chance to ask all of the questions you need to, before committing to this type of lease.
When you enter into a shared lease ownership, you are buying a portion of the equity in a property, whilst the remaining balance stays with the third party, which is typically a Housing Association or other type of Social Landlord. As time goes on, the third party owner will lease the remaining share of equity back to you.
What Payments Will I make?
As well as paying rent to your Social Landlord for the equity they have retained, you will also be required to pay mortgage repayments to your mortgage lender. If you are considering a shared lease as a way to get onto the property ladder, you should ensure that you factor in these payments when calculating whether you will have enough money to meet all associated costs.
After the initial purchase of a share of the property, you will then be able to continue making additional purchases (typically at a minimum of 10%), until you completely own the equity of that property. The strategy of purchasing a property in this way is known as staircasing; once you own 100% of the equity you will become the owner of a freehold house or a normal leasehold flat, something often referred to as “Final Staircasing”.
Shared Lease Ownership: Will I Pay Stamp Duty?
If the cost of the share of the property being purchased is less than the Stamp Duty threshold, you will not have to pay this extra cost. However, you may elect to pay Stamp Duty on the entire market value of the property, meaning any further stamp duty costs are likely to be negated as you continue to purchase shares of the property.
The team at Broadbents Solicitors have been providing comprehensive advice to individuals buying or selling their home for many years. Contact our trusted team today on 01773 769891 to see how we can help you.