Buying & Selling Your Home Conveyancing Solicitors & Lawyers

Buying a property: what do I need to think about?

1. Make sure the property is what you think it is – do you need a survey?
2. Cost of purchase – property price, legal fees, estate agent fees, stamp duty, searches. More info on our fees can be found here:
3. Make sure that you are protected if you are paying more towards your purchase than your co-purchaser: link to articles re greater deposit and parent contributions.
4. Make a will
5. Getting married before or after the purchase? Consider making a pre nuptial agreement so that your property interest is protected.
6. Obtain suitable life insurance so that your family are protected and are not forced to move out of the property if you die.

See also: Guide to Buying Your Home

Buying your first home - do I need a Will?

We would always recommend having a Will. If you do not have a Will then on your death your assets will pass to relatives in a particular order according to the laws of intestacy. Who inherits your assets would depend on a number of factors, including whether you are married and whether you have children, but assets may not pass as you would expect them to.

If you are purchasing a property jointly with another person it may not pass to the co-owner on your death, potentially leaving them homeless, and so we would recommend that you review your Will. You should consider who you would want to inherit the home, as well as whether you would like anyone to be able to remain living in the property for a period of time after you die.

In reviewing your Will we would also look at what the position would be regarding any outstanding mortgage on your death and how this would be paid, as well as whether any inheritance tax would need to be paid in relation to the home. Providing for this properly in your Will enables you to protect any co-owner or occupants from being evicted in the event of your death.

Please do give us a call if you would like to discuss further.

Do I have to have a survey?

There is no legal requirement to have a survey when buying a property, but it is strongly recommended that you do so.

In our experience, some people choose to rely on the mortgage lender’s valuation, instead of commissioning an independent survey of the property that they intend to purchase. A mortgage lender’s valuation will only ensure that the property value is sufficient for the lender to be able to recover their outstanding debt on a sale should they need to repossess the property and so is of little value to the purchaser. Some purchasers do commission an independent survey, but opt for the cheapest type, which may not reveal all potential (and possibly, expensive) problems with the property.

The possible types of survey are:

Condition report: This is the most basic level of survey, and therefore the cheapest, and typically costs from about £300. It is not exhaustive, and may simply identify the problem areas without explaining what repairs would be required. It will not include a property valuation or a surveyor’s follow-up advice.

Homebuyer report: This survey is cheaper than a full structural survey but contains more detailed information than a condition report. This type of survey is most suitable for properties that are less than 100 years old. The main disadvantage of this type of survey is that it usually advises a buyer to carry out further investigations rather than providing a detailed explanation or costs estimates for repairs. These surveys typically cost £400-£600.

Building survey: This is the most comprehensive type of survey and is advisable for older properties. These surveys provide detailed information about the condition of the property and repairs required. The main disadvantage of this type of survey is that it is often so detailed and technical that purchasers need professional guidance to understand them. A building survey usually costs about £1,000.

Snagging survey: This is used to pick up any problems with new-build properties. As new-build properties are covered by a 10-year guarantee from the National House Building Council a more detailed survey is not required. A snagging survey should ideally be carried out before a property is purchased (and the repairs agreed with the developer) as a developer may be slow to fix any problems identified in the report after completion. However, many developers will not allow access to the property before completion. Your conveyancer may be able to persuade the developer to give you/the snagging surveyor access. If this isn’t possible, the snagging survey should be arranged for as soon as possible after completion. Bear in mind that the developer should repair any defects reported in a snagging survey in the first two years, but they make take some time to do so! A snagging survey usually costs about £200-£300.

While the cost of a survey is an additional cost at what is already an expensive time, it is extremely sensible to obtain a survey before contracts are exchanged. This will allow you to identify any problems with the property and the cost to repair them, so that you can decide if you are willing to remedy the problems and afford to pay for them. Don’t forget that where a survey finds problems with the property before purchase, it could be used to negotiate a lower purchase price with the seller.

Do I have to have life insurance if I buy a property?

You’re not legally obliged to have life insurance for a mortgage, but some lenders may consider it a precondition for letting you borrow money to buy a home.

For many homeowners, having financial protection in place makes sense. If you own a property, a mortgage is likely to be the biggest debt you leave behind should the worst happen, so having a policy in place can help give you peace of mind.

With the average house price in the UK currently around £238,000*, a lot of homeowners will have a mortgage to pay, so it’s understandable that people want to spend any spare income wisely.

If you have children, a partner, or other dependents living with you who rely on you financially, taking out mortgage life insurance could be considered important expenditure.

Buying a Home with a Partner

Life insurance is important to consider when buying a house as a couple. When buying with your partner, your mortgage repayments could be calculated based on two salaries. If you or your partner died while your mortgage loan was still outstanding, would one of you alone be able to keep up the regular mortgage repayments?

Life insurance can help protect the family home by paying out a cash sum, which can be put towards the remaining mortgage balance if you die during the length of the policy. Your loved ones can use the pay out to help clear the outstanding mortgage debt, meaning they can continue living in your family home without worrying about the mortgage.

Life Insurance as a Landlord

If you’re buying a home as an investor, or you already own a home and you’re looking to rent it out, you may still need life insurance. This way, you can help cover the remaining balance in the unfortunate event you pass away.

This can help ensure continuance of any rental income for your beneficiaries as it reduces the need to sell the property to clear the mortgage. You might want to increase your life insurance cover to account for the higher mortgage liability should you refinance your investment property or portfolio.

Do I Need Life Insurance if I Don’t Have a Mortgage?

Life insurance is not only relevant to homeowners. While it’s true that renters are less likely to take out life insurance, that doesn’t mean you don’t need life insurance if you don’t have a mortgage.

If you’re a tenant, think about the financial impact of the loss of your income if you were no longer around. If you live with your family, could your loved ones afford the rent in your absence? What about other costs like household bills or childcare costs if you have a family. In essence, life insurance is always a good idea if other people rely on you financially, it is not just for those with a mortgage.

There are two main types of life insurance for a mortgage:

Level term life insurance - this could pay out a fixed lump sum if you die during the length of the policy, and help your dependents to pay the mortgage (interest only) or help maintain their lifestyle and everyday living expenses.
Decreasing life insurance - this is designed to help protect a repayment mortgage so the amount of cover reduces roughly in line with the way a repayment mortgage decreases.

If you do take out life insurance or decreasing life insurance you can add critical illness cover to your policy at an extra cost.

It could pay out a cash sum if you’re diagnosed with, or undergo a medical procedure for one of the specified critical illness covered during the length of your policy, and you survive a specified term from diagnosis (usually 14 or 28 days depending upon the provider).

A home is so much more than an asset, and whatever type of life insurance you choose, paying a small monthly premium can help your family carry on living there if you are no longer around.

The right policy for you depends on your individual circumstances, speak to a member of the Nockolds Wealth team to find out more.

Important Information

This article is for your general information only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.
No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.
Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is provided or that it will continue to be accurate in the future.
Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the specific circumstances of the individual. All figures relate to the current tax year unless otherwise stated.
These policies are not savings or investment products and have no cash-in value at any time.
If you stop paying premiums at any time during the policy term the cover will cease.

* (June 2020 source: https://landregistry.data.gov.uk/app/ukhpi)

Help to buy – what happens at the end of the mortgage term?

The help to buy government scheme has enabled many people who would not otherwise have been able to buy a property to get onto the property ladder. Under the scheme, property purchasers must purchase a new build property, and need a 5% deposit. The government provides an “equity loan” of 20% (or 40% in London) of the purchase price interest-free for five years. The remainder of the purchase price is met by a mortgage in the usual way. Equity loans are only available to first-time buyers or previous homeowners who no longer own a property. From 2021, only first-time buyers will be able to obtain a help to buy loan.

In our experience, many purchasers do not appreciate the requirements for repayment of the help to buy loan or the interest charges after the initial interest-free period.

No interest is paid on the help to buy loan for the first five years. After the initial five year period, the interest on the help to buy loan is 1.75%, and each year this increases by the Retail Prices Index (RPI) plus 1%. Bear in mind that the payment of interest does not reduce the outstanding help to buy scheme debt.

The loan must be repaid within 25 years or on a sale of the property, whichever happens first. The amount needed to repay the loan is the same percentage as the initial loan i.e. if the loan was 20% of the purchase price you must pay 20% of the proceeds of sale. So if the amount of the initial help to buy loan was £20,000, and the property doubles in value by the time you pay off the help to buy loan, the amount required to repay the loan would be £40,000.

In reality, most people remortgage at some point in the first five years (at the end of their fixed mortgage term) and the help to buy loan is repaid (or partially repaid) upon that remortgage. This means that the help to buy loan that has been paid off will form part of the bank’s mortgage from that point and interest is charged as per the terms of that mortgage. There will be an admin fee of either £115 or £200 (depending whether the equity loan is partially or fully repaid), which is paid to the administrators of the help to buy scheme.

The help to buy loan would also need to be paid back if the property is sold. The help to buy loan scheme would take back the percentage of the sale price that they are owed, but the remainder of the equity could be used towards the purchase of a new property, with a regular mortgage to meet the rest of the purchase price.

How can you make sure that the purchase of your dream property doesn’t become a nightmare?

We have come across many excited clients who, often after months and sometimes years of looking for their dream property, believe that they have found it. Happily, very often no problems are identified with the property and the purchase can complete.

So, how can you make sure that the purchase of your dream property doesn’t become a nightmare?

• Find out how long the property has been on the market for. If it seems to have been on the market for more than a few months, ask the agents why that is. We are fortunate to deal with many reputable estate agents, but sadly that is not always the case. The estate agent may be aware of problems with the property and the reasons why it has not sold, but has not told you. We believe that an agent’s reason for doing this is to hope that the matter completes so that they obtain their fee/commission. However, most issues would likely be flagged up as part of the purchase process, and so it seems illogical for agent’s not to be upfront about any problems that they are aware of. By failing to do so, the agent risks damaging your trust in them, as well as their reputation.

• Have a look at property information websites such as rightmove, zoopla and checkmystreet. Rightmove has a helpful property checker so that you can see when the property and others nearby have been sold and the sale price. If a property has been sold a number of times in a short space of time, try to identify why that may be. Is there a nightmare neighbour that people move house to get away from? Is the property in a flight path? Are illegal raves often held in an adjacent field? The websites also confirm school catchment areas, local utility bills and council tax rates, and crime rates that may help you to decide if the property is dream-worthy.

• Drive around the local area and also look on a map to see where the property is and what is near by. You may have missed something on a viewing of the property that is more easily spotted on a map.

• Chat with the neighbours. They may tell you relevant information that the seller and the agent have not.

• Have a survey to identify any problems with the property (see do I need a survey article).

• Your conveyancer will carry out legal searches which will help to flag up some issues, such as Local Authority (planning permissions and restrictions), environmental (land contamination and flooding), water authority (check that property is connected to water and sewerage), as well as location specific searches (such as mining). Tell your conveyancer if there is anything that concerns you about the property or that you are unsure about.

• If buying a leasehold property, don’t be afraid to ask other tenants what the freeholder is like to deal with, and if maintenance and repairs are dealt with swiftly. If you knock on doors to speak to other leaseholders, make sure that the person that you speak to is a leaseholder and not their tenant.

• Check what broadband is available, and the likely speed, particularly if internet access is important or essential to you.

How long does it take to buy a house?

One of the first questions that we are usually is asked is how long it will take for a sale or a purchase of a property to complete.

This can vary considerably. Typically, and providing there are no issues (examples below) most sales and purchases take about 12 weeks from offer to completion.

There can be delays for a number of reasons, such as:

• Instructing the “wrong” conveyancer. We often hear reports of sales/purchases being delayed because the seller or purchaser has instructed their estate agent’s conveyancer. Unfortunately, these conveyancers generally act for a low fee because they take on a significant workload. This means that their clients may not be given a high level of service, and delays and mistakes are common;
• Purchaser failing to get a mortgage, at all or quickly;
• Negotiations about a purchase price, usually as a result of issues flagged up in a survey. If a purchase price is changed, a new mortgage offer must be obtained, thus increasing the delay;
• Gazumping i.e a seller accepting a higher offer from a different purchaser, thus starting the sale process from scratch. This means that the rest of the chain will also be delayed. The original purchaser will need to find another property, and also begin the process again;
• Issues to be resolved with the title to the property. For example, there may be a restriction on selling a property that was bought from a council under a “right to buy” scheme. Even where that restriction has expired, it can take some time for it to be removed from the Land Registry title register so that the matter can proceed to the exchange of contracts.

If there is no chain, the process could take as little as four weeks.

We make sure that we identify potential issues that may cause a delay early on so that action can be taken and delays avoided.

How long should be left on a lease of leasehold property?

Most leases are for an initial period of 99 years. If the length of the remaining lease is less than 85 years make sure that you raise the issue of lease extension or freehold acquisition. When the remaining term falls below 80 years the freeholder will be entitled to a payment if the value of the property is increased by a leasehold extension or a freehold purchase. It is therefore prudent to address the issue when the remaining lease is 81 – 85 years to avoid having to make an additional payment to the freeholder.

Once the remaining time on a lease falls below 70 years, most lenders will not be willing to offer a mortgage on the property. The pool of potential purchasers of the leasehold would then be restricted to cash buyers. The value of the leasehold will be affected as a result.

Leaseholders are generally entitled to purchase a 90-year extension, but the amount that this will cost will depend on the amount of time left on the current lease. The shorter the current lease, the greater the cost to extend it.

If the length of the remaining lease is less than 70 years, you may need the seller to begin the lease extension process before you buy the property. This is because you must have owned the leasehold for at least 2 years before you can apply for a lease extension.

It is important to first check that you are eligible to apply for an extension, and to then correctly serve the statutory notice on your landlord. It is really important that this is done correctly, as if it is not, you may be prevented from resubmitting your application for a further 2 years.

It is advisable to use a specialist to deal with your lease extension. In our experience, unscrupulous landlords use the tenant’s lack of expertise to their advantage, and then offer unfair terms, an inflated lease extension price, or even dispute the right to a leasehold extension completely (and inaccurately).

I am putting more money into the property than my co-purchaser. Can and should I protect my deposit?

There are two ways of jointly owning a property – as joint tenants or as tenants in common. You and your co-purchaser will need to choose how you wish to own the property when you buy it.

Owning a property as joint tenants means that you both own the property equally. On a sale, you would each be entitled to 50% of the proceeds of sale. You would not be able to recover any additional amounts that you had individually paid to the deposit or the mortgage repayments. The 50/50 division is very difficult to argue.

If you own a property as tenants in common you have defined shares in the property. It is possible, and sensible, to protect your deposit by entering into a declaration of trust. This document would provide that, on a sale, you would recover your initial deposit (either as a specified figure or as a percentage of the purchase price). The declaration of trust would then document how the remainder of the equity in the property is to be shared. This could be in proportion of how the mortgage repayments will be shared, for example.

Care must be taken when you decide whether you wish to recover your initial deposit as a specified figure (usually the amount of deposit that you paid) or as a percentage of the purchase price. If a deposit is protected as a percentage of the purchase price, the amount that you recover would increase if the property increases in value by the point of a sale. The opposite is also true.

However, if you only recover your deposit as a specified sum (say £10,000) that would not have as much “buying power” in say 10, 15 or 25 years’ time. You would not have made any gain (or loss) on your investment. We offer two types of declaration of trust.

The first is very comprehensive and covers a great deal, including recovery of any deposit, confirmation of your respective percentage interests in the property, mechanisms for what should happen in the event that one of you wishes to sell and the other doesn’t, what should happen to the property in the event of the death of either of you, what happens if one of you is made bankrupt, and what should happen if one of you wishes to “buy out” the other.

The second type of declaration of trust is far more straightforward, and will just set out how the purchase is funded, the recovery of a deposit, and your respective interests in the property. Remember that if you and your co-purchaser marry in future, the declaration of trust will be a factor to be taken into account on divorce and would not be conclusive as to how the equity in the property is to be divided. Advice should be taken before entering into a marriage so that you can be protected. We prepare declarations of trust for a fixed fee so that you have certainty as to your outgoings during what is already a costly time.

I’ve been told to avoid buying a leasehold new-build house. Why is that?

The government banned the sale of leasehold new build houses in 2019, but there are still many home owners who bought one of these properties, most of whom now regret doing so.

Houses are usually sold as a freehold, which means that the freeholder owns the building and the land that it is on. Flats are usually leasehold. This means that the leaseholder does not own the building or land, but rents the property for a defined period, usually several decades or centuries. A ground rent is payable to the freeholder.

With a leasehold new build property, the purchaser is able to purchase a house for an attractive price. However, the practice has been criticised as “cash cow” for developers, as many purchasers did not fully understand that they were purchasing a leasehold rather than a freehold property, the increasing level of ground rent, or the fact that they would have to pay additional amounts for permission to carry out works in their own home. As a result, a NAEA (National Association of Estate Agents) Propertymark survey has called leasehold new build properties “the PPI of the house building industry”.

The NAEA Propertymark survey reported that:

• 48% of the owners of leasehold new build properties were unaware of how the ground rents may escalate over time. In some cases, the amount of the ground rent has doubled every ten years;
• Purchasers were unaware of additional charges to make alterations or changes to the property. Average charges reported in the survey were £1,597 for permission to add an extension, £1,472 to install new bathroom units and £1,348 to make structural changes. These changes would not be payable in a freehold property;
• 62% of the owners of leasehold new build properties felt they were mis-sold their leasehold property;
• 57% of leasehold new build owners didn’t understand what being a leaseholder meant until they had already purchased the property;
• 65% used the conveyancer that their house builder recommended. 24% claim that the difference between leasehold and freehold was not explained to them, and shockingly, 42% of purchasers claim that they were told they would own a “virtual freehold”. It is very concerning that developers and even solicitors were not open and honest about what the purchasers would be buying.
• Many leasehold new build owners are concerned that they will have difficulties selling the property, as a result of the ground rent and the additional charges.

When purchasing a property, it is important that a conveyancer is instructed that acts in your best interests, makes sure that you are fully aware of exactly what you will be getting for your money, and what charges you may be liable to pay in future.

My parents are going to give me money to buy a home with my partner. What happens if the relationship breaks down?

The most appropriate way to recover the deposit would depend on whether your parents have gifted the deposit to you, or if it is an investment by your parents in your property.

If your parents have gifted the deposit to you

If you and your partner own the property as joint tenants and the relationship then breaks down, the proceeds of sale will be divided equally between you and your partner. This means that you will not recover an additional amount to reflect your parent’s contribution.

Instead, you and your partner should own the property as tenants in common, and you should enter into a separate declaration of trust which provides for you to recover the amount of the deposit, whether as a specified sum or as a percentage of the purchase price.

Bear in mind that if you go on to marry your partner and later divorce, the declaration of trust may not be upheld, as the court has a very wide discretion to divide assets to achieve a fair settlement. It is sensible to take independent legal advice prior to marriage to ensure that you are as protected as possible.

If buying a property using a gift from your parents, you will probably need to provide proof of the deposit (i.e gift) as part of your application for a mortgage. Your parents will probably also need to sign a document to confirm what their relationship to you is, the amount of the gift, that it is non-refundable, and that they will not have a legal charge over the property. Your parents may also need to provide a bank statement to show where the money came from as part of standard money laundering checks.

Your parents need to be aware that, should they pass away within 7 years of the gift, the amount of the gift may be subject to inheritance tax. They should take independent legal advice on this as part of their estate planning.

If your parents have invested the deposit in the property

This means that your parents retain ownership of the amount of the deposit.

To protect the amount of the deposit, your parents, you and your partner could enter into a loan agreement. The loan agreement would need to be declared to the mortgage lender. The mortgage lender would likely factor the loan repayments into affordability calculations, which may limit the number of mortgages that are available. If your parents wish to protect the loan by putting a charge on the property, the mortgage lender’s consent will be required.

A better option may be for you and your partner to enter into a declaration of trust with your parents, which confirms that your parents are to recover their investment upon a sale. This declaration of trust would not be affected if you married your partner in future, and so your parents money would be recoverable before the rest of the assets are divided as part of the divorce settlement. Your parents could recover either a specified sum or a percentage of the value of the property.

Prior to your parents gifting or lending money to you, it is important that you and your parents take independent legal advice to ensure that the money is as protected as possible, and that a solution is found that works for all of you.

Remortgages, brokers and ‘free legals’ – what’s not to like?

Remortgaging your property should be relatively easy especially if you use a broker. A good broker will gain all the information they need to gain you a mortgage offer and the best mortgage deal. It should also be straightforward compared to buying the property in the first place as it’s our job to ensure what you are buying is a ‘safe as houses’ investment. Problems can occur when you are offered ‘free legals’ with the mortgage deal.

The mortgage company have a vested interest in lending money against your property as all they are concerned about risk. So they want confirmation from their solicitors that if they have to repossess your property if you do not pay the mortgage each month that when they sell it they will gain all their money back or the amount of the loan.

Be careful when you sign up to ‘free legals’ and discuss this with your broker. This phrase often means that the legal company (which normally does not encourage talking to you at any stage to keep costs down) acts for the mortgage company and not you.

You should therefore consider instructing an independent conveyancer, such as Nockolds, who will look after your interests as we will push the remortgage for you as we are also acting for you and in your best interests, rather than just for the lender.

We often hear complaints of remortgage clients being left in limbo with no remortgage date with long delays. This usually means that they enter their current lender’s variable rate and have to pay more in interest as a result of the delay. We have heard stories about these clients making a complaint to the lender’s lawyer, only to be referred to the terms and conditions that effectively state that the lawyer acts for the lender and not for the borrower, and therefore the borrower has no voice or influence in the transaction.

Give us a ring as we can act for both the mortgage company and you and this means you can put a face to a name. We will help push through your remortgage to meet your deadlines and on your terms.

What are the advantages and disadvantages of buying a property at auction?

As any “Homes Under The Hammer” fan knows, properties that need renovation work can often be snapped up for a low price and substantial gains can be made provided any works are carried out within a well-thought out budget and there are no hidden and expensive issues.

The usual process of buying a property (i.e viewing, offer, negotiations, arrange mortgage, establish a chain, completion on date suitable to all in chain) is far slower than buying a property at auction.

There are two methods of buying a property at auction. Under the traditional method, 10% of the purchase price must be paid on the day of the auction and completion of purchase must happen within 28 days. The modern method of auction requires a payment of a reservation fee (which is a percentage of your bid) and completion within 56 days. It is possible to withdraw from the purchase if the modern method is used, but the reservation fee will be lost. Each of these timeframes is achievable for us, but it is helpful if we are instructed as quickly as possible after the auction.

Before going to an auction:

• Decide on your budget and make sure that you stick to it. It can be very easy to get carried away at the auction and end up paying more than you had wanted or can afford. Don’t forget to include all costs within your budget, such as:
o You will need to pay 10% of the purchase price on the day of the auction if it uses the traditional method, or a percentage of the purchase price if the modern method is used. Ensure that you have access to sufficient funds to make the payment.
o The remainder of the purchase price will be due on the date of completion. Ensure that you have sufficient funds and/or a mortgage offer in principle.
o The auction house’s administration fee. These vary but are usually a few hundred pounds.
o Stamp duty land tax
o Legal costs
o Surveyor’s costs
o Buildings insurance. You should insure the property from the date that you buy it at the auction and so you should ensure that you obtain buildings insurance quotes before you go to the auction so that you can factor in this cost. Make sure that you purchase buildings insurance that will provide cover whilst building works are being carried out, if that is your intention.

• Arrange to view any properties that you are interested in before you bid. It would be sensible to take a builder or surveyor with you to identify any problems and give you an idea of the cost of remedial work. You can then commission a formal survey if you remain interested in the property.

• While auctions offer for sale many properties for a low price and financial gains can be made, auctions can very often be used to achieve a quick sale of (structurally or legally) defective properties. These problems would be revealed in a survey and/or legal appraisal. Have a full structural survey before you bid on the property. The auction house should also provide an information pack in advance, and you should instruct a conveyancer to carry out a legal appraisal. The survey and the appraisal will ensure that you are fully aware of any issues with the property and can determine the cost of any remedial work. This will help you to establish what you are willing to pay for the property before you bid. The downside of obtaining a survey and legal appraisal before the auction is that, if you do not win the bid, you will not be able to recover these costs.

What is shared ownership?

Shared ownership means that you partly own a property, and rent the rest. Shared ownership schemes have allowed purchasers who may not otherwise have able to afford to buy a property an opportunity to get onto the property ladder. The “owned” element of the property is between 25% – 75%. It is possible to purchase a greater share of the property at a later date, and that purchase is known as “staircasing” (see staircasing article).

The purchaser pays a deposit and obtains a mortgage in respect of the percentage of the property that they buy. As the value of the proportion of the property that is purchased is far less than if the property were being purchased outright, the required deposit and mortgage is therefore lower and more affordable. The deposit is usually lower than that required on the open market, at 5–10 %.

Rent is paid to a housing association for the share in the property that the purchaser does not own. The amount of the rent is less than that which is charged on the open market, and is usually set at 2.75% of the property value of the rented element of the property per year. The amount of the rent will increase annually, usually by the retail prices index (RPI) plus 0.5%-2%.

Ground rent may also apply and you must pay this in full irrespective of the proportion of the property that is rented. Service charges may also apply. These should be investigated before a shared ownership property is purchased so that you know what your outgoings will be, and that you can afford them.

There are general eligibility criteria, set out below, but individual housing associations may also have their own criteria and so it is sensible to check those if you are interested in an available property:

• You must be at least 18 years old.
• Your annual household income must be less than £80,000 gross (£90,000 if purchasing a property in London).
• You must demonstrate that you are not in mortgage or rent arrears, and that you have a good credit history.
• You should not be able to afford to buy a suitable home on the open market, or you must be a first time buyer or an existing shared owner.

Be wary of purchasing a property that needs renovation or improvement work. There may be restrictions on what works you can carry out on the property, or there may be charges for permission to carry out the work. Also bear in mind that you will only benefit from any increase in value as a result of improvement works in the proportion that you own the property, even if you bear the full cost of the works. The housing association will benefit from the remainder of the increase in value as a result of those works.

What is staircasing?

Staircasing is the term that is used when the owner of a shared ownership property purchases a further percentage of the property. Typically, purchasers of a shared ownership property purchase 25%-75% of the property. They can increase their ownership to 100% of the property by “staircasing” i.e. purchasing the remaining share, whether all in one go or in increments.

The staircasing can take place at any point but you may need to wait 1–2 years after the date of initial purchase of the property before you can first staircase. Shared ownership leases granted prior to 2011 may limit the number of staircasing applications to 3, but there is no restriction in leases after that date.

The price that is paid for the additional share will be determined by the housing association’s property valuation at the time that you wish to staircase. This means that the amount that you pay for each percentage may be higher or lower than at the time that you made the original purchase, as property values go up and down.

If you purchase 100% of the leasehold of a house, you may be able to buy the freehold interest in the property. This would mean that you own the building and the land it is on, rather than having a lease. If you own 100%, you will also not have to give the housing association an opportunity to buy the property if you wish to sell it. You will also not to have to pay rent to the housing association. You may need to pay ground rent and a service charge.

Sometimes, staircasing is capped at 80%, usually in rural areas (to prevent the property later being sold as a second home). If you think that you may wish to staircase, ensure that you check any restrictions on the amount of the property that you may be able to buy before you purchase the initial share.

Lifetime ISAs can be used for the purchase of the initial share of a shared ownership property, but you will pay a 25% withdrawal charge on any amount that is withdrawn from the ISA for staircasing.

Why do I need a solicitor to extend my lease?

Leases are complex documents; drafted badly they can delay and even prevent a sale or remortgage of a flat. Here are some of the issues that an expert solicitor will help you avoid:

Ground Rent Headache

Some landlords offer ‘voluntary’ leases. These will be on a take it or leave it basis. Instead of the usual peppercorn ground rent they are likely to include ground rents that increase over the lifetime of the lease.

There are some levels of ground rent that can turn a long lease into an assured shorthold tenancy and make it difficult to obtain a mortgage.

Pesky Pets and Noisy Neighbours

Many buildings which have been converted into flats have very poor soundproofing and wooden floors and pets can cause real headaches for flat owners. Often landlords will include clauses which prohibit pets and hardwood floors.

Grand Designs?

Leases will usually include clauses which prevent the flat owner from making changes to the flat without the landlord’s consent. Sneaky landlords might include a clause that prevents the flat owner from making any changes to the flat even minor ones.

Time to Move On

Most leases will contain some restrictions on selling or subletting the flat to avoid things like Airbnb and multiple occupancy, but what if those clauses are so restrictive it means you can’t sublet the flat at all? These clauses are often drafted in legalese and it may be tricky to spot them and understand their full effect.

Land Registry Rules Ok?

If the lease is not properly registered at the Land Registry you will not be able to sell or remortgage your flat.

The Land Registry is extremely vigilant when it comes to preventing fraud. All applications are stringently checked and rejected very quickly if they do not comply even in some very small way.

If you have a mortgage on your flat, you will not be able to register an extended lease without your lender’s consent and they are unlikely to grant this if you do not seek legal advice.

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