When purchasing a property through the New Build HomeBuy scheme, you will be assessed to ensure that you meet the required criteria. The criteria can vary from housing association to housing association and can be found on their individual websites. However, as the scheme is aimed at those who cannot afford to buy a property outright, you should consider that priority would normally be given to those with priority housing needs.

Although you cannot immediately purchase the property outright under this scheme, you will still have the rights and responsibilities of a full owner-occupier. You can buy further shares in the property at a later date, until you own it outright. You will enter into a shared ownership lease which sets out your rights and obligations, and your legal advisor can explain the terms of this to you prior to exchange of contracts, should there be any points you do not understand.

As you will only be purchasing a share of the property, you will be required to pay rent to the housing association on the share that remains in their ownership. In order to purchase your share, you are likely to require a mortgage and you would need to arrange this with a bank or building society who lend on New Build HomeBuy/shared ownership properties. You should be aware that not all lenders provide mortgages on properties sold under this scheme.

You can sell your home at any time, but you must tell the housing association in writing. The housing association has the right to buy the property back from you or to find you a buyer for it; if you own 100 per cent of your home, you can sell it yourself. However, the housing association has the right to buy the home from you for up to 21 years after you fully own it.

If you have any questions on this subject, then please do not hesitate to contact me direct at helen.chaproniere@mablaw.com

So what is shared equity? You purchase a property and own 100% of it, but you obtain a mortgage for a certain percentage of the equity (e.g. 75%) and the developer and/or Government holds a charge (mortgage) over the remaining share (e.g. 25%); depending on the scheme, you may or may not pay rent on that 25% share. In simple terms, although you own the property outright, your main lender holds a legal charge over the property and, in addition, the developer and/or Government will secure a second charge over the property to secure the repayment of their share when you sell or decide to pay the equity loan off.

So what is shared ownership? You purchase only a share in the property (e.g. 75%) and the local authority, developer or housing association retains the remaining share (e.g. 25%) and you pay rent on that share. In simple terms, you have a share in the property, which is usually purchased with the assistance of a mortgage, but you do not own the property outright. You can purchase further shares in the property later (up to 100%) and this is called ”staircasing”. This increases your share of the property and reduces the share retained by the local authority/developer or housing association, which  would also reduce your rent payments.

If you are still puzzled, please contact me at sarah.wilkins@mablaw.co.uk and let me help you understand the options open to you.

The changes are designed to encourage mortgage lenders to provide funds in the purchase of these properties.

The changes all involve the Mortgagee Protection Clause claim.  The mortgagee will now be able to claim the following when staircasing and selling the property following repossession:

1.  All loans advanced by the mortgagee secured by way of a first charge over the property if the advances were approved by the Housing Association.

2.  18 months’ of interest (up from the initial 12 months’).

3.  Amounts advanced by the mortgagee in protecting its security by paying arrears of rent and service charges.

4.  Fees and costs of enforcing the mortgagee’s security capped at an amount equal to 3% of the market value of the leasehold interest at the time of enforcement, i.e. 3% of the 100% staircased interest.

The last one is the main difference between the old and new regime.  The mortgagee can now claim, inter alia, administration fees, early redemption charges and capitalised interest as long as it falls within the 3% threshold.  These could not be claimed under the old regime.

This is very significant for mortgagees as the shortfall they will now suffer will be much lower than under the old regime.  If the mortgagee acts swiftly, it is possible that it may not even suffer a shortfall at all. That would be novel.

Many first-time buyers have felt the pinch, with the end of the stamp duty holiday for properties up to £175,000.00 taking place from the 1st January 2010. Now all properties over £125,000.00 attract stamp duty liability. This is an additional cost people are having to budget for from the outset, particularly for many of my first-time buyers who are purchasing new build properties off-plan and due to complete in 2010. Many buyers in the marketplace have wrongly assumed that an exchange of contracts prior to the change meant they avoided this cost – you should be aware that the stamp duty liability comes about on the completion date. First-time buyers are trying to save hard for their deposit, valuation fees, and legal costs, and the stamp duty for the lower end of the market does add to that struggle.

With first-time buyers trying to take that first step onto the property ladder, and some not having the large deposit required, I am seeing more shared-ownership and shared equity schemes through first-time buyer, government-led initiatives. Interestingly, I am even working with first-time buyers purchasing on one Milton Keynes new home development, where the developers are offering their own competitively rated mortgages. This is encouraging news for the first-time buyer, enabling the market to continue to grow and hopefully making moving home for everyone affordable again.

Recent market trends have meant I also see more of my first-time buyers using ‘the bank of Mum and Dad’, receiving financial assistance from their parents in order to take their first step; or, this could just be the parents wanting their children to finally fly the nest! It has been reported in the press that the average age of the first-time buyer has risen from 29 to 30 in 2008, and many confirmed that this move was made with the assistance of their parents. So our next generation property owners are starting to buy later and live at home for longer; after all, it’s cheaper to live at home than it is to buy and rent!

If you need any advice on the first-time buyer initiatives, please contact me at sarah.wilkins@mablaw.co.uk

The new leases must be used for all shared ownership leases granted on or after 6 April 2010 for homes built with funding from the HCA (unless an earlier contract requires the use of a different form of lease). The new leases replace the model leases published in September 2009, which should be used until 5 April 2010.

The HCA believes the lease will not only simplify and speed up the home buying process but, at a time of financial caution, will assure existing lenders of shared ownership mortgages. As economic conditions improve, the revised lease should help to encourage new lenders into the shared ownership market.

The lease has been developed in conjunction with the Departrment for Communities and Local Government, the Council for Mortgage Lenders, the National Housing Federation and a number of leading mortgage lenders and providers of affordable housing. The new leases have been amended to:

• Extend the level of protection given to mortgagees of shared ownership properties;
• Update the layout and language of the leases;
• Clarify the provisions relating to alienation, rent review, making good damage to common parts and frustration in the event of damage or destruction.

The lease can be adapted by housing providers and lenders to suit individual situations, but there are fundamental clauses that must be included in any new lease. The fundamental clauses cover alienation, mortgagee protection, ‘staircasing’ provisions, protected area ‘staircasing’ provisions (where appropriate), rent review, service charge provisions (where appropriate) and right of first refusal. The landlord must also give the leaseholder a document entitled “Key Information for Shared Owners”, which sets out the main terms of the lease.

So what is shared equity? You purchase a property and own 100% of it, but you obtain a mortgage for a certain percentage of the equity (e.g. 75%) and the developer and/or Government holds a charge (mortgage) over the remaining share (e.g. 25%); depending on the scheme, you may or may not pay rent on that 25% share. In simple terms, although you own the property outright, your main lender holds a legal charge over the property and, in addition, the developer and/or Government will secure a second charge over the property to secure the repayment of their share when you sell or decide to pay the equity loan off.

So what is shared ownership? You purchase only a share in the property (e.g. 75%) and the local authority, developer or housing association retains the remaining share (e.g. 25%) and you pay rent on that share. In simple terms, you have a share in the property, which is usually purchased with the assistance of a mortgage, but you do not own the property outright. You can purchase further shares in the property later (up to 100%) and this is called ”staircasing”. This increases your share of the property and reduces the share retained by the local authority/developer or housing association, which  would also reduce your rent payments.

If you are still puzzled, please contact me at sarah.wilkins@mablaw.co.uk and let me help you understand the options open to you.

Staircasing – what does it involve? If you are not sure whether you are financially able to staircase and purchase further shares in your property, it may be worth checking out the market in your local area to get an idea of the likely prices of property and obtain a valuation. You will need to contact your Housing Association to arrange for this up-to-date valuation and this will be something you will have to pay for. Once you have this valuation you can then decide what further percentage you wish to purchase. Your individual Lease may stipulate the amount you can staircase in any one stage and the Housing Association should be able to confirm this for you.

If you have the funds available from savings or an inheritance, for instance, you will be in a position to proceed immediately, and you would need to instruct me as your solicitor to deal with the legal paperwork on your behalf. Another option open to you would be to contact your existing mortgage company and arrange for a further advance. Your last option would be to obtain a new mortgage from a new lender, borrowing enough money to purchase the further share and to pay off the existing mortgage. You may wish to speak to an independent financial adviser or mortgage broker in relation to your current mortgage product and what new products could be available for you.

Once you have decided the way forward, you will need to instruct me to proceed with the transaction, which must take place within three months of the date of the valuation. You will need to consider the stamp duty implications of staircasing and this will depend on the percentage share you are purchasing and how you paid stamp duty on your original purchase of the property. I will be able to give you further information depending on your individual circumstances. Once the staircasing has been completed, your lease will be noted accordingly, so on the sale of the property there is a record of the extra share or shares purchased.

So what do you do? You raise your mortgage with any high street bank or building society through an independent legal adviser who is familiar with the scheme in your area (a list of appropriate advisers can be provided to you by your local MyChoice HomeBuy agent). Then, in addition to your mortgage, you will receive a government equity loan for up to 50% of the purchase price of the property. The scheme confirms that savings above £10,000 can be used to ‘top up’ your purchase price without affecting the equity loan provided by the government.

You are free to choose a home of your own choice on the open market provided the property you have selected is in a reasonable condition (you will need to instruct a homebuyer’s survey to ensure this is the case). If you are employed as a key worker, you must also ensure sure that you choose a property that is no more than 90 minutes travelling distance from your place of work.

MyChoice HomeBuy is for people who would not normally be able to buy their own home on the open market and is predominantly aimed at key workers and public-sector tenants. If you want to purchase a property with the assistance of the MyChoice HomeBuy scheme, you will need to meet the legal and other costs associated with buying a home. Your MyChoice HomeBuy agent will provide you with a list of recommended solicitors who are familiar with the scheme and the paperwork involved so you can be rest assured the transaction will progress smoothly.

Funding from the government for the scheme is usually available from April and is in huge demand, with many MyChoice HomeBuy agents accepting applications from January. So get the ball rolling and contact your local MyChoiceHomeBuy agent to see if you are eligible for the scheme.

In addition to the developers own schemes, developers have joined forces with local housing associations by participating in schemes backed by the Government. Indeed, properties on residential developments participating in such schemes have been quick to sell.

Homebuy Direct is one such scheme that developers have been participating in and is open to households earning less than £60,000 who would otherwise be unable to purchase their own home. First time buyers, key workers and housing association or council tenants are examples of those eligible to take part in the scheme.

Under this Scheme, an equity loan is given to the buyer by a Homebuy agent (through public funding) and the developer. These loans represent a percentage of the value of the property and are secured as second and third legal charges against the property. The Buyer then obtains the balance of the purchase price from a conventional mortgage lender.

No fees or charges are payable during the first five years of the equity loan, so what is the catch?

When the property is sold, the owner will be liable to repay both equity loans and also the conventional mortgage. The amount to be repaid will depend on the percentage borrowed. Therefore, if the property has increased in value then the owner has to share that profit with the Homebuy agent and the developer. However, there is also a risk to the developer and Homebuy agent if the property has fallen in value, as they may make a loss on the amount loaned.

We have seen a number of developers keen to participate in this scheme. This would suggest to me that they have confidence in a recovery of house prices in the near future!