What you should know when purchasing your first home with shared ownership

Shared ownership is an increasingly popular option for first-time buyers, particularly those in their 20s and 30s, looking to take their first step on the property ladder.

With house prices continuing to rise and wages struggling to keep pace, shared ownership offers an affordable way to achieve homeownership.

While shared ownership can be a great option, it comes with its complexities.

What is shared ownership?

Shared ownership allows you to purchase a share of a property – usually between 10 and 75 per cent – while paying rent on the remaining portion.

For instance, if a home is valued at £200,000 and you buy a 50 per cent share, you would pay £100,000 upfront (typically with a mortgage) and pay rent on the remaining £100,000.

Rent is generally below market rates, making it an attractive choice for budget-conscious buyers.

You may have the option to gradually buy additional shares, known as staircasing, until you own the property outright.

However, this is not mandatory, and some schemes may limit the percentage you can eventually own.

Shared ownership properties are usually offered through housing associations, local councils, or developers, often as part of new build schemes.

Increasingly, privately owned shared ownership homes are also available as their owners move on to larger properties.

Key legal considerations

Purchasing a shared ownership property involves specific legal factors, including:

  • Eligibility – Many schemes have criteria, such as income limits or local connection requirements, which you must meet to qualify.
  • Lease agreements – Shared ownership properties are sold on long leases, which outline your rights and responsibilities, including maintenance obligations, pet restrictions, rent reviews, and resale limitations.
  • Service charges – Additional costs for maintaining communal areas or the building itself can significantly impact your monthly expenses. Make sure you understand what’s included.
  • Staircasing costs – Buying additional shares incurs valuation fees, legal costs, and potentially Stamp Duty Land Tax (SDLT).
  • Resale restrictions – Selling a shared ownership property can be more complex than selling a freehold home, as the housing association often has the right to find a buyer for your share first.
  • Housing association relationships – Research the housing association to understand their reputation, processes, and any potential challenges.

Our solicitors can help you review your lease and highlight any unexpected obligations.

Stamp Duty Land Tax (SDLT) considerations

If you are buying a shared ownership property, SDLT may apply, and you can choose between two payment options:

  • A one-off payment – Based on the full market value of the property.
  • Paying in stages – Starting with your initial share and paying more as you staircase or if rental thresholds are exceeded.

First-time buyers may qualify for SDLT relief on properties valued under £425,000, though this threshold will drop to £300,000 from April 2025.

Acting before this date could save you thousands.

For example, if you buy a 60 per cent share of a £350,000 property after April 2025, your share (£210,000) exceeds the new £300,000 threshold by £50,000, incurring SDLT at 5 per cent (£2,500).

Our residential property solicitors can guide you through every step of the process, from reviewing lease terms to understanding SDLT obligations.

Contact our team today for advice and support in securing your shared ownership home.