Shared ownership conveyancing: the lease, Stamp Duty choices and selling your share

You're granted a long lease of the whole home by the provider, usually a housing association or council. You pay a lump sum (the 'premium') for your share and rent on the share you don't own, and the provider stays your landlord. GOV.UK says all shared ownership homes, houses and flats alike, are leasehold.

For homes funded by Homes England grant, the lease must contain Homes England's 'fundamental clauses', which providers can't change without its consent. They cover selling your home and the landlord's right to find a buyer first, protection for mortgage lenders, staircasing and rent reviews. Homes England's guidance covers England outside London. In London, the Greater London Authority sets the rules for affordable housing.

Homes funded under the 2021 to 2026 programme have a minimum first share of 10%, a lease of at least 990 years and the option to buy 1% shares each year for the first 15 years. For the first 10 years the landlord pays for essential repairs, and you can claim up to £500 a year for certain fixtures and fittings. The landlord's nomination period is 4 weeks instead of 8. Homes funded under the 2016 to 2021 programme needed a lease of at least 99 years, so check how many years are left: GOV.UK notes that a lease that's too short can make a home difficult to sell or remortgage.

On top of the normal purchase work, your conveyancer deals with the provider as well as the lender. The provider must give you Key Information Documents about the home no later than when you reserve, and send them to your solicitor with the memorandum of sale. Your solicitor then confirms you've received them. Homes England says lenders generally want the buyer's solicitor to confirm that the lease follows the model lease or contains the current fundamental clauses.

Your conveyancer also explains the rent and how it's reviewed. For leases signed on or after 12 October 2023, the lease allows either RPI plus up to 0.5% or CPI plus 1%. For earlier leases, the maximum increase is RPI plus 0.5%. They also explain service and estate charges, who pays for repairs and any limits on subletting. The model lease includes a Stamp Duty certificate, and your conveyancer marks your choice on it: tax on the share only, or on 100% of the value.

Firms often quote a shared ownership supplement on top of their standard purchase fee because of this extra work. There's no official data on what it costs, so ask for itemised written quotes and check what's included. See getting conveyancing quotes. GOV.UK says the provider's reservation fee is up to £500 and is taken off what you pay on completion, but you usually won't get it back if you pull out.

You choose between two methods. With a market value election, you pay Stamp Duty once, on the full market value stated in the lease, even though you're only buying a share. You then pay no more, however much you staircase. If you pay in stages, you pay tax on the premium for your first share, plus tax on the rent if its net present value is high enough. After that, there's no more tax and no return until your share goes above 80%.

You can make the election in your return, or by amending it within 12 months of the filing date, but you can't cancel an election once it's made. Paying in stages usually costs less at the start. Which costs less overall depends on how much more you buy and what the home is worth when you do. First-time buyer relief works with either method if the market value is £500,000 or less. With staged payments it applies only to the first share, and it also covers the rent. HMRC's helpline can calculate both options but won't say which is best, and Homes England recommends asking your conveyancer.

Worked example of staircasing past 80% when paying in stages: you've paid £260,000 in total, including £65,000 for the latest share. Stamp Duty on £260,000 at today's rates is £3,000. This share is a quarter of the total (£65,000 ÷ £260,000 = 0.25), so you pay £750. Once you own more than 80%, earlier shares can also become 'linked' to later ones.

Buying more shares is called staircasing. You can usually buy shares of 10% or more. Some older leases require 25%, some newer ones allow 5%, and homes bought on or after 1 April 2021 may allow 1% a year for the first 15 years. Shares of 5% or more are priced from a RICS valuation, which must be used within 3 months. 1% shares are priced from the original value adjusted by the House Price Index.

The landlord may charge an administration fee for shares of 5% or more. GOV.UK says this is typically around £150 to £500, and there's no fee for 1% shares. The landlord pays its own legal fees. You'll need a legal adviser if you borrow to buy the share. In some 'designated protected areas' you may only be able to own up to 80%, and on Older Persons Shared Ownership homes the maximum is 75%.

If you own less than 100%, you must tell your landlord first. It then has a nomination period to find a buyer: 4, 8 or 12 weeks, depending on your lease. A buyer the landlord finds pays no more than the current market value of your share, based on a RICS valuation, and must meet the normal shared ownership eligibility rules.

If the landlord doesn't find a buyer in time, or waives the period, you can sell on the open market. You can sell your share to an eligible shared ownership buyer, or staircase to 100% at the same time as selling the whole home. The nomination period doesn't apply in some cases, such as after a death or a court-ordered transfer. Homes with a 'designated protected area – mandatory buyback' lease can't be sold on the open market: the landlord buys the home or finds a buyer.

Expect to pay your own legal fees, the RICS valuation and any landlord fee set out in your lease or Key Information Document. If your lease has an initial repair period, any unused repair allowance usually passes to your buyer, unless they buy 100%.

In Wales, Shared Ownership – Wales lets you buy a first share of 25% to 75% with a repayment mortgage and pay rent on the rest. Land Transaction Tax offers a similar choice: a market value election, or tax on the premium you pay. If you pay on the premium, later staircasing is relieved up to the 80% mark in the Welsh Revenue Authority's guidance. Rent on a residential lease isn't taxed for LTT, and Wales has no first-time buyer relief. At main rates, LTT on £280,000 is £3,300 (the WRA's own example for a £280,000 purchase), so that's what an election on a £280,000 home would cost. Tax on a £140,000 premium for half of it would be nil, because it's under the £225,000 threshold (our calculation).

In Scotland, housing associations run shared ownership: mygov.scot says you can buy a 25%, 50% or 75% share and pay an occupancy charge on the rest. It warns that this is very different from Scotland's shared equity schemes, where you own the home outright. LBTT applies instead of Stamp Duty. Ask your solicitor how it works for your share.

In Northern Ireland, Co-Ownership, a registered housing association, sells part-shares, and you can increase your share in 5% steps. nidirect lists a £100 application fee, a £120 property assessment fee and a £480 fee towards legal costs.