Newcastle City Council are committed to providing all residents in the city with a range of opportunities to access affordable housing that is suitable for their needs.
For residents who would like to purchase their own home but cannot afford to buy a property outright, there are a range of options available including the shared ownership. This policy sets out the key aims of shared ownership and how the city council will manage the sales and purchase process.
We aim to:
This policy should be read in conjunction with the requirements of Homes England Capital Funding Guide. The CFG will take precedence over this policy for schemes that have been built using an element of Homes England funding.
Shared ownership products, to be offered whereupon the City Council retains part ownership.
Access to NCC shared ownership products will not be available as an option to existing tenants who wish to exercise the right to buy in their current accommodation.
Anyone wishing to buy a NCC shared ownership property must have been assessed as eligible to purchase a shared ownership property.
Applicants must have an annual household income of less than £80,000 per annum.
Applicants must not be a current homeowner (or named on the deeds of any other property).
Must not have any outstanding credit issues (i.e., unsatisfied defaults or county court judgements).
Current or former tenants of NCC or YHN as its housing provider must have a clear rent account and no substantial breaches of tenancy conditions.
Applicants must be able to demonstrate they can afford to purchase a share of no less than 10% and are unable to afford a 100% purchase.
Applicants must demonstrate the ability to afford the regular payments and costs involved in buying a home – including any service charges.
Where circumstances require it, there may be additional scheme specific requirements such as a local connection with the Newcastle area.
Prospective buyers will be encouraged to purchase the maximum affordable and sustainable share of the property.
Affordability will be assessed through the Homes England Sustainability Calculator with housing costs being a minimum of 35% of net income and a maximum of 45% of net income. Sustainability Calculator guidance - note March_2020.pdf
Shared owners will be responsible for 100% of the service charge regardless of their level of ownership.
The affordability assessment will take into account available deposit, mortgage repayments and shared ownership rent payments. NCC or its representatives will not provide mortgage advice to applicants but we may signpost applicants to mortgage advisors with experience of shared ownership products.
Applications must be made initially to NCC who will carry out an initial assessment to determine eligibility and affordability.
NCC will then arrange to have an affordability assessment undertaken by a suitably qualified and regulated independent financial advisor (IFA). The IFA will calculate the maximum share the customer could afford to buy and also obtain proof of funds for the deposit.
Once the IFA has approved the applicant and confirmed the percentage share that they are able to purchase NCC will arrange the reservation appointment and complete the reservation agreement. Applicants should be encouraged to maximise the initial share they can afford.
NCC will collect payment of the reservation fee of £350.00. The reservation fee is refundable only on completion of the purchase. Applicants are advised, that should the purchase does not proceed due to the buyer, the reservation fee will be forfeited (not refunded to the applicant).
The reservation form should set out the details of the property to be reserved, detailed information about the buyer, solicitors acting for the purchaser and the initial share of the property to be purchased.
Applicants reserving properties will be given 12 weeks’ notice to exchange contracts on the purchase, excluding matters outside their control. Reservations will be held until the exchange target date or until the applicant withdraws their interest in the property if sooner.
It will be at the discretion of NCC whether a reservation is held beyond the target exchange date, and this will be determined by the cause of the delay and whether it is related to issues beyond the buyer’s control.
Valuations of shared ownership properties, either at initial sale, on staircasing or resale must be assessed by an independent Royal Institute of Chartered Surveyors qualified valuer.
Valuations only remain valid for 3 months and need to be renewed if the sale of a property has not completed within that time period.
All shared owners will on completion enter into a standard shared ownership lease with an initial term of 990 years.
A lease will be issued regardless of whether the leaseholder has purchased a flat or a house.
Where properties are offered as shared ownership by Newcastle City Council (NCC) a purchaser may initially buy an equity share of between 10% and 75% of the full market value of the property.
The rent to be paid on a Shared Ownership home is often referred to as 'subsidised' or 'discounted' because it is lower than the market rent for the local area. The rent is a percentage (usually 2.75% and no more than 3%) of the share retained by the housing organisation, in this case Newcastle City Council.
NCC will charge a rent for the unsold equity. Rents on the unsold equity will be calculated in accordance with the relevant s106 agreement or the Homes England Capital Funding Guide, with the s106 agreement taking priority:
The market value for the property will be set by an Independent Valuer registered with the Royal Institute of Chartered Surveyors (RICS).
When there is a staircasing event or a property is re-sold the rent will be reset for the month following the transaction (staircasing) or commencement of the lease (resale) by undertaking a new valuation using the same methodology.
Total charges for shared ownership properties may also include additional sums for management fees, building insurance, sinking funds, and estate charges.
Costs relating to upkeep of buildings and services in communal areas will be apportioned to individual properties and recovered from the property owner by way of service charges. Where service charges are applied to shared ownership properties, the approach will be set out in the shared owner’s lease. Information on the costs which form the service charge will be provided to shared owners annually. The requirements around these will be specified in individual leases.
Any shared owner who feels that their rent has not been set in accordance with the policy or their lease, can appeal using the council’s complaints procedure.
Guidance issued by government allows, from the 12th of October 2023, a rent increase once a year for shared ownership, on the unsold equity (the portion of the property retained by NCC) by up to CPI plus 1% for new shared owners.
If CPI is -1% or lower rents cannot be increased. Annual increases will be made on 1 April of each year.
Shared owners will receive written notification of an annual rent increase no less than one calendar month prior to the increase being applied. Notification will include:
It is a condition of a shared owner’s lease to pay the shared ownership rent and maintain mortgage payments. Failure to pay the shared ownership rent, service charges or mortgage payments and other breaches of the lease agreement could result in the loss of their home.
If an account goes into arrears, NCC will take appropriate action to recover those arrears including personal contact by phone, letter, or email, or by contacting the mortgage lender.
NCC will only seek possession proceedings as a last resort, when all alternative debt management actions have been exhausted.
NCC will provide the shared owner’s mortgage lender 28 days’ notice of any intention to commence possession proceedings. This will include full details of the rent arrears.
NCC will cover the cost of certain repairs and maintenance in the home for the first 10 years up to a value of £500 per annum. This is known as the Essential Repairs Allowance (ERA). Any repair and maintenance costs in excess of £500 are the responsibility of the owner. For information see: Shared-ownership-scheme/repairs-home-improvements.
Shared owners can also roll over a maximum of one year’s worth of unused repairs expenditure to the following year. This also applies to any subsequent owner if the property is resold within the first 10 years.
However, if the owner staircases to 100% within the first 10 years responsibility for repairs and maintenance will transfer to them.
Homes England have published the following definition of repairs that are to be covered by the £500 allowance.
Shared owners will remain responsible for repairs inside of the home but will be eligible to reclaim costs from the landlord for the essential repair or replacement of (if faulty and not covered by warranty):
Any claims received will be processed in accordance with the Essential Repairs Allowance procedure and claim form.
NCC as landlord will provide buildings insurance cover until the point where the owner staircases to own 100% of the property.
The cost of which will be recharged back to the owner via the monthly rent charge. It is the responsibility of the individual owner to arrange contents insurance. NCC will not accept liability for costs arising due to owners not having any or inadequate contents insurance in place.
The minimum initial purchase for shared ownership is 10% and further purchases should be of no less than 10%.
Owners can staircase until they own the full 100% of the property.
There is also provision within the legislation for owners to staircase by 1% per year for the first 15 years of the lease with reduced legal fees. You cannot, however, buy shares of 2%, 3% or 4%. See the following link for further information: Shared-ownership-scheme/buying-more-shares-staircasing
Staircasing provisions are included within the lease. NCC will sell the purchaser additional shares at the open market value determined by an independent RICS valuation and based on Capital Funding Guide guidance and affordability.
When an owner staircases to 100% the Freehold of the property (this is only applicable to houses) should transfer to the owner as part of the final transaction.
The property will be marketed with the permission of NCC as landlord.
Any prospective purchaser must buy at a minimum the share the seller currently owns.
Administration charges will be applied where they are provided for in the lease.
NCC will also charge administration fees for other services provided to shared owners that are not specified in the lease, for example, re-mortgaging applications.
Shared owners will be advised of the level of administration fees in advance of any work being carried out.
This policy will be reviewed annually or whenever a significant change to local or governmental policy occurs, whichever is the sooner.
This policy is owned by the Fairer Housing Unit, Housing Policy, and Commissioning team.
Date of next review: February 2025