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Shared ownership for tenants

Barking and Dagenham is proud to be a working class borough, and we want to help our residents reach their housing aspirations. We don't want our current residents to be forced out because they cannot afford to stay. 

To counter this, we have developed this scheme, which makes owning a part of your home much more affordable. You only need to get a mortgage for the percentage of your home you wish to own, not the full value of the property, and you pay the rest as a percentage of your current rent.

Shared ownership for council tenants

Right to invest is a tenant shared ownership scheme for council tenants in Barking and Dagenham that allows you to buy a share of your council home. Tenant shared ownership will help you get on to the property ladder by owning a share in your home, which you can increase when you can afford it.

As a council tenant, if you meet the eligibility criteria you can purchase your home in full under the right to buy scheme, but as property prices are increasing many people are struggling to get mortgages to cover the full price of their home. 

The scheme will provide an affordable home ownership option for council tenants on low incomes; helping tenants to stay in their family homes, which will also help to create a stable less transient community.

If you invest in this scheme, you will no longer be a council tenant. You will instead be a leaseholder, giving you similar rights and responsibilities as a full owner-occupier. The standard lease term is for 125 years.

Right to invest - Tenant shared ownership brochure (PDF, 1.4 MB)

Tenants of Reside do not have the right to buy as a part of their lease. They are therefore not eligible for this shared ownership scheme which is based on the right to buy eligibility criteria and discount.

To be eligible for the scheme you must:

  • be a secure tenant of the council
  • have been a secure tenant for at least three years
  • pass an affordability test

There are some council properties that are exempt from the scheme, such as sheltered accommodation and bungalows.

Advantages of the right to invest scheme:

  • it's an affordable way to get on the property ladder, as you do not have to get a mortgage for the whole cost of your home
  • you can use your right to buy discount to help reduce the price of your home
  • your monthly mortgage and rent can work out much cheaper than buying outright, and sometimes not much more than renting alone
  • you can buy more shares if you want to, when you can afford them - you only buy what you can afford so you don’t overstretch yourself financially
  • you can pass your home onto your children, or anyone else that you choose

Restrictions of the right to invest scheme:

  • you can only buy shares up to a maximum of 70%
  • the lease on your property is for 125 years and you will lose your right to buy, although you can still benefit from the discount you are entitled to
  • as a leaseholder on this scheme you are not allowed to sub-let your home and you will be responsible for maintaining the property and carrying out repairs
  • there are some council properties that are exempt from the scheme, such as sheltered accommodation and bungalows
  • you will no longer be a council tenant, you will instead be a leaseholder, giving you similar rights and responsibilities as a full owner occupier - the standard lease term is 125 years
  • your home is at risk if you do not keep up repayments on both your mortgage and your rent

Your discount for the right to invest scheme is based on a percentage of your right to buy entitlement.

For example, if your home is worth £200,000 and you want to buy a 25% share (worth £50,000) and you are entitled to the minimum right to buy discount of 35%, this would equate to a discount of £17,500, meaning your initial purchase price would be £32,500.

The amount of discount you are entitled to is set by central government and depends on if you live in a house or a flat and how long you have lived there.

The cost of buying your tenant shared ownership lease will depend on the market value of your property (minus any improvements that you have carried out), the number of shares you want to buy and the amount of right to buy discount you are entitled to.

Below is an example of the costs associated with three share options based on a house worth £270,000:

  • estimated value of the house: £270,000
  • monthly rent: £440
  • discount entitlement: £94,500

(Full minimum discount available based on the above valuation and a tenancy of three to five years).

Overall costs of the property

Initial share purchase    25%25%50%Right to buy outright purchase
Value of share purchase£67,500£94,500£135,000£270,000
Discount£23,625£33,075£47,250 £94,500
Mortgage required    £43,875£61,425£87,750£175,000

In addition to the overall cost of your home, you should also consider the costs incurred as a part of the buying process. These costs include the deposit, mortgage arrangement fees, solicitors’ fees and Stamp Duty Land Tax.

Potential monthly expense

Proportion of monthly rent payable£330£286£220£0
Buildings insurance£20£20£20£20
Estimated monthly mortgage
(repayments based on a 25 year term and 5% interest)
£256£359£513£1,026
Total estimated combined monthly costs£606£665£753£1,046

Your home is at risk if you do not keep up repayments on both your mortgage and your rent.

Houses

If you own a shared ownership lease for a house you will have responsibility for all repairs to the interior and exterior of the property.

Flats

If you own a shared ownership lease for a flat you are responsible for internal repairs, including replacement of fixtures and fittings.

Repairs and upkeep of the building’s structure, exterior and communal parts and services remain the responsibility of the council, but you may incur a cost for any such repairs and improvement works.

There are 13 stages to the right to invest application process. Every time we write or communicate with you we will tell you how much time you have to provide the information being requested.

A number of these time periods are legally fixed, and if you miss any deadlines it may mean that you have to start the process again from the beginning irrespective of what stage you have reached.

If every stage of the application process is completed as quickly as possible, the shortest time frame to complete the shared ownership of your property is 12 weeks.  However, it can take up to six months.

Stages

  1. You submit an expression of interest in taking up tenant shared ownership.
  2. We send you indicative costs and an application form.
  3. You complete the application form and return it to us.
  4. We do a qualification check and affordability assessment, and write to you with the outcome.
  5. If you meet the criteria we request your permission to get a valuation of your property (if you do not qualify, this is the end of the process).
  6. You return the permission form, and we get a valuation of your property and reassess your affordability based on the accurate figure.
  7. If you pass the second affordability assessment we will send you an informal offer (if you do not qualify, this is the end of the process).
  8. You then need to send us evidence of your income and finances.
  9. Once we receive that and it’s checked we will invite you to a meeting.
  10. At the meeting we will give you a formal offer, and discuss the costs of your various share options.
  11. Following the meeting you can seek independent advice and you must get a solicitor and arrange your mortgage.
  12. You must send us a signed acceptance of the formal offer, confirming your share decision and provide details of your solicitor and mortgage company.
  13. When we receive this we will complete all final paperwork, issue a memorandum of sale and liaise with your solicitor, which will complete the process.

If you want to buy more of your home, you can do so through a process called staircasing. You do not have to do this; you can keep and maintain your initial share purchase throughout your entire lease.

When you can staircase

You can staircase anytime you can afford it, and you can start the process after 12 months from the date that you purchased your initial share.

The number of shares you can buy

There is a share ceiling of 70%. This means the council will always own at least 30% of the shares in the property; you cannot own 100% of the property and will always therefore be a leaseholder rather than a full owner-occupier.

When you staircase under this scheme the minimum amount you can purchase each time is 10%.

The cost of staircasing

The amount you pay is based on the percentage share you wish to buy minus your right to buy discount entitlement. The cost is calculated on the market value of your home at the time you wish to staircase, minus any improvements you have made to the property. Any previous valuations do not count.

The discount you will receive

If you did not receive the maximum discount when you purchased your initial share you will be entitled to another discount when you staircase. This will be a proportion of the full amount you would have been entitled to if you had bought outright under the right to buy scheme.

You can continue to do this, until you reach the maximum discount allowed. This table shows how discount is calculated when an additional share is purchased.

Initial share purchaseSecond share purchase
Market value of house at date of initial share purchase£200,000Market value of house at date of staircasing
(property values can go down as well as up)
£240,000
 
Initial share purchase25% shareAdditional share purchase25% share
Value of share purchase£50,000  Value of share purchase £60,000
Discount payable 35% 
(after five years tenancy - up to maximum of £103,900 - this figure is set by central government and can change)
£17,500Usable discount payable 40%
(increased by 1% per year up to maximum of £103,900 - this figure is set by central government and can change)
£24,000
Purchase price for initial share    £32,500  Purchase price for second share£36,000
Total amount paid for 50% share (initial purchase and second share) £68,500

Your rent

Your rent will go down each time you increase the share of the property that you own. The full rent amount will decrease by the additional percentage share that you buy.

For example, if your full rent was £440 a month, and you buy an initial share of 25% your reduced rent would be £330; if you then buy an additional 25% (making a total of 50%) your new rent would be £220.

How to staircase

Before you do anything formally, you can contact the Sales and Leasing team. The team will be able to give you some basic calculations including a rough valuation of your home, the value of additional shares and the discount you will receive. These calculations will help you to understand the provisional costs involved and this will help you decide if you can afford to staircase.

If you decide to proceed, you will need to pay for your home to be accurately valued. You’ll need to speak with your mortgage provider about lending you the funds and you’ll have to appoint a solicitor. There are also some administration costs that you will need to pay us. We will then work with your solicitor to complete all the paperwork and complete the transaction.

Your lease agreement with us does not allow you to sub-let your property. In exceptional circumstances the council may give temporary permission to sub-let, but each case would be considered on its merits and the council’s decision is final. You may also be in breach of your mortgage terms if you sub-let without the lenders permission.

After you have taken up shared ownership of your home, you may decide you no longer want to live there and you wish to sell the property. Under the terms of your lease you must obtain a market valuation from a qualified valuer and then offer the property to the council first. The council then has eight weeks to decide if we wish to buy the property back from you at market value.

Alternatively we may provide you with details of a council nominee who would like to buy the property from you. This would save you the expense of going to an estate agent. If we decide not to buy your property from you or nominate a buyer, then you are free to sell it on the open market.

Depending on when you wish to sell your property you may be required to pay back some or all of your right to buy discount.

If you are interested in the right to invest tenant shared ownership scheme you should contact the Sales and Leasing team. They will send you indicative costs of taking up shared ownership on your property, along with an application form.

Some of the words and terms used throughout the right to invest pages are technical, legal or financial references. In case you are not familiar with all of these terms, we have explanations for you here.

Affordability assessment

This is the method we use to assess your financial suitability to take part in the right to invest scheme.

The minimum requirements are that your net annual income is at least 4.5 times the amount of your mortgage and that your monthly repayment is less than 45% of your net monthly salary.

Improvements

These are improvements that are made to double glazing, a fitted kitchen, or a bathroom suite (as described in Part E of the tenant shared ownership or right to buy application).

Initial share

This refers to the first share of your home that you choose to purchase. This can be for 25%, 35% or 50% of the equity in the property.

Initial discount

This is the amount of discount payable under the tenant shared ownership scheme when buying the initial share. It refers to your right to buy discount.

Major works

Improvement or repair works costing more than £250 per unit.

Market value

This is the value of a property for sale on the open market by a willing vendor and a willing buyer.

Qualification check

These are the checks we carry out to make sure you meet the eligibility criteria for the scheme.

Service charge

The service charge is a payment made by a leaseholder to meet the cost of management services such as communal cleaning and caretaking.

Share ceiling

This is the 70% percentage maximum share purchase that you can make under the tenant shared ownership scheme.

Staircasing

The process through which you can increase your percentage share of a lease.

Succession of tenancy

This refers to passing on your tenancy to a family member living with you.

Unadopted estate land

This is a defined area of land within an estate boundary that has not been adopted under the Highways Act and is not therefore maintained at public expense.

Useable discount

This refers to the amount of discount that will be released with an additional share purchase.

Sales and Leasing team

020 8227 2906

righttoinvest@lbbd.gov.uk