Organisations selling under the Shared Equity Scheme have the option to retain a "Golden Share" but what exactly is a golden share?
When a purchaser is buying a property though a shared equity scheme he only has to pay a percentage of the value of the property in cash - the remaining percentage being paid by way of a Standard Security in favour of the scheme funder (for Registered Social Landlords this is likely to be The Scottish Ministers). A Standard Security is a loan secured against the equity in the property being purchased. This Standard Security could represent a maximum of 40% of the current market value of the property or 49% in certain exceptional cases. Over the course of ownership, the shared equity owner has the option to redeem this shared equity loan in terms of the current legislation. If there is no Golden Share, the shared equity owner can purchase the full equity of the property unencumbered by any loans other than their mortgage.
Should the surrounding community be experiencing a housing shortage or be expected to experience such a situation, the organisation providing the properties under the Shared Equity Scheme may decide to try and keep the properties within the scope of the Low-cost Initiative for First Time buyers (LIFT). One way of doing this is to impose a Golden Share on each property within the development, this may also be a condition of grant funding.
How Does This Work?
If a Golden Share condition is imposed on a property, this means that the shared equity owner is unable to fully redeem the Shared Equity Standard Security. Essentially, a portion of the equity (usually 20%) always remains secured to the scheme funder.
Should the shared equity owner wish to sell the property and move on, the Golden Share condition gives the scheme funder the option to buy the property from the shared equity owner should they wish to do so and should the local housing needs suggest that this would be beneficial. This then allows the scheme funder the chance to offer the property once more under the LIFT umbrella and make the property available to people of low incomes who wouldn't normally be able to purchase a property.
If you'd like further advice regarding shared equity, or the golden share get in touch.
