‘I own 25pc of my home, but must pay 100pc of cladding bill’

Leaseholders who bought their home using the Government’s shared ownership scheme face paying 100pc of the costs of cladding remediation even though they own only a fraction of their properties.

Campaigners have warned that these homeowners may have to pay out for repairs whose costs exceed the total equity they have in the property.

Under the shared ownership scheme, buyers can purchase a portion of a home and pay rent on the rest to a housing association, which manages the property. The idea is that they can then increase their share in increments, a process known as staircasing.

But while they only own a portion of the property, and are therefore entitled to only a share of any profit on the sale of the property, they are liable for 100pc of its maintenance.

Sue Phillips, of Shared Ownership Resources, a research group, said: “The cladding scandal throws this issue into stark relief. It is a disaster for all leaseholders, but shared owners are disproportionately affected.”

Ms Phillips added: “Shared owners with shares as low as 25pc are now facing huge liabilities for the costs of waking watch and fire safety remediation works. In some cases, it’s possible these costs will exceed the value of their equity stake. It’s completely unfair.”

Meanwhile, the Government plans to reduce the minimum entry level share from 25pc to 10pc.

Tom Bedford, 41, owns a 60pc share of a flat in Ballymore’s High Point Village development in west London. He has been trying to sell his home since December 2018 so that he can move in with his partner. But his buyer’s surveyor valued his home at zero because it required an external wall safety ( EWS1) form. When this was completed in August, Mr Bedford found the building received a B2 fail, meaning it required remedial works.

These will take two years to complete. Ballymore has told residents that it has applied for the Government’s building safety fund, but any excess, such as changes to balconies, will be charged to the leaseholders via the service charge, for which Mr Bedford already pays £245 per month.

Mr Bedford’s lease means that he will have to pay all of the extra costs associated with his property, despite not owning 100pc of it.

Mr Bedford works for an airline and has been on furlough since March 2020. “We need the Government to step in to help us, so that developers and insurers foot these bills and we don’t face bankruptcy,” said Mr Bedford.

A spokesman for Ballymore said: “High Point Village was signed off as compliant with all building regulations by the local authority at the time of construction.”

He added: “Shared ownership leaseholders will have agreed their lease terms and service charge costs with their housing association.”

Mark Chick, a leasehold reform specialist, said: “Housing associations tend to say they are pursuing the matter via the compensation scheme, or say they are continuing to lobby the Government, but they are not prepared to pick up the costs themselves.”

Mr Chick added: “It is a sign of the wealth divide. It doesn’t seem fair that people on lower incomes have to fund these costs.”

Shared ownership contracts mean many homeowners have also lost hundreds of pounds in extra fees to their housing associations to market their properties – which they have now discovered are unsellable.

Ricky Bath, 44, lives with his partner and their two- year- old son in a two- bedroom shared ownership flat in Lewisham. They have been trying to sell their 30pc share in the property, which is managed by Peabody, since September 2019.

Shared ownership leaseholders must first try to sell their homes via their housing associations for a period of typically three months. This is to give lower-income earners a better chance of buying affordable housing. The downside for the homeowner is they must pay administration, marketing and surveyor fees to the housing association to put it on the market.

For Mr Bath, these costs totalled £1,000 – but he later realised he was paying to market an unsellable flat. He found a buyer and had agreed a completion date for January 2020, but then the sale fell through because the building needs an EWS1 form.

This is a common complaint against housing associations. Mr Bath said: “You go to a housing association because they’re meant to look after you, but it seems they are just profiting from us,” said Mr Bath.

A Peabody spokesman said that the guidance on EWS1 requirements had changed between the period when the property was first marketed and when the sale was agreed. Peabody is covering interim fire safety costs including a waking watch while it discusses plans to bring the building up to standard with the developer.

He added: “We’ll do everything we can to keep normal service charges affordable, and support leaseholders in wanting the EWS1 system reformed.”