Leases explained

Everything you need to know about a Shared Ownership lease

What is a leasehold flat or house?

  • Leasehold ownership of a flat is simply a long tenancy, the right to occupation and use of the flat for a long period – the ‘term’ of the lease. This will usually be for 99 or 125 years and the flat can be bought and sold during that term.
  • The leasehold ownership of a flat usually relates to everything within the four walls of the flat, including floorboards and plaster to walls and ceiling, but does not usually include the external or structural walls.
  • The structure and common parts of the building and the land it stands on are usually owned by the freeholder, who is also the landlord. The freeholder is responsible for the maintenance and repair of the building. The costs for doing so are recoverable through the service charges and billed to the leaseholders.
  • Leasehold ownership of a house usually relates to both the internal and external of the whole building, as well as the garden and driveway.
  • Typically a leaseholder of a house would be responsible for the repair and maintenance of the whole building.
  • The landlord can be a person or a company, including a local authority or a housing association.

What is a shared ownership lease?

In addition to the usual leasehold property, there is a form of leasehold property referred to as a shared ownership lease where the leaseholder can purchase a share of a property (house or flat) and pay rent on that part of the property retained by the landlord. The leaseholder will have a right to purchase additional shares in the property until they own up to 100% of the equity’ as some associations won’t allow you to own all of the home. At this point the property is no longer a shared ownership property.

Most shared ownership leasehold properties are granted by housing associations as part of their home ownership programme. Such leases are almost always in a format approved by the Homes and Communities Agency (HCA, formerly the Housing Corporation). The intention is to provide a first step into home ownership for those who are currently renting and cannot afford to purchase a home at the full market value.

What are the differences between a shared ownership lease and an ordinary long residential lease?

A shared ownership lease of a house does not qualify for the right to purchase the freehold, under the provisions of the Leasehold Reform Act 1967, if there is a provision in the lease for the freehold to be transferred on the purchase by the leaseholder of the remaining share in the property (referred to as the final staircasing). Other exemptions apply if the leasehold house was provided for the elderly or within a designated area referred to as a protected area.

A shared ownership leaseholder of a flat only qualifies for the statutory right to extend their lease as the holder of a “long lease” if they have “staircased” up to 100% ownership. However, the landlord may have their own policy of allowing lease extension where there is less than 100% ownership. Leaseholders would need to check with their landlord.

As rent is paid on that part of the equity not owned by the leaseholder, a landlord can take action to repossess the property for rent arrears in the county court in the same way that a landlord of an assured shorthold tenancy can under the provisions of the Housing Act 1988. If the property is repossessed in these circumstances no compensation is payable to the leaseholder to take into account the balance, between the leaseholder’s debt and the market value of the leaseholder’s share in the property.

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