Shared ownership is also an increasingly popular form of ownership by buyers who are not in a position to own a home outright but want to get a foot on the housing ladder.
Practitioners needs to understand the changes that have been introduced by government under its Affordable Homes Programme (AHP) from 2021 – 2026, and the implications for both shared owners and prospective buyers. The changes reflect the government’s recognition that the shared ownership scheme is not as desirable as it could be.
However, it is important to note that the changes will not have retrospective effect, so practitioners will need to understand both schemes in order to be able to effectively advise clients. The new model lease will be required for shared homes delivered through the 2021-2016 programme.
The changes are applicable to all new grant funded Shared Ownership homes delivered through the 2021-2026 AHP, as well as shared ownership homes delivered through section 106. The key changes to the new model lease are:
Reduction in minimum stake - Buyers no longer have to buy at least 25% of the property (up to 75%) based on its full market value – they may now purchase a 10% stake, which is a significant reduction.
But this will mean many buyers face the prospect of higher rents in respect of the part they lease (rent being set by the provider). Note that the government says buyers should be encouraged to buy the most they can afford.
Staircasing - There is now the option of staircasing in 1% increments across the first 15 years of ownership. The previous minimum option was 10%. Shared owners will be able to staircase up to 100% ownership, subject to specific restrictions.
Lease term - The lease length has been lengthened to 990 years. Previously, it was a minimum of 125 years (and 99 before that).
The problem this may cause is to make older and shorter shared ownership leases less attractive to future buyers.
Repairing obligations - There is a new 10-year period during which housing associations and landlords must contribute towards the costs of essential maintenance and repairs. Under the old rules, it was the shared owner’s responsibility to foot the bill without contribution from the HA/landlord.
Essential repairs means those externally and, internally, structural repairs to walls, floors, stairs and ceiling except where they are covered by building warranty or other guarantee (in which case, the claim is to be made by the policy holder).
But there’s a catch as far as general repairs and maintenance is concerned: the HA/landlord only has to pay up to £500 per year – over and above this will be the shared owner’s responsibility.
Alienation and pre-emption - The HA/landlord’s exclusive right to market the property is reduced to four weeks instead of the previous eight weeks. This means the owners can try to sell the property on the open market in half the time as under the earlier scheme.
Providers must give prospective buyers, early on the sale process, an easy to read, key information document that sets out the key responsibilities, processes and costs involved in being a shared owner.
Underletting – Under the old model lease, underletting is not allowed until the shared owner owns the property outright. The changes under the new scheme soften this prohibition, stating that consent to underlet can be reasonably withheld if it does not comply with Homes England guidance or grant funding conditions.
Government has issued guidance on share ownership in England, but note that this does not apply to shared ownership within London. Instead, the Greater London Authority (GLA) has produced its own guidance to reflect the fact that allocations in London have been under the GLA’s responsibility since April 2012.