The new shared ownership model lease and the implications for the housing sector02/06/21
In case you missed it…
At our recent webinar on the new shared ownership model lease on 20 May, we took an in-depth look at the new provisions of the shared ownership model lease and the impact on the housing sector. The new lease has now been published by Homes England and in addition to the existing fundamental clauses, includes further new provisions that make the shared ownership product more affordable by reducing the initial minimum share. We set out the new additions and the impact they will have on registered providers (RPs) below.
The landlord’s period to nominate a purchaser or accept a surrender of the lease in the alienation provisions has been reduced from eight weeks to four weeks. This will help shared owners to sell on the open market quicker than before.
A new 1% staircasing schedule has been introduced. This will allow more shared owners to increase their share of the property. The costs of staircasing are now the responsibility of each party with the cost of the valuation being met by the party that requested it.
A new schedule in relation to the initial repair period has been introduced. The repair period is for ten years from the date of the lease or until final staircasing whichever is the earliest. Repairs to wear and tear are excluded and only external and structural parts are included, these are subject to the leaseholder notifying the landlord. Any item which is the responsibility of the leaseholder is excluded from the list of covered items. The initial repair period will cover costs up to £500 per annum which can be rolled over for one year.
Any draft transfer in the new lease (houses only) which creates an estate rent charge and is to be used on final staircasing must exclude section 121 of the Law and Property Act 1925. This will come as a relief to most buyer’s solicitors who had to report these provisions specifically to lenders. It will also enshrine what has slowly become the norm in everyday conveyancing and deals with one of the issues with estate rent charges.
There is a new term of 990 years. This is very a welcomed change providing a much-needed, longer lease term for leaseholders.
The minimum share that can be purchased through a shared ownership lease has been reduced to 10%. This is a significant reduction and means that buyers will need a much lower deposit and mortgage to fund the balance. This will make buying a shared ownership property more affordable. However it may affect the cash flow of many RPs who rely on the sales of new homes for their revenue stream.
A two tier system will continue to be operational for some time to come, with the two forms of shared ownership leases still in existence. RPs are obliged to use the new lease for homes funded through the Affordable Homes Programme 2021 – 2026 or new s106 units (which do not currently have planning). RPs are able to use the new lease for any homes funded via the previous funding programme if they choose to do so.
What to take away
The additions to the new shared ownership lease have provided welcome step to bolstering the government’s plan of making home ownership more affordable for the many and increase home ownership nationwide however it remains to be seen as to the cost to the RP.
How Capsticks can help
Our Housing and Regeneration lawyers are experts in shared ownership, we provide advice on everything from setting up shared ownership schemes and new build plot sales to shared equity and financing. If you have any questions in relation to the current or the new proposed model lease, please contact either Nalton Stembari or James Howard to find out more about how we can help.
If you would like to receive a copy of the webinar, please do get in touch with our events team by emailing [email protected].