The current Shared Ownership model is changing under Government reforms and a new model lease is coming into effect from April 2021.
What do we know so far?
The Government’s consultation which closed in November 2020 put forward the following proposals:-
The minimum initial share is to be reduced from 25% to 10%
Purchasers should be encouraged to buy the maximum share they can afford and providers should ensure they sell flexibly (i.e. not to the nearest 10%).
Staircasing can take place in tranches of 1% with reduced fees
Purchasers will have the option to buy additional shares in increments of 1% each year, the price of which will be based on an estimated valuation linked to the original purchase price then adjusted upwards/downwards in accordance with inflation. Landlords will not be permitted to charge valuation or administration fees. Gradual staircasing is to be available for a minimum of 15 years.
Landlords will be responsible for repairs and maintenance in the first 10 years
With the intention of bridging the gap between renting and homeownership, shared ownership leaseholders will not be responsible for essential repairs and maintenance in the first 10 years of ownership.
Where work is not covered by the new-build guarantee, Landlords will be responsible for the cost of essential repairs that relate to the external composition of the building (and external structural parts where the Landlord is also the building owner) as well as indoor structural repairs to the property such as floors, stairs, walls and ceilings.
Where work is required inside the property, responsibility remains with the shared ownership leaseholder, however, they will be entitled to reclaim costs up to a maximum of £500 per year from their Landlord towards essential repairs and maintenance. Shared ownership leaseholders will also be given the ability to carry over a year’s worth of unused repairs and maintenance allowance to the following year.
The “first 10 years” applies to new-build properties only and will be effective from the date it is built (i.e. Practical Completion). The repair and maintenance period will then last until the end of the first 10 years or the date the shared ownership leaseholder staircases to 100%, whichever is the earlier. If a property is resold in the first 10 years, the next shared owner will be entitled to benefit from the remaining repair and maintenance-free period.
Nominations period and pre-emption clause
The current 8-week timeframe, in which Landlords can exclusively market the property and find a new purchaser, will be reduced to 4 weeks, giving shared ownership leaseholders more control when it comes to selling their home.
Introduction of “Right to Shared Ownership”
This will enable social tenants to purchase a share in their rented home using the new model.
Lease Term
All shared ownership leases under the new model are to have a 999-year term as standard (or no shorter than the Headlease).
The proposal also includes transitional arrangements to cover situations where land has already been procured by developers and planning applications have already been submitted. Those sites that receive planning permission from April 2021, where affordable homes are secured through S.106 developer contributions, will fall under the 2021 – 2026 Affordable Homes Programme and will be subject to the new shared ownership model.
Many Registered Providers have given feedback on the above proposals since the consultation closed. As a result of that feedback, the final form of model lease published by Homes England may end up looking slightly different to the one originally envisaged.