Shared Ownership is the term used to describe a house or flat where the owner holds a lease of a percentage of the property. The other percentage is owned by a landlord. The minimum percentage the owner can hold is 25%.
Listed below are the most common types of shared ownership lease. This list is not exhaustive as shared ownership has been around since the 1980s and there are a wide variety of leases out there.
Standard Shared Ownership Lease
While there is no universal shared ownership lease, there have been various guidelines provided and most shared ownership leases will have similar provisions and requirements.
The usual provisions for a standard shared ownership lease are:
- The landlord will collect rent on the share of the property you don’t own, usually at a discounted rate
- You will have a right to purchase additional shares
- You may have a right to buy the freehold in certain circumstances
- You won’t be allowed to rent the property or rooms in the property until you own the whole property
- Your lease will contain provisions to protect your mortgage lender
Retirement leases will be different in that one of the requirements of any lease owner will be that they are over a certain age, usually between 50 and 60 years old. These leases will often limit the total share that can be owned in order to allow the landlord to retain control over who can buy the lease. Retirement leases may also contain provisions for additional service charges to fund an employee on site who can offer assistance to residents should they require it.
Key Worker Leases
In large cities and affluent areas where house prices are above the affordability level for ‘key workers’, the Local Authority may decide to purchase property or create a requirement for a percentage of new property to be held under key worker shared ownership leases.
‘Key workers’ will be defined by the lease and will usually refer to firefighters, police or hospital staff who need to live close to work in case of emergency.
Shared Ownership Leases made under s106 of the Town and Country Planning Act
Sometimes when planning permission is granted for new homes the Local Authority will insist that some homes are set aside for a certain purpose. For example in an area of outstanding natural beauty where house prices are pushed up by tourism, the Local Authority may insist that certain percentage of new homes are always to remain shared ownership. The landlord will be responsible for ensuring that the owners are locals. The aim of these leases is to ensure that there is housing available for local people to buy who may otherwise be unable to afford 100% of a property.
When the property is sold, the lease will require that the landlord consents to the new owner. The lease terms will specify the criteria that need to be met for the landlord to consent to the new owner. If the property is designated as affordable property for a local, the prospective purchaser will usually have to have lived within a certain area for at least 5 years and will have to prove this. These leases will contain provisions preventing an owner from renting the property as a holiday let and will usually prevent an owner from buying 100% of the property. That way the landlord always retains control over the new owner.