You are viewing 1 of your 1 free articles
Shared owners to be given 990-year leases as government confirms raft of changes to tenure
The government has announced plans to introduce 990-year leases for new build shared ownership homes and confirmed a number of changes to the shared ownership model, including shifting the liability for repairs to housing associations.
As part of its response to its consultation on a new model for shared ownership, the government has announced that all homes built under the new model will be issued with a minimum 990-year lease term.
In addition, current shared owners will be given the statutory right to extend their lease by 990 years where the shared ownership landlord is also the freeholder.
Under the current model, shared owners can be issued with a minimum lease of 99 years. This means they often have to pay thousands for a lease extension within the first 20 years of living in the property as it is extremely difficult to sell a home with a lease that is shorter than 80 years.
The government said it is also exploring options on how shared owners can extend their lease by 990 years when their landlord does not have sufficient leasehold interest to issue a 990-year lease extension.
The government said it is also exploring how shared owners can be given the right to extend their lease by 990 years when their landlord is not the building’s freeholder.
READ MORE
As part of its consultation response, the government also confirmed a number of changes to the shared ownership model, including the new requirement that landlords will be responsible for repairs in the first 10 years of the lease.
It was confirmed that shared owners will be able to claim a maximum of £500 per year to cover certain repairs and that unspent expenditure can be rolled over for one year.
The government is also going ahead with plans to reduce the initial minimum stake shared owners can purchase in their property to 10%, compared with the current 25%.
In its response the government said many respondents “had concerns about the affordability of shared ownership for those who can only access at a lower share” and that Homes England is reviewing the current affordability guidance to ensure “purchasers will not be financially stretched”.
Housing associations have previously warned that repairs costs combined with shared owners purchasing lower shares in their homes could make the tenure “financially unviable”.
On repairs, the government said providers should “be careful to not make overestimated assumptions, particularly on new build repair costs in initial years where repairs should be a rare occurrence and would usually be covered by a warranty”.
“Careful consideration should also be made to assumptions on initial trance sold. Although the smaller initial stake could mean a lower capital receipt, many purchasers will continue to access shared ownership at a higher entry point, reducing grant required,” the government added.
The government is also forging ahead with plans to allow shared owners to staircase at increments of 1%, compared with the current minimum of 10%.
“The government acknowledges that an increased number of staircasing transactions will result in increased administration costs for providers. We have prohibited fees and we do not expect these costs to be passed on to the consumer. Government expects providers to consider efficient systems and automated processes to help manage these costs,” the consultation response said.
The new shared ownership model will apply to all homes that receive grant funding via the Affordable Homes Programme.
It will also apply to shared ownership homes funded via Section 106 contributions, however the government has said there will be a transition period to ensure developments already progressing through the planning process are not adversely affected.
Sign up for our development and finance newsletter
Already have an account? Click here to manage your newsletters
