New model for Shared Ownership Leases introduced on 6 April 2010

A new model for shared ownership leases was introduced on 6 April 2010 by the Homes and Communities Agency (HCA).   It is to be used for homes which are built with funding from the HCA. The new style lease  is aimed at providing more clarity for people buying new build Home Buy properties and it is also aimed at extending greater protection to lenders so they will be encouraged to lend more readily on shared ownership lease properties.

Staircasing

Shared ownership is where you part own and part rent a property. It is aimed at those who have difficulty getting onto the property ladder since it is an affordable housing scheme. The greater your share in the property, the less rent you will have to pay. When you can afford to, you can buy larger shares in the property until you own it completely and this is known as ‘staircasing’.

The new shared ownership lease has been developed after consulting with the Council for Mortgage Lenders, Communities and Local Government and the National Housing Federation.

Lucy Thornycroft, investment leader of the National Housing Federation, was very positive about the launch of the lease saying. 'This considerably strengthens existing protection for lenders who provide mortgages. We hope that these changes, combined with the very low levels of repossession of shared ownership properties, will encourage lenders to commit greater mortgage funds for this key product that has helped ten of thousands of families buy an affordable home. '

Jackie Bennett, head of policy for the Council of Mortgage Lenders, added: 'Shared ownership lending is more complex than mainstream mortgage products and requires a good level of communication and awareness from all parties involved.   “

  • The main changes that have been introduced are as follows:
  • To update and improve the language contained in the clauses
  • To provide greater protection to mortgage lenders
  • To improve the wording of clauses relating to rent review,   making good damage to common parts, alienation and frustration caused by damage or destruction.
  • To ensure fundamental clauses are included in the lease, e.g. relating to pre-emption

Some parts of the lease can be amended to suit the particular transaction but there are some fundamental clauses that must be included in all shared ownership leases.

As the property market improves it is hoped that the option of shared ownership leases becomes more  popular and that lenders start to lend more readily on them.