The need for change:
Shared ownership and leasehold enfranchisement schemes have been used by the Government as a means of making home ownership available to those who would otherwise not be able to afford their own home.
When a tenant exercises its right to enfranchise or buys 100% share of its shared ownership lease they would own the property outright and the property is then lost to the affordable housing sector and taken to the open market.
Although the Government wants to encourage home ownership and increase of equity stake over time, in some areas this is not beneficial. For instance, in rural areas, it has proved difficult to replenish the affordable housing stock after a shared ownership owner has brought their home outright. Factors, such as the lack of land and opportunities to build new houses or the lack of available stock in the existing property market have contributed to the problem. In order to help these areas, the Government has introduced new statutory instruments.
These are namely, the Housing and Regeneration Act 2008, the Housing (Shared Ownership Leases) (Exclusion from the Leasehold Reform Act 1967) (England) Regulations 2009 and the Housing (Right to Enfranchise) (Designated Protected Areas) (England) Order 2009.
The Changes:
The 2008 Act contains provisions for designating these rural areas as “protected areas” and retaining shared ownership properties to ensure future buyers also have a chance to step on to the property ladder.
The Regulation prescribes conditions which shared ownership leases must contain. For shared ownership properties in “protected areas” the lease must contain a fundamental clause either:
i) restricting to 80% the share owners can buy; and/or
ii) allowing a leaseholder to acquire up to 100% share, but with a proviso that should they wish to sell they must sell the property back to the landlord, or a Housing Association or a registered social landlord nominated by the landlord.
The new provisions apply to England only. They came into force on 7 September 2009 and apply to all new shared ownership leases for houses granted after this date. Existing shared owners will not be affected.
The Results:
These new measures will not only help protect affordable rural homes but also boost the number of properties available. The provisions allow non-housing association organisations and companies to provide shared ownership properties, while benefiting from the same protections as housing associations with leasehold properties that owners wish to buy to 100% ownership.
This will be of significance to developers and owners of houses in rural areas and a boost to organisations such as Community Land Trusts (CLTs), which are private bodies that own or control land and assets for the benefit of the community. The provisions will also help ensure affordable homes for local people remains affordable.