© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Shared ownership has been around for over 20 years in various guises and offers people the security and stability that the private rented sector doesn’t provide. Unfortunately relatively little is generally known about this form of tenure and there remain some major misunderstandings about it.
Whether or not shared ownership works depends on each individual circumstance at any given time – much like private renting or owning outright. It’s simply a housing option that works for many, but not for some.
Housing Associations treat their shared owners as leaseholders and they have all the normal obligations of a long leaseholder who has purchased the whole lease.
The difference is a shared ownership purchaser will buy a share in the flat that ranges upwards from 25 per cent and they have a right to buy a larger stake in the property at any time (known as staircasing).
Shared owners in flats are liable to pay a mortgage, service charges and rent. Legally they are both a leaseholder and an assured tenant.
This joint status lies at the heart of some misunderstandings about shared ownership and is the cause of some controversy.
The main implications of the assured tenancy are that the grounds for possession of that tenure are valid, in addition to those contained within a lease. Most importantly the grounds for possession for rent arrears apply as set out in the well-known Midland v Heart case.
The critical point to note is that Housing Associations treat shared owners as leaseholders and do not exercise these powers to obtain possession except in extreme and exceptional circumstances.
A question frequently asked by shared owners is why they should be liable for the whole cost of the repair and service charge obligation when they do not own the whole equity of the lease.
The answer to this is in the structure of the rent payment. Shared ownership is designed to be an affordable option and a cheaper option for residents than outright purchase.
The standard rent element is designed so that the shared owner pays an annual rent based on 2.75 per cent of the value of the unsold equity at the point of sale.
If this amounts to £100k the annual rent is fixed (in the lease) at £2,750 with a clause that it will increase annually in line with inflation plus 1 per cent.
As with any purchase there is an element of risk but this is mitigated by the certainty of the rent outgoings and the knowledge that provided that they do not break the conditions of the lease they have security of tenure.
Steve Michaux is Chair of the National Leasehold Group, and Director of Leasehold Services for A2Dominion Group.
Save the Date for the National Leasehold Conference - 22nd October 2014. See www.nationalleasehold.co.uk