New model leases for shared ownership properties

A new model shared ownership lease aimed at creating more certainty for lenders and more clarity for purchasers of New Build HomeBuy property has been created by the Homes and Communities Agency (HCA).

The new leases must be used for all shared ownership leases granted on or after 6 April 2010 for homes built with funding from the HCA (unless an earlier contract requires the use of a different form of lease). The new leases replace the model leases published in September 2009, which should be used until 5 April 2010.

The HCA believes the lease will not only simplify and speed up the home buying process but, at a time of financial caution, will assure existing lenders of shared ownership mortgages. As economic conditions improve, the revised lease should help to encourage new lenders into the shared ownership market.

The lease has been developed in conjunction with the Departrment for Communities and Local Government, the Council for Mortgage Lenders, the National Housing Federation and a number of leading mortgage lenders and providers of affordable housing. The new leases have been amended to:

• Extend the level of protection given to mortgagees of shared ownership properties;
• Update the layout and language of the leases;
• Clarify the provisions relating to alienation, rent review, making good damage to common parts and frustration in the event of damage or destruction.

The lease can be adapted by housing providers and lenders to suit individual situations, but there are fundamental clauses that must be included in any new lease. The fundamental clauses cover alienation, mortgagee protection, ’staircasing’ provisions, protected area ’staircasing’ provisions (where appropriate), rent review, service charge provisions (where appropriate) and right of first refusal. The landlord must also give the leaseholder a document entitled “Key Information for Shared Owners”, which sets out the main terms of the lease.