Changes to Shared Ownership Leases

Following an informal consultation process towards the end of 2009, all new shared ownership leases granted on or after 6^th April 2010 funded by the Homes Community Agency will be different to the current crop of existing shared ownership leases.

The changes are designed to encourage mortgage lenders to provide funds in the purchase of these properties.

The changes all involve the Mortgagee Protection Clause claim.  The mortgagee will now be able to claim the following when staircasing and selling the property following repossession:

1.  All loans advanced by the mortgagee secured by way of a first charge over the property if the advances were approved by the Housing Association.

2.  18 months’ of interest (up from the initial 12 months’).

3.  Amounts advanced by the mortgagee in protecting its security by paying arrears of rent and service charges.

4.  Fees and costs of enforcing the mortgagee’s security capped at an amount equal to 3% of the market value of the leasehold interest at the time of enforcement, i.e. 3% of the 100% staircased interest.

The last one is the main difference between the old and new regime.  The mortgagee can now claim, inter alia, administration fees, early redemption charges and capitalised interest as long as it falls within the 3% threshold.  These could not be claimed under the old regime.

This is very significant for mortgagees as the shortfall they will now suffer will be much lower than under the old regime.  If the mortgagee acts swiftly, it is possible that it may not even suffer a shortfall at all. That would be novel.