30/05/2022
The “new” form of Shared Ownership Lease and the updated layout of the “old” form of Shared Ownership Lease has been available for a few months now and Registered Providers should, if they haven’t already, be starting to get to grips with when they need to use the “new” form of Lease and when they can continue to use the “old” form of Lease.
Homes England have provided template shared ownership leases for the following:
Affordable Homes Programme 2021-2026:
- Standard Shared Ownership House Lease
- Standard Shared Ownership Flat Lease
- Designated Protected Areas Shared Ownership House Lease – 80% restricted Staircasing
- Designated Protected Areas Shared Ownership Flat Lease – 80% restricted Staircasing
- Designated Protected Areas Shared Ownership House Lease – 100% Staircasing – mandatory buy back
- Designated Protected Areas Shared Ownership House Lease – 100% Staircasing – mandatory buy back
- Older Persons Shared Ownership House Lease
- Older Persons Shared Ownership Flat Lease
SOAHP – 2016 - 2021:
- Updated layout standard Shared Ownership House Lease
- Updated layout standard Shared Ownership Flat Lease
They have not provided a DPA or OPSO Lease for SOAHP 2016-2021 but recommend updating the standard shared ownership lease using the relevant provisions from the AHP 2021-2026 lease.
Please note that upon review of the pro-forma lease provided by Homes England in the Capital Funding Guide on-line we have discovered that there is an error in the fundamental clauses in clause 3.20.5 of the DPA Shared Ownership Lease – 100% Mandatory Buy-Back.
The clause in question reads:
“For the avoidance of doubt, on completion of the payment under clause 3.20.1, the Leaseholder's Acquired Percentage will become the Maximum Percentage.”
Clause 3.20.1 is the provision which, where the shared owner owns less than 80%, they have to pay the Landlord the premium to staircase the Property to 80% if the Leaseholder fails to ask for a nominee from the Landlord and simply proceed with a sale to an un-nominated party.
However the effect of clause 3.20.5 in the Lease (as drafted) is that the Leaseholder will, once they have acquired the further share of the equity to take it up to 80%, be deemed to be the owner of 100% of the equity (effectively gifting them 20% of the equity in the Property).
We have raised this point with Homes England who have confirmed that there has been a drafting error in this clause and the equivalent clause 3.19.5 in the DPA flat lease.
As both clauses 3.20.5 (in the House Lease) and 3.19.5 (in the Flat Lease) are fundamental clauses they cannot be removed or altered without Homes England consent.
Homes England have confirmed to Bevan Brittan that that they have no objection to us amending clause 3.20.5 in the House Lease and clause 3.19.5 in the House Lease to read:
“For the avoidance of doubt, on completion of the payment under clause 3.20.1, the Leaseholder's Acquired Percentage will become 80%”
The above will remedy the error and Homes England have confirmed that they are looking to get the standard leases on their website amended.
If you are using Bevan Brittan for shared ownership sales in a Designated Protected Area (where you are required to use the DPA Lease) we will be at liberty to amend the relevant clause.
If you are preparing and issuing the Leases in-house or using another firm of lawyers you should ensure that you (or the other lawyers (as appropriate)) obtain a specific consent from Homes England to make this change to those fundamental clauses before utilising them in any Leases issued to prospective Leaseholders or their lawyers.
If you would like to discuss this please contact either Richard Stirk or Julie Cowan-Clark.
