Shared ownership Lease (A 3 point guide)
Shared ownership Leasehold agreements can be complex for the average person to understand and this is why legal advice when dealing with shared ownership schemes is always a good idea.
Your shared ownership lease is essentially an agreement between you and the landlord on the terms of your stay in the property. It will essentially lay out your rights, what you can do and what you cannot do.
The leasehold agreement will contain what is called “leaseholder covenants” which will detail out the things you must d0 (e.g paying ground rent and service charges) and the things you must do eg subletting the property and not bringing pets in for example.
Below are some specific areas of your shared older lease which you must pay attention to:
- Your rent review clause
- Your service charge clause
- Your mortgage protection clause
- Your rights to purchasing additional clause
- Your stamp duty land tax obligation
- Your restrictions on subletting.
Below are some terms you may find in your shared holder lease agreement and their meaning.
- Lease: Alease is essentially the agreement between two parties where one is the tenant and the other the landlord. The agreement allows the tenant to inhabit the property for a specific period for some periodic payment. It may also require other costs known as ground rent. (although not all shared ownership leases will require payment of a ground rent until you own 100% of the property)
- Gross Rent: The gross rent is the full market rent for the property for the year. You will pay rent based on your ownership so if gross rent is £10k and you on 50% then you will pay £5k in rent over the year.
- Staircasing: staircasing is the process of buying more shares in your shared ownership property. You can staircase to 100% of the shares in the property but you must be very aware of the terms set by your landlord for you to staircase.
- Covenant: A covenant is a promise to take responsibility. The lease will set out the leaseholder’s covenants (what you are responsible for) and the landlord’s covenants (what the landlord is responsible for).
- Easement: Easement simply means your rights in the property. It will refer to particular scenarios or things.
- Alienation: The lease will refer to restrictions on assignment and sub-letting and these are known as the alienation restrictions.
- Assignment: This is the term used when you sell your flat and with it the lease. The new leaseholder is known as the assignee.
- Mortgagee: This is the mortgage lender who has given you the funds to buy your share in the shared ownership property.
- Forfeiture: The terms of your lease are contractually binding and if you do not comply with its terms you are in breach of the lease. If you are the landlord can go to court asking for a judge to order that the leaseholder forfeits (or loses) their lease.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.