Shared ownership schemes are sometimes delivered via complex ownership arrangements. In this 3-part feature Consultant Solicitor (and Shared Ownership Resources sponsor), Zahrah Aullybocus, explains some potential pitfalls to be aware of when the housing association is the landlord but isn’t the freeholder. She concludes with a checklist of questions to ask the sales team and solicitor.
In Part 2, we’ll cover the following potential pitfalls:
- Fewer benefits and more risk when the housing association is not the freeholder
- Liability for ALL the housing association’s costs, including payments they make to their own landlord
- Weak accountability for repairs and maintenance, and duplicate management fees
- Ground rent might be payable in the housing association’s lease, and charged on to the shared owner
- The housing association’s own interest in the lease might be too short to offer meaningful lease extension to shared owners
In Part 3 we’ll provide a checklist of questions to ask the sales team and your solicitor if you’re considering purchasing a shared ownership home.
But we start by discussing landlords and ownership structures.
Is the housing association always the landlord?
The terms ‘freeholder’ and ‘landlord’ are sometimes used interchangeably. A freeholder owns the freehold of a building. This means they own both the building and the land the building is on. Your housing association is your landlord. And sometimes your housing association is the freeholder. But not always!
For example, if a developer sells an entire block of flats to a housing association, they may transfer the freehold. But if only a few flats in a block are designated as shared ownership, the developer may sell the housing association a lease specifically for those flats, making the housing association the ‘Head Landlord’ when the flats are sold on to shared owners.
Complications can arise if your housing association is your landlord but not the freeholder. In this case, shared owners may have fewer benefits than where the housing association is the freeholder, and face more risks and restrictions. We discuss this in more detail later on. But first we explain what we mean by complex ownership arrangements, and give some examples.
Complex ownership arrangements
If a developer sells a head lease to a housing association, there are three parties with an interest in the lease: the freeholder (developer), the head leaseholder (housing association) and the leaseholder* (the shared owner).
EXAMPLE ONE: THE HOUSING ASSOCIATION ISN’T THE FREEHOLDER BUT HAS A HEAD LEASE
But sometimes it’s even more complicated.
EXAMPLE TWO: THE HOUSING ASSOCIATION DOES NOT HAVE A HEAD LEASE
Shared owner ‘Annie’ discovered that there were four different parties with an interest in her lease: a freeholder, a head lessee, a leaseholder (her housing association) and her (also a leaseholder*).
Does it matter if the housing association isn’t the freeholder?
In Part 2 we go on to discuss some potential pitfalls if the housing association is the landlord, but isn’t the freeholder.
*Shared ownership leasehold takes the form of an assured tenancy / assured shorthold tenancy until staircasing to 100%.
Featured image: Freepik
Zahrah Aullybocus is a Consultant Solicitor with Nexa, and a Shared Ownership Resources sponsor.
This article is the personal opinion of the author and without any liability to Nexa. Any concerns should be checked with the solicitor that is acting for you.
Shared Ownership Resources continues to exist thanks to the generosity of supporters.