UPDATE: In May 2022 NTSELAT issued new guidance for agents. Unfortunately the guidance doesn’t achieve the stated aim of ensuring that information on tenure is ‘clear and unambiguous’. By conflating shared ownership with conventional leasehold, the guidance perpetuates confusion regarding the nature of the tenure.
Section 7.3 Tenure
The tenure of the property must be contained on the property listing, e.g. “freehold”,
“leasehold”. This refers to the way in which the property will be legally owned and it affects the legal rights and associated costs with the property. In respect of tenure, prospective buyers may not be familiar with the differences between the types of ownership and you should ensure that information is clear and unambiguous.
The different types of tenure are:-
Freehold, known as Heritable title in Scotland
Leasehold, including shared ownership
Shared ownership property listings: what constitutes ‘material information’?
Date: 14 May 2021
To: James Munro, Head of the National Trading Standards Estate and Letting Agency Team
Dear Mr Munro,
Re: Shared ownership property listings: what constitutes material information?
We are pleased that NTSELAT are developing guidance to clarify what should be considered as material information on property listings. As you point out:
“Buying or renting a home is one of the biggest purchasing decisions that a consumer will make in their lifetime” (National Trading Standards News, 2021)
The NTSELAT publication Improving the provision of material information in property sales and lettings (2021) is absolutely correct is stating that: “Access to accurate and essential information to make the decision to buy or rent is vital. It is this information which supports consumers, helping them make informed choices about whether to make further enquiries about the property”.
The Case for Change
“Homes matter more than ever: Of all the decisions we take in our lives, deciding where we live is undeniably one of the most important.” (Improving the provision of material information for property sales and lettings, 2021)
It was interesting to learn from the NTSELAT consultation The Case for Change that:
- 90% of respondents who use property portals would prefer to find detailed or key information about a property on a portal;
- 87% of respondents agree that property portals should include all key information about a home in their property listing;
- More than half of respondents (54%) said that they would be less likely to buy or rent a property where information was missing on the property listing; and
- 41% of respondents assume that missing information means something must be wrong with the property.
The Cost of Inadequate Information
You quote research by Propertymark which found that property transactions that fall through lose consumers £1,571 on average. However, shared owners whose property transactions do not fall through may encounter liabilities for much larger sums over the long-term: liabilities which are unexpected precisely due to the absence of relevant, essential information at the point of sale. For example, some shared owners report lack of information about the cost implications of short leases, or the risk of unlimited liability for 100% of all repair and maintenance costs (including fire safety remediation costs) regardless of % share purchased.
Why Exclude Long-term Owners from Consultations?
We were disappointed to learn that your consultation with home buyers was restricted to people who moved in the last three years or are looking to move in the next three years. Research on home ownership frequently excludes long-term owners and campaigners. It’s an omission which is hard to understand; long-term owners are often the people with the most in-depth understanding of what constitutes ‘relevant, essential information’, and campaigners are people with in-depth knowledge of problems arising from the lack thereof.
Shared ownership is an extremely complex tenure, and it may take decades for shared owners to discover exactly what information would have been material at point of sale. Whilst 41% of your respondents assume missing information means something must be wrong with the property, it may be extremely difficult for first-time buyers and/or recent buyers to identify exactly where information is incomplete, or omitted.
Property Listings: Relevant, Essential Information
With this in mind, we hope you will be able to take our input into account in developing best practice guidelines for estate and letting agents.
- It is essential to specify that shared ownership is an assured tenancy until 100% staircasing is complete.
- The legal tenure following staircasing to 100% should also be specified: leasehold for flats and leasehold or freehold, as applicable, for houses.
- Given the statistical unlikelihood of staircasing to 100% (less than 2-3%), it is essential not to imply otherwise in property listings or related advertising.
- NB. Shared ownership is, from a legal perspective, neither shared nor ownership. Some legal experts consider it may even be: “incorrect, and therefore misleading and potentially an offence in contravention of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) for housing associations, landlords, developers or lenders to advertise or refer to shared ownership schemes as “part buy, part rent”, or indeed … any other terminology or slogan which suggests that the customer purchases anything other than an assured tenancy leasehold interest at any time prior to the 100% staircasing stage’.
It is essential to clearly communicate the following leasehold details:
- Lease term remaining.
- Number of years until the 80-year threshold.
- The freeholder’s policy on lease extension premiums (ie. whether charged on total value or % equity shared held; and whether marriage value is chargeable prior to Government reforms).
- Contractual ground rent increases, where ground rent is not on a peppercorn basis.
- Contractual rent increases on shares as yet un-purchased (eg. RPI + specified percentage).
- That shared owners have unlimited liability for 100% of repair, maintenance and service charges, regardless of their % equity share.
- Management charges, particularly where multiple charges are due (for example, to both a housing association and their managing agent).
- Whether responsibility for specific utilities and insurances resides with the occupier (assured tenant/leaseholder), or is arranged and charged by a third party (managing agent, etc).
Building Safety Information
- It is essential to explain that cladding and fire safety information cannot currently be relied upon.
Information about a Specific Property
- Where the property is part of a mixed tenure development, explanations should be provided regarding the respective responsibilities of the key parties (head lessee, freeholder, and management agent).
- An up-to-date list of permission fees, admin fees and other fees chargeable – including fees for selling the property.
- Reserve fund balance and estimated contributions.
- Any planned or anticipated major works, including fire safety remediation.
We hope this is useful and would be grateful if you could confirm receipt of this letter.
Sue Phillips, Founder, Shared Ownership Resources
Jo Darbyshire, Katie Kendrick, and Catherine Williams, Co-founders, National Leasehold Campaign (NLC)
Michael Edwards, Honorary Professor (Property Development and Planning) Bartlett School of Planning, UCL
Lucie Gutfreund, Founder, Homeowners of L&Q
Dermot Mckibbin, Housing Campaigner
Suzanne Muna, Communications Officer, Social Housing Action Campaign (SHAC)
Sebastian O’Kelly and Martin Boyd, Directors, Leasehold Knowledge Partnership (LKP)
Jennifer Reid, on behalf of Birmingham Leaseholder Action Group (BrumLAG)
Rituparna Saha & William Martin, Co-founders, UK Cladding Action Group (UK CAG)
Ed Spencer, on behalf of One Housing Residents Action Group (OHG Action)
Liam Spender, Trustee, Leasehold Knowledge Partnership (LKP)
Shared Ownership Resources was launched in March 2021. One of the aims of the platform is to provide greater clarity on complex issues to assist first-time buyers and shared owners in making informed decisions. I will therefore be publishing this open letter on the website, and will publish your response as and when it is received. I look forward to hearing from you.
NTSELAT Response (17 May 2021)
Thank you for your letter regarding our new initiative to improve the provision of material information on property listings. It’s an important topic and I’m sure you agree that change is long overdue.
I’m delighted that the programme is generating significant traction and seems to be galvanising the case for change across the industry and related sectors, sparking a range of related initiatives to help improve the home buying and renting process.
I would also like to thank you for sending through your views on relevant and essential information that should be included in property listings, which will be considered as we develop recommendations for the future.
You expressed disappointment at a lack of consultation, so I would like to take this opportunity to provide more information about the project. For background, the initiative is at a very early stage. We are currently undertaking initial research with estate and letting agency businesses to identify some of the opportunities and barriers to providing material information and the extent to which that information is already being provided.
Our engagement with agents follows research we carried out with people who have recently moved to a property or plan to do so in the future. At this formative stage of the project where we are learning about opportunities and barriers facing the industry, this was designed to highlight some of the issues facing consumers and the need for change.
We will review the responses from agents to our survey and will use these insights to help us develop recommendations. We look forward to publishing these recommendations once they’re drafted and would be grateful for views from a wide range of stakeholders on these. This will provide an opportunity to engage meaningfully on proposals that will bring about genuine change to how material information is provided on property listings. We will confirm timings for this part of the process in due course.
Thanks again for your letter and for your support of the wider aims of the programme.
Head of the National Trading Standards Estate and Letting Agency Team
National Trading Standards press office
Tel: 020 7101 5013
Would a footpath that needed to be rerouted be considered material information? My daughter was due to complete on her shared ownership property in May 2021 but the housing association disclosed in middle of March 2021 about this footpath issue. The searches did not show this footpath issue.
Thanks for your question. It sounds as if it would have been helpful for the housing association to disclose this information earlier in the process. Your daughter’s solicitor should be able to comment on how and when it should have been communicated.
Can we please inform the buyer what exactly is being sold. I was misled in to buying a leasehold as if it were the same as freehold. I am now clear that this is not the case.
The industry is unclear quite how to describe but comparing it to leasing a car would be more true than comparison to freehold.
Thanks for your comment. Greater transparency on tenure (freehold, leasehold, assured tenancy) in property listings is essential. The National Leasehold Campaign (NLC) have been raising this issue for a long time now. Enforcement of better practice is overdue.
I agree that it is absolutely vital to advertise shared ownership properties in a manner that is both completely transparent and easy to understand.
The term ‘Shared Ownership’, is taken literally by most people and most people assume there’s a simple way to staircase in stages to buy a home using a scheme recommended by the Government. It’s only at a later stage that most clients, currently, become aware of extra fees, expenses and legal liabilities.
Before a deposit of any kind is placed, these details need to be explained clearly to potential clients, most of whom will be young, first time home buyers. Indeed, it might well be more fair to advertise these properties as ‘Shared Ownership’/Rental’, making it clear in the description how the tenure works towards eventual full Freehold or Commonhold (as opposed to Leasehold) tenure. Anything less is not truly ‘Ownership’.
Thanks for your comment. The term ‘shared ownership’ is extremely misleading – given it is neither shared nor ownership. This terminology is a matter for the Government and for housing associations to address. Albeit property portals should also be responsible for ensuring greater clarity about the legal tenure of advertised properties, On staircasing, statistics indicate that fewer than 2-3% households ever staircase to 100% (and most of those as a simultaneous sales and staircasing transaction, in order to sell). So it’s even more important that first-time buyers understand the assured tenancy (rental) nature of the tenure until (if) staircasing to 100% is complete.
Leasehold ownership is a toxic way to own your home.
Made worse when you are not made fully aware of the financial horror you are agreeing to.
Thanks for your comment. Transparency is essential in order that first-time buyers can make informed decisions about what may well be the most expensive purchase they ever make.