Homebuyers need clarity on what shared ownership is – and how it works – in order to make informed purchase decisions. A Law Commission review of current shared ownership legislation would be beneficial.
Date: 11 June 2023
To: Joanna Otterburn and Stephanie Hack, joint Chief Executives, The Law Commission
Cc: Department for Levelling Up, Housing and Communities; Levelling Up, Housing and Communities Committee
Dear Joanna Otterburn and Stephanie Hack,
I am writing to inform you about a new report published by Shared Ownership Resources on 31 May 2023: Shared Ownership: The Consumer Perspective.
I would like to draw your attention to the following two recommendations in particular:
- As a matter of urgency, the Government and the Law Commission should resolve the problem that lease extension – which takes effect as a surrender and re-grant of a lease – is not covered or exempted in the new Building Safety Act 2022 meaning that any shared owner who potentially qualifies for leasehold protections will now lose those protections on extension of a short lease. Action should be taken to ensure no leaseholder loses protections as a result of lease extension undertaken after 14 February 2022.
- As a matter of urgency, the Government and the Law Commission should consider options to change the legal status of shared ownership from an assured tenancy to ‘conventional’ leasehold in order to afford shared owners the same rights and protections as any other leaseholder.
Building Safety Act 2022
The flaw in the Building Safety Act 2022 which – currently – removes essential protections from eligible leaseholders on undertaking lease extension is a blow for affected shared owners, some of whom have already extended their lease since 14 February 2022. As one shared owner explains in Shared Ownership: The Consumer Perspective:
“I’m a 30% shared owner who extended my lease last year because it was on 81 years. I did this because I knew it would double the following year due to marriage value, so would become unaffordable. I never envisaged this could lead to no longer qualifying for leaseholder protections.”
Shared owners impacted by the building safety crisis are in a particularly pernicious situation given they are most likely of all leaseholders to have been sold short 99 or 125-year leases.
Legal status of shared ownership
The Law Commission has previously flagged up concerns that: ‘Members of the public do not always understand exactly how shared ownership schemes operate, or the precise nature of the legal arrangement which the purchaser of a shared ownership property is entering into.’
Understanding is clearly essential for informed purchase decisions, particularly given that assured tenancies (and assured shorthold tenancies) have generally been assumed to provide fewer rights and more burdens than ‘conventional’ leasehold.
What shared ownership is and how it works
The Court of Appeal’s judgement in Avon Ground Rents v Canary Gateway (Block A) RTM is welcome in confirming shared owners’ statutory right to manage. But the implications could make it harder than ever for members of the public to understand exactly what shared ownership is, and how it works.
A home is likely to be the single most expensive purchase most people will ever make. For this reason alone, there is surely a strong argument to review and reform the law as it stands in order to provide shared owners with clarity – not to mention the same rights and protections as any other leaseholder.
Shared Ownership Resources was launched in March 2021. One of the aims of the platform is to provide greater transparency on complex issues to assist first-time buyers and shared owners in making informed decisions. I will therefore publish this ‘open letter’ on the website, and will likewise publish your response as and when it is received.
I look forward to your response.
Sue Phillips, Founder, Shared Ownership Resources
Shared Ownership Resources was established in 2021 to champion the interests of shared owners and households considering shared ownership. The project publishes case studies, collaborates with housing, legal and financial experts to offer specialist information and advice; and campaigns for improved transparency and better outcomes and against mis-selling and other poor practices in the sector.
Response received 19 June 2023
Thank you for your email and attaching a copy of the “Shared Ownership: the Consumer Perspective” document. Your email has been forwarded to our team (Property, Family and Trusts).
As you are aware, the Law Commission published a number of reports in 2020 in which it set out recommendations for reform of the enfranchisement, right to manage and commonhold regimes, and which included discussion of, and various recommendations relating to, shared ownership in the context of those regimes. The Law Commission’s reports and various summaries are available on our website here, alongside other material and information about the project.
Following publication, it is now for Government to consider whether to accept and implement our recommendations. Ultimately, for our recommendations to become law an Act of Parliament would be required.
We do not currently have any law reform work planned in the area of shared ownership and so are unable to take any action based on the recommendations made to us. The department with responsibility for shared ownership is the Department for Levelling Up, Housing and Communities
., and I can see that you copied your email to that Department.
I am sorry not to be more help.
With best wishes,
Poppy Kemp | Law Commission
Research Assistant | Property, Family and Trusts Team