Can a shared ownership tenant struggling to meet costs, simply hand their keys back? In this two-part Q&A with law firm, Womble Bond Dickinson (UK) LLP, we explore whether shared ownership tenants who are struggling to meet costs can simply hand their keys back.
In Part One we explain how shared ownership works, and the legal and practical implications of handing back keys to a housing association or a mortgage lender. In Part Two we will go on to explore the options that are available to people who are struggling to meet their housing costs.
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Here are the key takeaways:
- Option of last resort: Handing the keys back should be considered as a last resort due to the risk of ongoing debt, loss of control, and limited protection for shared owners.
- Long-term financial circumstances: There are long-term financial consequences to handing the keys back, whether to the housing association or the mortgage lender.
- Seek independent debt or housing advice: If you are struggling with your housing costs, we strongly recommend seeking independent debt or housing advice tailored to specific circumstances. We hope this two-part Q&A will help you have informed conversations with your housing association, mortgage lender, and professional advisors.
Read on…
It’s first necessary to understand a bit about how shared ownership works…
What is shared ownership?
Shared ownership is an affordable home-ownership scheme intended to help aspiring buyers to purchase a share of a new-build or resale property whilst paying subsidised rent on the remainder of the equity that is retained by the landlord. (Please note, there are different rules for shared ownership in Northern Ireland, Wales and Scotland which we do not cover here.)
The shared owner will pay a premium for the granting of a shared ownership lease of the property, and its share is set out at a fixed amount of equity in the property (normally, 10 to 75% of the home’s full market value). This will usually be purchased with the aid of a mortgage.
In addition to the mortgage payments made to its lender, the shared owner will pay rent to the landlord. This rent on a new build home is a maximum of 3% annually of the landlord’s retained share in the property value. Shared ownership rents are also subject to annual increases which for leases granted before 12 October 2023 is by a maximum of the RPI (Retail Price Index) plus an additional 0.5%. Since the 12th of October 2023, shared ownership leases have been subject to CPI (Consumer Price Index) plus an additional 1%.
Monthly housing payments
As such, shared owners will make several different monthly payments, including (but not limited to):
(a) Rent
(b) Mortgage
(c) Service charges
As is the case with property bought on the open market or tenants who pay rental payment on a property, shared owners are equally at risk of eviction if they fall behind on these payments.
Essentially, if a shared owner were to fall behind with mortgage payments, rent or even its service charges, the landlord or mortgage lender could take steps to initiate proceedings to recover possession of the property.
Handing back the keys to a housing association
To start off with, let’s assume a shared owner can no longer afford these monthly payments and was thinking about simply handing back their keys to the housing association……
We discuss some of the implications of this, below.
Shared ownership tenants are long leaseholders. They are liable to pay rent on the landlord’s percentage share of the retained equity for the entire term of their lease (unless of course they staircase out to 100% of such equity). Such lease terms typically range from 99 years to 990 years. As such, tenants are liable for contractual rent payments due under the lease, therefore, even if they hand keys back, they are still obliged to meet the rental payments under the terms of their lease.
This long term liability may prove difficult for tenants who fall into financial difficulties, especially as inflation-linked payments increase.
Why is falling behind with rent particularly problematic for shared owners?
Shared owners and the Housing Act 1998
If a homeowner who has purchased their property outright on the open market and owns 100% of it (even with assistance of a mortgage) falls into financial difficulties, the Court has the power to decide whether to delay or pause possession proceedings. The Court can use this same discretion for shared-ownership leaseholders. This is because, although shared-ownership leases are technically long leases, they are still treated as assured tenancies under the Housing Act 1988 (HA 1988). Where a landlord can rely on one of the grounds set out in Schedule 2 of the HA 1988 – such as the tenant being in more than two months of rent arrears – they may normally serve a Section 8 notice to seek possession.
Shared owners and the Renter’s Rights Act 2025
However, the Renter’s Rights Bill has now received Royal Assent (28 October 2025) and the Renters’ Rights Act 2025 (RRA 2025) will alter how these rules apply to shared ownership leaseholders.
Under section 31 of the RRA 2025, certain types of tenancies can no longer be classed as assured tenancies. This includes fixed-term leases of over 21 years, and fixed-term leases between 7 and 21 years. In practice, this means any shared ownership lease lasting longer than 7 years (which they inevitably would, given most start with a minimum term of 99 years) will now be treated as a long lease. As a result, section 8 of the HA 1988 (as modified by the RRA 2025) will no longer apply. Landlords will no longer be able to use the section 8 process to recover rent arrears or possession and will instead need to rely on the forfeiture procedure.
Most provisions of the RRA 2025 are due to come into effect gradually from 1 May 2026. However, Chapter 2 of Part 1 (which includes section 31) will take effect earlier, on 27 December 2025. This means that if, before 27 December 2025, a landlord has already issued Court proceedings based on a valid Section 8 Notice, those proceedings may continue. Similarly, if a landlord has served a valid Section 8 Notice and the deadline for starting proceedings has not yet expired, the tenancy will continue to be treated as an assured tenancy, and the notice will remain valid.
Once section 31 takes effect, landlords will be required to use the more complex and time-consuming forfeiture process to recover possession of a property. For the tenant though, if the landlord is successful in proceedings, this means the tenant could still lose their home.
Apart from the risks associated with rent arrears, are there any other downsides of handing back keys to a housing association landlord?
We outline a few further risks associated with handing back the keys below:
Things are made worse for shared owners by the fact that repossession may not simply cancel the lease. Handing back the keys may not automatically terminate the lease and bring it to an end and so a shared owner may still find themselves liable for costs until the formal repossession or surrender is accepted by the landlord.
Homelessness
A shared ownership tenant makes themselves intentionally homeless as a result of handing back the keys to a housing association landlord and is perhaps the most damaging risk for shared owners who fall into financial difficulty.
Homelessness is a major societal issue and can lead to the breakdown of livelihoods, relationships, standards of living and may impact the health and well-being of those affected. There are calls for more ‘concrete steps’ to be put in place to properly inform potential buyers of their responsibilities as shared owners to avoid situations of financial difficulty.
Potential problems for shared owners who claim benefits
Handing back the keys can affect these benefits even before an owner receives money from the sale of the property. This is because the Department for Work and Pensions (DWP) works out what you’re likely to get following the sale at current market value. If there is more than £6,000 equity calculated to be due back and a tenant moves out, their benefits could be reduced or stopped before a sale even completes. However, benefits will not be affected if you’re in negative equity or would get less than £6,000 after the sale of the property.
Let’s assume a shared owner was considering handing back their keys to their mortgage lender. Would they face similar risks?
In some cases, monthly rent payments can be affordable but mortgage payments less so. Voluntary repossession means giving the keys back to the lender and moving out so the lender can sell the property to pay off the mortgage. It is not always necessary to hand back the keys in order to sell. It could worsen the situation a shared owner finds themselves in if they do decide to hand back keys to a mortgage lender. We discuss the risks below.
Continued liability for mortgage debt and shortfall
Surrendering the keys does not release a shared owner from obligations under the mortgage. If the property is sold and the sale proceeds are insufficient to cover the outstanding shortfall, the shared owner will remain liable for the shortfall and the lender will pursue them for this via the courts.
Loss of control over the sale
Once a shared owner has surrendered the keys to the property to the lender, the lender has the right to take possession and sell it. This sale will be for the benefit of the lender to recover the debt and is not in the interest of the shared owner who has surrendered the property. There is a brief relief under the Mortgage Repossessions (Protection of Tenants) Act 2010 which gives a postponement of 2 months for tenants to find alternative accommodation. Though this protection is limited.
Impact on credit rating
Handing the keys back and surrendering the property is treated as a ‘default’ on your mortgage. This will be recorded on a credit file and is likely to negatively impact a person’s ability to obtain credit in the future and for a term of 6 years from the date of the default notice being issued.
Legal and practical consequences
If proceedings are underway for repossession, a tenant’s rights are governed by statutory provisions. Section 36 of the 1970 Administration of Justice act allows the court to postpone a possession order if they are likely to pay off arrears within a reasonable period. However, once the keys are handed back and the property is sold, their right to the property disappears.
These issues are particularly important in the context of shared ownership. This is because handing the keys back to the mortgage lender may also impact the relationship between a tenant and the housing association or landlord for the unsold share. This may lead to additional rent arrears or forfeiture of the lease. It is not just the relationship with the mortgage lender that will be negatively impacted.
Put plainly, handing the keys back should be considered as a last resort due to the risk of ongoing debt, loss of control, and limited protection for shared owners. There are also long-term financial consequences and we strongly recommend seeking independent debt or housing advice tailored to specific circumstances.
In Part One of this two-part feature we have considered the risks associated with handing back the keys, In Part Two we discuss the options shared owners have.
We are extremely grateful for the support of Places for People and Womble Bond Dickinson in creating this content.
DISCLAIMER: The information provided on this website is for general purposes only. It is not intended to be a substitute for legal, financial, tax or other professional advice. Everyone’s situation is different so always seek expert advice on any questions you may have.
Featured image: katemangostar on Freepik
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Additional Resources
Shared Ownership Resources – Handing the keys back: Q&A with Womble Bond Dickinson (Part 2)
Very helpful resource, thank you.
Thanks for taking the time to comment, Geraint. Glad it’s helpful.
Shared ownership is a perilous partnership to enter. For those who bought their properties when interest rates were low or through Help to Buy could now be facing exponential rises in rent, service charges and mortgage rates, Some of these rents (which can increase up to an iniquitous 3% above RPI ) will have risen to an extent where the shared owner is better off renting privately.
Housing associations can be ruthless business partners. There have been many cases where properties have been possessed through the mechanisms described in the article above, because of this, it’s possible that shared ownership leases will become so onerous that the scheme will eventually fall into obsolescence.
Is there a solution for those struggling leaseholders? In these circumstances, the right and proper thing to do as far as the housing associations are concerned, is to buy back the properties – a remedy given scant mention.
There is further iniquity in the shared ownership scheme: bereavement. If a shared ownership dies, the beneficiaries will need to continue paying rent, If they fail to sell, using the mechanism described above they could lose the equity but still be liable for rent and service charges, which may have accrued to many thousands of pounds.
It’s hard to see what’s good, long term for SO. What began 30 odd years ago, with low rents and cheaper shares, smaller more user-friendly housing associations, has now become a behemoth, a monster which only serves a hard faced, ever more bloated out of touch business partner. It’s time to void the current leases and start again.
Thanks for your comprehensive comment, Freddie.
On buyback, we made a recommendation in our 2023 report, ‘Shared Ownership: the consumer perspective’, that:
“Government should support an independent review of current criteria for buyback to provide earlier and greater support for households where total housing costs (including current and future liabilities related to building safety) are financially unsustainable and/or ground rent is higher than a peppercorn and/or where ground rent is triggered by staircasing to 100% and/or shared owners are unable to sell their share at the price established by a RICS valuation.”
Buyback recurs as a theme in the ‘My SO Home’ series of real-life experiences, and it’s a topic we will continue to focus on in our activities over the coming year.
We’ve since followed up your queries with WBD and their response is as below:
Shared Ownership has always been intended to help people get onto the property ladder in an affordable way. With the rise in interest rates and the cost of living we appreciate that the increase in rent, service charge and mortgage rates can be challenging not only in the context of Shared Ownership, but across the board.
It is the obligation of any Registered Provider who engages with Shared Ownership schemes which are funded by Homes England to carry out assessments on what level of share a purchaser can afford and ensure that the purchase is affordable and sustainable. Depending on the terms of the Shared Ownership Lease, there are some options available to struggling leaseholders, this could include selling back part of the share to the housing provider, known as ‘Downward Staircasing’; discussing with your provider or mortgage lender a break in payments or payment plans; voluntary surrender of the lease; or as you have mentioned, invoking a buy back procedure (again depending on the terms of the lease and whether the provider has a buy back scheme). We would always suggest taking independent advice if financial circumstances change. Please note you would need to obtain independent valuation and legal advice.
In relation to bereavement, WBD will be collaborating with Shared Ownership Resources on a Q&A specifically on bereavement and Older Person’s Shared Ownership (OPSO). Please sign up to Shared Ownership Resources’ newsletter for monthly updates on recently published features.”
Can anyone help me. I am an executor and beneficiary on a will that leaves us a 25% share in a homeownership. We can’t seem to sell it because it has a 61 year lease. I’m worried once the Estate’s money runs out paying the bills what happens. Will the beneficiaries become liable?
Also, can I sell the 25% share a giveaway nominal price just to get rid of the flat?
Does anyone know where I can advertise the 25% share?
Thanks for commenting, Jane. Though I’m really sorry to hear about the complex and distressing issues you are facing in relation to inheriting a shared ownership flat.
Our first recommendation is to contact the Leasehold Advisory Service for free, government funded advice – https://www.lease-advice.org
Please do let us know how you get on – info@sharedownershipresources.org
Jane, thank you for your comments and sorry to hear that you are having difficulties with the sale. We’ve followed up your queries with WBD and addressing your points in turn:
1. Across the market, where a leasehold property has a term of less than 80 years this is unattractive to mortgage lenders, which may be why you are finding it difficult to sell. In order to make the property more attractive to potential purchasers and lenders, a lease extension could be requested. This would usually involve a valuation being carried out as to the value of increasing the term and you would pay a premium for the term to be increased. This would be a one-off payment. Whether this is an option available to you and on what terms the lease extension would be given would be determined by the lease and we would recommend seeking independent legal advice in this respect.
2. Generally, the estate is responsible for the bills and this question would need to be looked into further with the full details of the situation.
3. Usually there are requirements within a lease as to the valuation procedures of the property and a social housing landlord would need to agree the price. Which, in most instances, will be the relevant percentage of the market value of the property.
4. Shared ownership properties can usually be advertised through any estate agent, as with any other property, but the terms of the lease must be followed first in respect of any notification requirements to a social housing landlord who usually have re-sale rights first.
Please note you would need to obtain independent valuation and legal advice in respect of your queries, and the above is for information purposes only. We are working on a follow up Q&A with WBD to explore these and other issues in more detail.