Shared Ownership and Leasehold

What is a leasehold property?

Leasehold is a form of property ownership in which a person owns a property for a fixed period, rather than owning it outright. In a leasehold arrangement, the leaseholder has the right to occupy and use the property for the duration of the lease, which can range from a few years to several centuries.
The key aspects of leasehold ownership include:
The lease has a fixed term, after which the property reverts to the freeholder.
Leaseholders often pay an annual fee to the freeholder known as ground rent.
For maintenance of common areas in buildings with multiple units, service charges apply
The lease may include restrictions and rules about property use and alterations.
The freeholder owns the land and building, while the leaseholder owns the right to occupy.
Leaseholders may have the right to extend their lease, often at a cost.
As the lease term shortens, the property's value may decrease.
In reality, leasehold agreements are common across various types of properties, not just Shared Ownership homes. Many new-build flats, apartments in converted buildings and even some houses are sold as leaseholds. It's crucial for buyers to understand the terms of a leasehold agreement, as it affects their rights, responsibilities, and the property's long-term value.

What is the difference between shared ownership and ordinary leases?

Traditional leasehold flats or apartments are the most common, where the buyer owns the interior space for a set period. Leasehold houses, though less common, also exist, particularly in some new developments. Shared Ownership schemes offer a hybrid model, allowing buyers to purchase a share of a leasehold property while paying rent on the remainder.

A shared ownership lease of a house does not qualify for the right to purchase the freehold, under the provisions of the Leasehold Reform Act 1967, unless there is a provision in the lease for the freehold to be transferred on the purchase by the leaseholder of the remaining share in the property (referred to as the final staircasing).

Homes England approved shared ownership leases must contain core clauses. We have listed the clauses below, but for more information you can read the Capital Funding Guide by Homes England.

Sub-letting clause

Pre-emption Right

Rent review clause

Service charge clause

Mortgage protection clause

Purchasing additional shares (staircasing clause)

Stamp duty Land Tax (SDLT)

*some of this information has been sourced from the leasehold advisory service Shared Ownership Leases - The Leasehold Advisory Service