Understanding your Shared Ownership Lease
When purchasing a property your solicitor or conveyancer will send you a variety of important documents all of which should be read thoroughly and understood by you before exchange of contracts. After exchange of contracts you will become legally bound to purchase the property.
One of those important documents will be the Shared Ownership lease. The Lease will contain all of the information you will need relating to the "do’s and don’t’s , "can’s and cant’s" that may affect your lifestyle choices once you move in to your new home.
New Homes Law, one of Family Mosaic’s panel solicitors, take a look at understanding of your Shared Ownership lease and provide a glossary of terms you can expect to see in the lease.
Your rights and obligations
Your Lease in many ways, is like a guide book to the property, listing all information from the length of the Lease, service charge calculations to the allowance of pets!
The lease will contain what are called "leaseholder covenants" which include, amongst others, obligations to pay the ground rent, service charge, not to sub-let and as mentioned whether or not pets are allowed.
If any of those covenants are breached, ie. not adhered to, your Landlord could take action to enforce the covenant, and if still breached, could lead to your Lease being ended and you would be without a home.
All too often, questions are raised when the time to ask them has passed which can lead to uncertainty, confusion and realising that the property you have purchased might not be right for your life-style.
We understand that it may be a daunting task to read through the documents you receive but it needn’t be that way.
You should never feel silly or afraid to ask any questions as ultimately, it is your conveyancer’s job to ensure you fully understand every aspect of the property you are looking to purchase.
Glossary of terms found in a Shared Ownership Lease
- Lease: A lease is a contract by which one party (the Landlord) conveys property to another (the leaseholder or lessee) for a specified time (the term) usually in return for a periodic payment (the ground rent) (although not all shared ownership leases will require payment of a ground rent until perhaps 100% staircasing)
- Shared Ownership: This is where you buy a share of your home (between 25% and 75%) mainly through housing associations and pay rent on the remaining share. The share you buy is known as the Initial Percentage and the share remaining is the Unacquired Percentage. Read more about Shared Ownership.
- Gross Rent: The gross rent is the full market rent and on which the amount you will pay is calculated, eg. If the gross rent is £10,000 per annum and you have purchased a 25% share then the rent you will pay (the Specified Rent) is 75% of this being £7,500.
- Staircasing: Once you have bought the initial share (or initial percentage) of your shared ownership home, you can buy further shares and this process is known as staircasing. Once 100% has been achieved you will no longer pay the specified rent but may have to pay ground rent and service or estate charges. If your home is a house then the freehold can be transferred to you. Read more about Staircasing.
- Covenant: A covenant is a promise to take responsibility. The lease will set out the leaseholder’s covenants (what you are responsible for) and the landlord’s covenants (what the landlord is responsible for).
- Easement: This is another word for a right provided under your Lease, eg. A right to use any common areas in the building or the estate on which the property has been built.
- Alienation: The lease will refer to restrictions on assignment and sub-letting and these are known as the alienation restrictions.
- Assignment: This is the term used when you sell your flat and with it the lease. The new leaseholder is known as the assignee.
- Mortgagee: This is a bank or building society that has lent you money so that you can buy the property.
- Forfeiture: The terms of your lease are contractually binding and if you do not comply with its terms you are in breach of the lease. If you are the landlord can go to court asking for a judge to order that the leaseholder forfeits (or loses) their lease.