Why shared ownerships are now considered to be long leases
If you own the freehold of a property containing shared ownership tenants, a recent Court of Appeal ruling may change how you run your business. Let’s find out more.
Shared ownership leases were conceived as a way to get on the property ladder without breaking the bank. With shared ownership, people buy a percentage of the property and pay rent on the remaining share. As time goes by, they can purchase extra shares in the property, known as ‘staircasing’. Eventually, they’ll reach 100% and be fully staircased.
A recent ruling by the Court of Appeal clarified the rights of shared ownership leaseholders before they reach the 100% staircasing threshold. In this article, we’ll explain the decision - and what it means to you as a landlord.
Shared ownership and RTM companies
In the case in question, a group of residents in a block of flats in East London formed a company with a view to acquiring the right to manage the property. This is known as an RTM company.
However, the new RTM company did not serve the shared ownership leaseholders in the property with a Notice of Invitation to Participate in it, believing that as they were not full property owners on a long lease, they did not qualify to join the RTM company.
The Court ruled that as shared ownership leaseholders still have a substantial interest in the running of the property, they should still be entitled to be part of the RTM company.
Implications
The decision from the Court of Appeal creates several implications for landlords dealing with shared ownerships in their properties:
A shared ownership tenant with more than 21 years on their term is considered a long leaseholder
Shared ownership leaseholders do not have to be fully staircased to take advantage of the rights associated with having a long lease
As they have a clear interest in how their property is managed, they should be allowed to form or be part of RM companies
The long-term implication of this decision is that landlords can expect more tenants to form RTM companies.
Why you need a property solicitor
This recent decision from the Court of Appeal refers back to sections in acts from more than 20 years ago. It clarifies a definition, which doesn’t sound that seismic, but it could have significant consequences for landlords with shared ownership tenants in their properties. Also, it’s possible that this definition could change again shortly, as the freeholder intends to take the case to the Supreme Court.
In this challenging environment, having a good property solicitor in your corner has never been more important. Your solicitor will make sure all your bases are covered and ensure whatever you want to do conforms with the law as it stands. If problems arise, they’ll pursue your interests and defend any challenges.
Property law is complex, so don’t leave things to chance. If you need help, get in touch with your solicitor straight away.
Find out more from Couchman Hanson
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