Shared ownership leases have long been in an odd position when it comes to taking possession proceedings. 

Marketed as a form of home ownership, with the purchaser buying a % share e.g. 25% and signing a long lease, there is often considerable shock when shared owners discover they are treated as assured shorthold tenancies (ASTs) for possession purposes with mandatory ground 8 for rent arrears being routinely used. 

Schedule 1 to the Housing Act 1988 which contains the list of types of occupiers excluded from being assured tenancies, does not include those on long leases. The Renters Reform Bill would have changed this with one small sentence to be added, making clear fixed-term tenancies with a term of over seven years would be excluded from being assured. With the Renters Reform Bill falling away due to the election, we do not yet know if and when a new government will re-introduce it or if it will be in the same form.

I ran the first case to partly test this point in 2008 called Midland Heart v Richardson in 2008 with counsel Christopher Baker. A circuit judge in Birmingham County Court accepted the shared ownership lease was an AST and therefore a possession order underground 8 for large rent arrears was ordered. Ms Richardson obtained permission to appeal and a Court of Appeal hearing was all set to proceed, but the occupier withdrew it a few days beforehand for legal aid funding reasons (if I stretch my powers of recollection from 16 years ago, this was because she had moved out so the issue had become academic).  

The case also confirmed that once the landlord has possession, they are not legally obliged to return the % share to the former shared owner (thus gaining a ‘windfall’)  which remains a controversial outcome many RPs overcome by voluntarily agreeing to do so. 

The Richardson case was only a county court decision of course (albeit of a circuit judge) and therefore not binding and only persuasive on other courts.  

Where there is a lender, protections have since been built into the template shared ownership lease and via the joint CML/HCA guidance on shared ownership arrears. This recognises shared ownership leases are treated as ASTs, ground 8 can be used and social landlords agree to give 28 days notice before serving a ground 8 Notice of seeking possession (NSP) for arrears. This is also referred to in the Government guidance at HCA Policy Covers (publishing.service.gov.uk) - see chapter 11 on rent arrears. 

The legal principles above are the foundation of most shared ownership arrears debt recovery policies and procedures for RPs. It is of course also why the Renters Reform Bill was going to make the change referred to above.  

This most recent (also county court) case involving Sovereign Network Homes (SNH) is helpfully set out in some detail by Inside Housing with information and comment from both legal teams. Due to a 2023 Court of Appeal case to do with the right to manage, the argument was made, sufficiently to satisfy the court that there was a triable issue to be heard on another occasion, that shared ownership leases should not be categorised as ASTs but as long leases. That would mean they would be subject to forfeiture (not possession via an NSP and grounds for possession). That would also mean s166 notices need to be served for the arrears of ‘rent’ for the non-purchased % share to be ‘lawfully due’. 

The SNH case will now it seems, be heard at a substantive trial on the above issue in due course but I presume that could be months away. If heard, the outcome could also of course be appealed. Will it be heard before any change in a new Renters Reform Bill is introduced? 

What should RPs therefore now be doing with their shared ownership debt cases where there is either no lender to pay the debt or they decline to do so? Serve a s166 notice or not? Proceed as if an AST or use forfeiture? Tricky issues with no clear answer currently.  

Please contact me to discuss this further.