Significant changes are proposed to the Shared Ownership in the Renter’s Rights Bill which is currently making its way through the Parliamentary process. 

Shared Ownership was once thought to be part of the solution to increase the number of households on the housing ladder with it being a more affordable route into ownership particularly for first-time buyers. Significant changes however may affect whether it continues to be a viable option for landlords to continue to offer. 

Currently, Shared Ownership operates as both a long lease and an assured shorthold tenancy. This creates an interesting position when landlords seek to recover possession of a shared ownership property. 

For the significant majority of landlords who provide shared ownership properties, possession may be sought under the provisions of the Housing Act 1988. There are a small number of exceptions to this, for example, if a shared ownership lease was entered into before the Housing Act 1988 came into force in January 1989, then the provisions of the 88 Act cannot apply, for forfeiture proceedings are the only alternative available to a landlord to rely upon.

Possession through the Housing Act 1988 should be a familiar process as most landlords will be aware of the requirement of serving a Notice of Seeking Possession (NSP) and the landlord must rely on proving one (or more) of the applicable grounds set out in Schedule 2 of the Housing Act 1988. If the ground is proven, the court can grant an order of possession, although further consideration by the court depends on whether possession is sought using a mandatory or discretionary ground and any defence advanced by the Defendant.

All change?

Landlords of Shared Ownership properties should pay particular attention to the possible consequences of such a change now as the Renter’s Rights bill gathers pace through Parliament.

The Renter’s Rights bill seeks to abolish Assured Shorthold tenancies which will have a significant effect on the way in which possession of a Shared Ownership can be obtained. This is nothing new to the sector as it was initially proposed as a change under the previous government’s Renter’s Reform bill. 

Notwithstanding any significant changes to the Bill, if (or when) it comes into force, landlords will no longer be able to rely on the provisions of the Housing Act 1988 to obtain possession of a shared ownership property. 

In the absence of an Assured Shorthold Tenancy and the Housing Act 1988, possession of a shared ownership property may only be sought by way of forfeiture proceedings. Landlords will now have to rely on the terms of leases rather than tenancy agreements and consider the differences between rent, ground rent and service charges. Landlords may also be required to serve a notice under section 166 of the Commonhold and Leasehold Reform Act 2002. 

These changes make clear that Shared Owners should be considered more like leaseholders rather than tenants. They are also likely to present a number of issues which landlords have not previously considered in the context of shared ownership such as the need for a prior declaration of a breach of the lease, and so-called ‘waiver danger’, where the actions of the landlord can be deemed to ‘waive’ a breach by a Shared Owner if for example rent is accepted after the service of a notice.  

It will be interesting to see how the bill develops as it makes its way through committee stages however it is likely that these changes will eventually come into force. 

What next?

Landlords should start considering now what action needs to be taken including changes to their processes and training of employees to ensure there is a smooth transition. 

It is worth stating however that NSP’s can still be served on Shared Owners, and the proposed legislation does not affect any current proceedings or any possession orders.  Once served NSP's are valid for 12 months. 

Landlords may wish to consider whether they want to make use of what is soon likely to be the ‘old’ system, serve an NSP (if the grounds relied upon can be proved), and protect their position as a new age of housing law is rolled out. 

Should you have any questions regarding this or possession proceedings in Shared Ownership, please do not hesitate to contact me or another member of our housing litigation team.