© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Around 30 years ago a new form of homeownership came into the property world - shared ownership. This new scheme came with a shelf life as the leases being granted were generally given for 99 years.
The private residential property owner is very aware of the problems caused by short leases. The cost of extending these rises over time, particularly as the lease term drops below 80 years and marriage value becomes payable, but for a shared owner the problems can be magnified.
Mortgage lenders have traditionally seen residential leases of around 70 years remaining on the border of mortgageability so today those early shared ownership leases have to consider extending their leases in order to protect the value of their homes. These lessees are now beginning to flock to their Housing Association with what on the face of it seem two simple questions. Can I extend my lease and how much will it cost?
These questions may seem easy to answer on the face of it but there are two big problems thrown up by the current leasehold legislation. Housing Associations are considered to be exempt from the provisions of the Leasehold and Urban Development Act 1993 as amended by the Leasehold and Commonhold Reform Act 2002 and as such can’t be forced by a lessee to give a lease extension and a shared owner has no right to claim a lease extension under the current statute.
Shared owners do not have any statutory rights to extend their leases under the Leasehold and Urban Development Act 1993, so how do the gathered Housing Associations deal with this? Many associations have a range of approaches, some charging nothing, some charging a proportion and some charging as if a shared owner of 50 per cent actually owned 100 per cent. It’s a position that too many will find a scary and unacceptable proposition.
Clearly this is an area of great concern as there is no guidance given under the relevant legislation. So, how should these requests be dealt with and the premium calculated?
If you take the time to review the RICS’s many advice guides you will fail to find a method of valuation that deals with a shared owners request for a lease extension. Online lease extension calculators may seem to answer these questions, but as soon as ‘shared ownership’ enters the equation the formula falls apart.
Given the number of shared ownership leases that have been created in the last 30 years it seems peculiar that these issues have been overlooked for so long. There needs to be action taken to protect shared owners and to give guidance to Housing Associations on a common method of calculating extension premiums, otherwise as it stands the shared owners lease could simply waste away.
Chris Baker is Managing Director of McDowalls Surveyors