Affordable Homes Programme: 2021- 2026 details and model leases released

On 28 May 2021 Homes England published new model leases that apply to shared ownership developments that are delivered through Homes England’s Affordable Homes Programme 2021 to 2026 (AHP 2021-2026).

Providers of shared ownership housing need to be aware of the requirements of AHP 2021-2026 and the provisions in the model leases.

To which developments does the new model apply?

The new shared ownership model applies to all shared ownership homes delivered through AHP 2021-2026, including Home Ownership for People with Long-Term Disabilities (HOLD), Older Persons Shared Ownership (OPSO), homes in rural protected areas and homes purchased through the Right to Shared Ownership.

The new model also applies to new Shared Ownership homes funded from 1 April 2021 using receipts from the Voluntary Right to Buy programme.

What changes have been made?

The major changes proposed to the shared ownership model from 1st April 2021 are:

• Minimum initial share: the minimum initial share that can be purchased has reduced from 25% to 10%. The maximum initial share remains at 75%.
• 1% staircasing: the introduction of the option of staircasing in 1% increments for the first 15 years. Larger shares can still be purchased with the minimum reducing from 10% to 5%.
• 10-year landlord repair period: the introduction of a 10-year period during which the costs of any maintenance or repairs will be met by the landlord rather than the shared owner. The cost of the repairs is capped at £500 per year. Any allowance that is not used can be carried forward to the next year. The allowance does not cover any work that would be covered under a warranty. There is no limit on the number of claims that the shared owner can make in one year but the total value of the claim cannot exceed £500. The work can be carried out by a contractor appointed by the landlord or an approved service provider appointed by the shared owner.
• Nomination period changes: the shared owner may end the nomination period after four weeks if they wish to pursue a sale on the open market, rather than the previous eight-week period.
• Minimum term: the minimum lease term has increased from 99 to 999 years, with no exceptions.

Will these changes affect homes provided through SHOAHP 2016-2021, which complete after 1 April 2021?

The provider will be able to choose to offer the AHP 2021-2026 lease to those homes provided through the Shared Ownership and Affordable Homes Programme 2016 to 2021 (SOAHP 2016-2021) and which will complete and be sold after 1 April 2021. Providers will need to consider their options for such sites.

Are there differences in the fundamental clauses between the SOAHP 2016-2021 and the AHP 2021-2026 model leases?

Fundamental clauses are those which cannot be altered without the consent of Homes England. For both SOAHP 2016-2021 and AHP 2021-2026 Shared Ownership homes the following fundamental clauses apply:

• Restrictions on alienation (assigning, subletting, charging or parting with possession of the property)
• Mortgagee protection
• Staircasing provisions
• Protected area staircasing provisions, where appropriate
• Rent review
• Pre-emption provisions

However, new Shared Ownership homes provided through AHP 2021-2026 from 1 April 2021 have the same fundamental clauses as the SOAHP 2016 to 2021 programme with the following amendments / additions:

• In the alienation provisions, the landlord’s period to nominate a purchaser or accept a surrender of the lease is reduced from eight weeks to four weeks.
• A new schedule dealing with 1% staircasing as referred to above.
• A new schedule dealing with the initial repair period as referred to above.
• A mortgagee forfeiture notification proviso. The wording of this clauses has not changed from the SOAHP 2016-2021 but this is now a fundamental clause which gives greater protection to a lender.
• Any transfer deed on final staircasing which creates an estate rent charge must exclude the fairly severe remedies in section 121 of the Law of Property Act 1925.

The AHP 2021-2026 lease now also contains two stamp duty certificates to enable the purchaser’s solicitor to select whether the shared owner has elected to pay stamp duty either on the value of the initial share or if they have elected to pay on the full market value.

What other key information must be provided?

For shared ownership homes provided through the AHP 2021-2026, there is a separate key information document pack to be completed and presented by providers for the sale of new Shared Ownership homes. It is a condition of grant funding that these documents are completed and provided to the customer no later than at reservation stage. The completed documents should be sent to the buyer’s solicitor along with the memorandum of sale. Providers should obtain confirmation from the buyer’s solicitor that these have been provided to the customer.

TLT has a dedicated Housing and Regeneration team with experience of all types of shared ownership. Please get in touch to find out how we can help you.

Contributor: Matt Battensby

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions