Shared Ownership Lease Extensions
Leaseholders who own a flat on a shared ownership scheme need to be aware that the options available to them to extend a lease are more restrictive than owning the flat outright.
Firstly, what is shared ownership?
Shared ownership, also known as part buy-part rent, allows individuals to purchase a share of a property (typically between 25% and 75%) and pay rent on the remaining portion. These shared ownership properties come with lease agreements that typically last for 99 or 125 years. As time passes, leaseholders may find that they want to extend their lease for a variety of reasons, such as increasing their share of ownership or ensuring a more secure long-term investment, or makingn the property easier to mortgage or sell.
Why are shared ownership lease extensions different?
If you own a lease under a shared ownership scheme then the statutory route for a lease extension is not available to you. Instead you must follow the informal route
The process is fundementally different, mainly in the sense that a leaseholder does not legally have the right to extend a lease under shared ownership. Most freeholders will allow a leaseholder to extend informally, but in reality you are at their mercy, in terms of timescales and cost.
For example, if time is of the essence to extend the lease due to the term dropping below 80 years, you can't 'freeze the clock' by serving a section 42 notice, as you would when proceeding throught the formal statutory route.
If you are buying a shared ownership lease that requires an extension to the term during your ownership, it's important to keep the above in mind.
How is the premium on a shared ownership lease extension worked out?
To put it simply, if you own 30% of the flat then you will pay 30% of the premium that you would normally be expected to pay should you own 100%. The downside is that you are still expected to pay 100% of the freeholder's legal fees. The freeholder is unlikely to negotiate on the offered premium either, which means that you could pay more than you would thrugh a statutory extension.