Sunday, September 03, 2023
Are owners of shared ownership properties being forgotten?
This post is from my Newham Councillor colleague's blog, James Beckles. While I am broadly in favour of shared ownership, it is simply disgraceful how badly many are treated with high service charges and fees, poor management and I think less than 3% "staircase" up to becoming 100% (still nearly all leasehold) "owners".
Why we still have a medieval "leasehold" system in this country deserves another post.
© 2020 Andrew Baker. 24.25th Feb Feb 2020. Photograph © Andrew Baker PR HANDOUT
"In July 2023, I wrote to Lyn Brown MP about the problems faced by residents with their shared ownership properties. While shared ownership is marketed as an affordable housing option for first-time buyers and those with modest incomes, it can become expensive in the long run due to rising service charges, rents, and mortgage costs.
Shared ownership property owners are in a precarious situation as they have short-term leases (less than 99 years) or are “mortgaged tenants” who do not fully own their share of the property. As highlighted in the report Shared Ownership: The Consumer Perspective buying more shares in the property through stair-casing can also be costly, making it difficult for many to afford.
I was and am also concerned about the seeming lack of legal attention and protection shared owners are receiving in the Government’s recent Leaseholder Act 2022, which promised to do away with the medieval leaseholder system but is still very much intact.
I highlighted my concerns to Lyn stating:
“Shared owners (or mortgaged tenants) are not within the scope of the Act or even covered by other legislation that is making its way through parliament. Shared owners who own a share of their property while paying a subsidised rent on the outstanding share of the property they do not own are:
•Subject excessive service charges which can raise to 13% – a cap should be introduced.
•Unable or discouraged from selling their share of the property by housing associations who are either not equipped to buy back or reluctant to purchase the mortgages tenants share if they chose to sell their share – housing associations should purchase the shared owners property share or advise house they can sell it on the open market without excessive fees
•Subject to the whims of management agencies often chosen or operated by a housing association – a common good should be introduced to allow shared owners more say and rights in the management of their buildings and homes,
•Penalised for stair-casing (buying additional shares in their home) by excessive legal fees and cost placed up them by the housing association – an affordable flat rate should be introduced, and fees should be transparent and accessible.
•Classed as leaseholders when they have ‘purchased’ a share in a property – their share should be converted to a freehold or commonhold
•Given short term leases – leases should be longer than 99 years granting more security and providing an asset to pass on to relatives rather than the present system where shared owners have to buy extensions to their lease again at exorbitant rates placed on them by their landlords the housing associations.”
Lyn’s response was considerate and thoughtful. I have referenced it below.
Thank you for contacting me regarding the shared ownership scheme for purchasing property. I understand your concerns on this issue, and I fear for the conditions shared owners face, particularly given the current economic climate.
As you are aware, shared ownership is a method whereby new buyers can purchase part of a property and pay rent to a housing association for the rest, only paying the mortgage for their part of the property. The individual who owns part of the property can then purchase more shares in the property from the housing association, sometimes leading to the eventual outcome of the buyer owning 100% of their property and becoming the outright owner.
I share your alarm over the lack of protections and reforms for shared owners within the Leaseholder Act 2022. I do not feel the Act went far enough to overhaul the antiquated and feudal leasehold system, which leaves leaseholders open to excessive service charges and poor-quality maintenance companies.
For some, shared ownership schemes are a useful way of getting onto the property ladder without having to pay prohibitively large deposits. However, I know that for many in Newham and across the country, the lack of proper protections for those within shared ownership agreements has resulted in great difficulties for primarily new homeowners.
For example, I have heard from many constituents about the pain that excessive service charges have brought. Currently, service charges can rise up to 13%, often from housing management agencies providing sub-standard service. These charges are simply unaffordable for many young couples and working families, especially as the prices of food and energy continue to soar.
Moreover, one of the advertised perks of shared ownership is the promise of ‘stair-casing’, whereby shared owners can buy more of their home as they can afford it until they own the property outright. However, I know that many shared owners have been hit by excessive and cumbersome legal fees and other costs placed upon them by housing associations, thereby preventing them from buying more of the property.
On top of this, many owners are either unable or dissuaded from selling their portion of a property should they decide to leave the home, often by housing associations who are either unequipped or unwilling to buy back the shares. This leaves some shared owners in properties they simply cannot sell or afford to leave.
Finally, I am aware many shared owners have issues with the leasehold process itself. Despite owning a portion of the property, they are legally classed as leaseholders and often given short-term leases. This creates insecurity for those living in the homes and introduces all of the problems we know come with the leasehold system.
I believe that our housing system, from rental to leasehold and outright home ownership, needs fundamental and wide-reaching reform.
In 2019, during a debate on leasehold reform, I told the Government of the conditions that many leaseholders are forced to endure, from instances of completely dead water pressure to non-existent waste disposal services. I called on the Government then to free leaseholders from the injustice of the leasehold system, but I fear that they did not listen. I will link this speech below.
Moreover, on 23 May this year, I voted for an Opposition motion calling on the Government to end the sale of new private leasehold houses, introduce a workable system to replace private leasehold flats with commonhold and to implement the Law Commission’s recommendations on enfranchisement, commonhold and the right to manage in full. This motion passed unanimously.
I have written to the Minister for Housing and Planning, Rachel Maclean MP, to further raise these concerns. I have asked what steps the Government are taking to ensure that shared owners are given the protections they need to live securely in their homes. I have also asked how the Government plans to reform the shared ownership and wider leasehold sector to end current abuses.
Please do not hesitate to contact me again on this, or any other, matter.
Clearly Lyn has been advocating for the rights of leaseholders and owners of shared ownership properties. Shared ownership can be the right housing option for some, however more needs to be done to ensure there is equity in the housing system and share ownership is not the forgotten section of our housing system.