Shared ownership lease extension restrictions

bellypowell

Hi all, I wonder if anyone has experience of this.

I am looking to “purchase” a shared ownership flat, going in at a 25% share. The flat was originally sold in 2010 so I am purchasing it as a resale, and there are approx 114 years left on the lease. I'm buying it on my own in London and it's unlikely I would be able to staircase to 100% - I would either need to inherit c. 300k (extremely unlikely); get a pay rise of c. £30k so I could borrow that much (extremely unlikely, especially now in the Covid climate); or find a wealthy partner and marry them (not currently on the cards and also not what I see as the purpose of marriage!!)

The HA is named as the landlord on the lease, but there is also a head lease, with a superior landlord which is a property developer, and the HA is named as tenant on the head lease.

I appreciate that there is still quite a long term left on the lease and I wouldn’t need to worry about extending it for at least 25 years, however I am concerned that I may not ever be able to extend the lease. First of all because as a “shared owner” I have no legal right to do this unless I own 100% of the property, which I may not ever be in a position to do; and secondly because the HA might not have the ability to grant this either. The guidance on their website says:

“Shared ownership leaseholders do not have a legal right to extend their leases. However we wish to give these leaseholders the same choice as 100% lease owners. This procedure explains the circumstances in which [Housing Association] will allow shared owners to extend their leases and its ‘informal’ procedure for doing so.

Upon receipt of an initial enquiry we will check if [Housing Association] is the freeholder. Where [Housing Association] owns a head lease we check whether [Housing Association] is the immediate landlord and that the head lease has a long enough term remaining to be able to grant the lease extension. In cases where [Housing Association] only holds a head lease which does not have a sufficient term remaining it will not normally have a legal right to extend its head lease and may therefore be unable to extend the underlease.”

And in another place on the housing association’s website it says:

“We’ll check that we’re both the freeholder and the immediate landlord, and confirm the lease has a long enough term remaining for an extension. If we don’t own the freehold, we don’t have the legal right to extend your lease.”

The term remaining on the head lease is about 113 years.

If it’s basically impossible for me to extend the lease then it makes no sense to buy this property and surely it would be impossible to sell in the future?

I have queried this with my conveyancer and will post an update on here, but if anyone else as knowledge or experience on this area it would be appreciated! Right now this feels like a big red flag and I shouldn't go ahead with it.

bellypowell

Update from my conveyancer on this:

"A shared ownership lease of a house does not qualify for the right to purchase the freehold, under the provisions of the Leasehold Reform Act 1967, if there is a provision in the lease for the freehold to be transferred on the purchase by the leaseholder of the remaining share in the property (referred to as the final staircasing). A shared ownership leaseholder of a flat only qualifies for the statutory right to extend their lease as the holder of a “long lease” if they have “staircased” up to 100% ownership. However, the landlord may have their own policy of allowing lease extension where there is less than 100% ownership. Leaseholders would need to check with their landlord for their own procedure.

In your case, [housing association] is the superior landlord and not the Freeholder so in order to extend your own lease, [housing association] must have a sufficient term remaining under their headlease. If they do not have this then it may mean they have to extend their headlease with the Freeholder first before they can extend your underlease.

I would suggest that you speak with [housing association] directly to confirm what their procedure is in this instance. This will help you make a decision on whether to proceed or not."

I'll post again when I hear back from the HA. Ultimately though it seems that I am essentially "buying" a lease which I have no guarantee I can extend.

rik111

If they do grant you a lease extension it could work out very expensive plus you would be liable for solicitors fees for all three parties.