Social Homebuy 11

1 RENTS

1.1 Shared ownership leases after 15 January 1989 are assured tenancies and as a result are not subject to rent control under the Rent Act 1977.  The setting of rents for shared ownership is a matter for the RSL to agree with the leaseholder at the point at which the lease is granted.  However initial rents must be set at a level not exceeding 3% of the capital value of the equity retained by the RSL. RSLs are expected to aim to achieve an average of 2.75% across all homes sold through the social Homebuy programme.

1.2 In setting rents the RSL must have regard to the affordability of the rents to the intended client group and ensure the rents are sufficient to cover the RSL’s long-term loan repayments.  In addition to the rent, the RSL will need to determine an appropriate service charge that should include the cost of management and insurance. (see Social Homebuy 12). The landlord should ensure, in consultation with the leaseholder, that the insurance policy provides adequate/appropriate cover particularly in respect of alternative accommodation for the leaseholder should the property become uninhabitable. The RSL should comply with the Leaseholders’ Guarantee and Landlord and Tenants Acts in respect of setting service charges.

1.3 The RSL should note that leases granted for the disposal of houses must be excluded from enfranchisement under the Leasehold Reform Act 1967 and should seek their own legal advice.
  

2 RENT INCREASES

2.1 Annual rent, including HB eligible service charges, increases must conform to the Investment Contract and Regulatory Code.  However, once the method of setting increases has been decided on and written into the lease, then the provisions of the lease will be binding.

2.2 The RSL is required to charge a rent based initially on a sum not exceeding 3% of the capital value of the unsold equity.  Annual rent increases are to be limited to RPI plus 0.5%, using the September RPI figure published annually.

2.3 The RSL can choose whether to increase rents on the anniversary date of each lease, or whether to increase all its shared ownership rents on the same date each year e.g. 1st April.

2.4 Notice of any rent increase should be given in writing to the leaseholder according to the manner and time stated in the lease.