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4 Rents
4.1 Rent Levels at Initial Sale
4.1.1 For some explanatory Guidance about shared ownership rents click here.
Rents and service charges must be reasonable and consistent with those agreed at bidding stage and in compliance Regulatory Code.
4.1.2 The initial rent must not exceed 3% of the capital value of the unsold equity at the point of initial sale, but it can be less.
4.1.3 RSLs must try to set rents that average no more than 2.75% of the value of the unsold equity at the point of initial sale.
4.1.4 In setting rents RSLs must have regard to the affordability of the total housing expenditure of the residents i.e.:
- mortgage costs;
- rent;
- service charges (that must include the cost of management and insurance).
4.2 Rent Increases
4.2.1 Annual rent, including service charges, increases must conform to the levels set at Bid stage 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.
4.2.2 Any rent review clause must use independent publicised data. This may be the General Index for Retail Prices (RPI) or a specified percentage increase, but must adhere to the limitations at 2.4.5
4.2.3 RSLs 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.
4.2.4 Notice of any rent increase must be given in writing to the leaseholder according to the manner and time stated in the lease.
4.3 Quality of Management & Maintenance Services & Service Charges
4.3.1 RSLs must comply with the Residents Charter and Landlord and Tenants Acts in respect of setting service charges.
4.3.2 Where RSLs are selling flats and maisonettes on a leasehold basis it will continue to be responsible for the repair and maintenance of the building and the provision of services such as lighting in communal areas. RSLs will need to apportion these costs to the individual unit and recover the costs from the leaseholders by way of the service charges.
4.3.3 The RSL must ensure, in consultation with the leaseholder, that the RSL’s building insurance policy provides adequate/appropriate cover particularly in respect of alternative accommodation for the leaseholder should the property become uninhabitable.
4.3.4 RSLs must set up and maintain sinking funds for the long term upkeep of flats. It may also be appropriate, in some instances, to levy an estate rent charge for houses on estates with communal facilities. However, the contribution to a sinking fund for freeholders is a contractual obligation, as a condition of conveyance, rather than statutory one. RSLs will need to consider the most appropriate mechanism for the recovery of this monies bearing in mind the client group involved.