6  Leases

6.1 General

6.1.1 The standard Requirements relating to shared ownership leases are set out in New Build HomeBuy Section 5.  These Requirements all apply to SHB schemes.

Additional Requirements that are specific to SHB are set out in this section.

6.1.2 To assist RSLs, the Agency has published sample house and flat leases for Social HomeBuy.

6.2 The Premium

6.2.1  The premium payable by the tenant plus the discount (Social HomeBuy price of the lease) on the grant of the lease must be equal to a percentage of the full market value of the property as assessed by an independent qualified valuer, please see section 8.6.  The range of initial shares purchased can be between 25% and 100% i.e. the purchaser can buy the property outright from the outset. Purchasers should buy as much as they can afford and sustain to the nearest percentage point. Shares are not restricted to the nearest 5% e.g. they can be 26%, 27% etc. The minimum additional share that can be purchased is 10% including the final share.

6.3 Rent Waiver

6.3.1  During the 06-08 programme one RSL was given permission, as part of the pilot programme, the flexibility not to charge rent on 25% of the equity to make the schemes more affordable and to expand the market for SHB. This was subject to the Agency’s  agreement to keeping a small proportion of the Disposal Proceeds Fund receipt for their own use.  This flexibility was only available in the pilot period.

There is no equivalent rent waiver for the 08-11 programme.

RSLs who wish  to waive rent for SHB purchasers may do so from within their own resources. Rent may be waived for a specified period e.g the first few years or for longer.

6.4 Right of First Refusal

6.4.1 RSLs have the right to nominate the next purchasers when SHB purchasers wish to sell their share. Additionally RSLs have the Right of First Refusal in respect of both houses and flats where purchases were originally at or have subsequently staircased to 100%.

6.5 Repayment of Discount

6.5.1  If a shared owner sells their share within five years of receiving a discount, the discount is repayable, see 9.2

6.5.2  The covenant for repayment must be inserted in conveyances and leases and is included in the model lease.  The covenant must be protected during the 5 year discount repayment period by the entry of a restriction on the title at the Land Registry. See RTA Section 4.12 

6.5.3 RSLs' solicitors must insert the discount % figure in the particulars of the Lease. This figure must equate to the percentage value of the discount given to the buyer compared to the property’s sale price. For an example follow the asterisk  

 

6.5.4 Discounts payable in respect of subsequent staircasing sales after April 2008 will also be subject to a five year repayment period. A separate 5 year period will exist for each further discount received and will run from the date the further shares are purchased. For an example follow the asterisk.  RSLs will need to keep accurate records.  

 

6.5.5 The requirement to repay discount is a charge that will rank immediately after that of the purchaser's lender. If, in the future, the new owner wishes to extend their mortgage to fund works to the property the RSL may postpone its charge in favour of the lender. The charge should not be postponed for any other reason.