New model for Shared Ownership: technical consultation
Shared Ownership Consultation
Ministry of Housing, Communities and Local Government
3rd Floor, South East Fry Building
2 Marsham Street
17 December 2020
This response to your consultation is on behalf of The Federation of Private Residents’ Associations, which as far as we know, is the only national body that represents the voice of leaseholders in England and Wales.
We have over 500 member associations representing tens of thousands of individual leaseholders.
We have drafted this response on the basis of our regular daily contact with our members who inform us of the problems they encounter in the leasehold sector and we have analysed those contacts so that we understand and can convey to you the problems concerned with the concept of shared ownership but cannot comment on the technical aspects.
Leaseholders are told they share the ownership of their flats with whichever Housing Association is their head lessor. In fact the leaseholder does not share ownership. The leaseholder as you will see from the Land Registry is the proprietor of the flat.
The writer who is a specialist in Right to Manage and Vice Chair of FPRA has recently succeeded in obtaining RTM for a block of almost 80 flats some of which were so-called ‘shared ownership’
These flats – most of which became members of the RTM Company are all listed as the proprietors of their flats, not the shared proprietors.
The proprietor leaseholder of a so-called shared ownership flat pays 100% of the service charge. In addition, they pay a management charge to the Head Lessor -the Housing Association – which manages that block of ‘shared ownership’ flats leased from the freeholders.
Two example Land Registry Titles are shown here :
One proprietor of a shared ownership flat paid less than 25% of the price for the flat purchased without a Housing Association Mortgage.
So, the financially challenged whom the Government is trying to help, are basically led into a situation where they pay more service charges on a flat costing less than £200,000 than the proprietor of the same flat in the same block who paid the full price of more than £800,000.
The element which is referred to as shared is not the flat it is a second mortgage. The terms can be more onerous than any other mortgage because they can involve prohibitions on letting and selling which are not in the standard leases or other mortgages.
So called shared owners also have to suffer an extra layer of bureaucracy in querying the service charges passed on by the Housing Association from the freeholders. Their staff are not trained in Service Charge apportionment and are forced to justify charges that they are not responsible for.
In our experience shared owners end up in helpless fury and very few are even aware that they do not share ownership but have merely taken a second mortgage with different terms to their main loan.
The term ‘shared ownership’ deceives the leaseholder into believing they are not the proprietor of their flats when in fact they are! Government should not acquis in such a deceptive term.
We suggest :-
(1) that the term shared ownership should not be used as it is misleading and unnecessary
(2) Housing Associations offer second larger mortgages to their clients on better terms than other lenders.
(3) Housing Associations should not become head lessors as this imposes needless bureaucracies on their tenants and makes HA flats more expensive to live in than other flats in the block
We would be happy to see the Department with evidence of the situation which this system has created and explore our suggestions for genuine improvements for the less well-off.
We look forward to hearing from you further.
FPRA Voluntary Vice Chairman