Leasehold and Freehold Reform Act 2024

Part 3 Shared ownership leases and the LRHUDA 1993

Amendment of the LRHUDA 1993

16 The LRHUDA 1993 is amended in accordance with this Part of this Schedule.

Repeal of special provision for shared ownership leases in definition of “long lease”

17 In section 7 (definition of “long lease”)—

(a) at the end of subsection (1)(c) insert “or”;

(b) omit subsection (1)(d);

(c) in subsection (7), omit the definitions of “shared ownership lease” and “total share”.

No right to collective enfranchisement for certain shared ownership leases

18 (1) In section 5 (qualifying tenants), after subsection (2)(c) insert “or

“(d) the lease is an excluded shared ownership lease (see section 5A);”.

(2) After section 5 insert—

“5A Excluded shared ownership leases

(1) For the purposes of this Chapter a lease is an “excluded shared ownership lease” if it—

(a) is a shared ownership lease, and

(b) meets conditions A to D.

(2) But conditions C and D do not need to be met if the shared ownership lease is of a description prescribed for this purpose in regulations made by the Secretary of State.

(3) Condition A: the lease allows for the tenant to increase the tenant’s share in the demised premises by increments of 25% or less (whether or not the lease also provides for increments of more than 25%).

(4) Condition B: the lease provides—

(a) for the price payable for an increase in the tenant’s share in the demised premises to be proportionate to the market value of the premises at the time the share is to be increased, and

(b) if the tenant’s share is increased, for the rent payable by the tenant in respect of the landlord’s share in the demised premises to be reduced by an amount reflecting the increase in the tenant’s share.

(5) Condition C: the lease allows for the tenant’s share in the demised premises to reach 100%.

(6) Condition D: if and when the tenant’s share in the demised premises is 100%, the tenancy provides that the terms of the lease which make the lease a shared ownership lease cease to have effect, without the payment of any further consideration.

(7) In this section “demised premises” means the premises demised under the shared ownership lease.”

(3) In section 38(1) (interpretation of Chapter 1 of Part 1), after the definition of “conveyance” insert—

• ““excluded shared ownership lease” has the meaning given in section 5A;”.

Tenant under shared ownership lease to have right to new lease

19 In section 39(3)(a) (definition of qualifying tenant: application of section 5), after “subsections” insert “(2)(d),”.

Consequential amendment

20 In section 77(2)(b) (qualifying tenants for audit rights), for “that section” substitute “section 101”.

Collective enfranchisement: mandatory leaseback

21 In Schedule 9 (grant of leases back to the former freeholder), after paragraph 3 insert—

“Flats etc let under shared ownership leases

3A (1) This paragraph applies where immediately before the appropriate time—

(a) any flat falling within sub-paragraph (2) is let under an excluded shared ownership lease (and accordingly the tenant is not a qualifying tenant of the flat), and

(b) the landlord under the lease is the freeholder.

(2) A flat falls within this sub-paragraph if—

(a) the freehold of the whole of it is owned by the same person, and

(b) it is contained in the specified premises.

(3) Where this paragraph applies, the nominee purchaser shall grant to the freeholder (that is to say, the landlord under the shared ownership lease) a lease of the flat in accordance with section 36 and paragraph 4 below.

(4) In this paragraph any reference to a flat includes a reference to a unit (other than a flat) which is used as a dwelling.”

Inclusion of terms for sharing staircasing payments

22 In Schedule 11 (procedure where competent landlord is not tenant’s immediate landlord), after paragraph 10 insert—

“10A (1) This paragraph applies if—

(a) at the relevant date—

(i) the existing lease is a shared ownership lease (the “original shared ownership lease”), and

(ii) the tenant’s share of the dwelling is less than 100%, and

(b) the landlord who grants the new tenancy (the “new shared ownership lease”) is not the immediate landlord under the original shared ownership lease.

(2) At any time after the grant of the new shared ownership lease—

(a) the immediate landlord under the new shared ownership lease, or

(b) the landlord under any relevant intermediate lease,

may apply to the appropriate tribunal for an order making provision to secure that each relevant intermediate lease is varied to include (if or to the extent that it does not already do so) a payment sharing term.

(3) A “payment sharing term” is a term under which staircasing payments are to be shared between—

(a) the immediate landlord under the new shared ownership lease, and

(b) each landlord under a relevant intermediate lease,

in a way which fairly and reasonably reflects staircasing losses that are incurred after the variation of the lease to include this term.

(4) An order under this paragraph may include—

(a) an order relating to a relevant intermediate lease not specified in the application;

(b) an order appointing a person who is not party to a relevant intermediate lease to execute a variation of the lease.

(5) A lease is a “relevant intermediate lease” if—

(a) the lease demises some or all of the shared ownership premises, and

(b) the lease is intermediate between—

(i) the new shared ownership lease, and

(ii) the interest of the landlord who granted the new shared ownership lease.

(6) In this paragraph—

• “shared ownership premises” means the premises demised by the new shared ownership lease;

• “staircasing loss”, in relation to a staircasing payment, means the loss that a landlord incurs because of the increase in the tenant’s share in the shared ownership premises to which the staircasing payment relates;

• “staircasing payment” means a payment made by the tenant under the new shared ownership lease to their immediate landlord in consideration of an increase in the tenant’s share in the shared ownership premises.”

Meaning of “shared ownership lease”

23 In section 101(1) (general interpretation of Part 1)—

(a) after the definition of “interest” insert—

• ““landlord’s share”, in relation to a shared ownership lease, means the share in the premises demised by the lease which is not comprised in the tenant’s share;”;

(b) after the entry relating to “lease” and “tenancy” insert—

• ““shared ownership lease” means a lease of premises—

  (a)

  granted on payment of a premium calculated by reference to a percentage of the value of the premises or of the cost of providing them, or

  (b)

  under which the tenant (or the tenant’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the premises;

• “tenant’s share”, in relation to a shared ownership lease, means the tenant’s initial share in the premises demised by the lease, plus any additional share or shares in those demised premises which the tenant has acquired;”.