What is the definition of a long lease, and does shared ownership make a difference?
This was a question that was recently considered by the Court of Appeal in London.
Under a shared ownership lease, you rent a part and buy a part of your property. The idea is to provide affordable housing and help you to get onto the property ladder and then ‘staircase’ your share of ownership to 100%.
The Commonhold and Leasehold Reform Act 2002 defines a long lease as one granted for a specified term of over 21 years.
The Appellant owns the freehold of a development in St Anne Street, London E14, which comprises two blocks – A and B. Block A contains 97 flats, 17 of which are subject to a head lease to a housing association and then under let on separate shared ownership leases for terms of over 21 years. The remaining flats are either leased to the housing association or under conventional long residential leases.
The Respondent is a Right to Manage (RTM) company established with a view to acquiring the right to manage block A. The Appellant opposed this move, contending that the housing association, rather than share ownership occupiers, was the qualifying tenant and ought to have been given notice. Further, a tenant with an interest of less than 100% was not a ‘qualifying’ tenant.
The only issue for the Court of Appeal was whether a shared ownership lease can be a long lease for the purposes of the 2002 Act if a tenant has not acquired a 100% interest.
Lord Justice Newey held:
“Tenants with long shared ownership leases who have not staircased to 100% will still have an obvious interest in how the premises are managed, the more so since they will typically pay full service charges. That being so, Parliament might have been expected to have intended them to be able to participate in management issues.”
Therefore, a tenant with a shared ownership lease “granted for a term of years certain exceeding 21 years” has a “long lease” regardless of their percentage interest.
The Respondent has acquired the right to manage the block. As a point of principle, there may be broader implications, including the impact on applications to extend leases, which may need the Supreme Court to resolve. Watch this space…