Challenges of Shared Ownership. Steve Chapman

Transcription

1 Challenges of Shared Ownership Steve Chapman

2 Elephants in room! WARNING

3 General Shared Ownership Why shared ownership? Originally not considered a charitable activity Tax status - Separate associations Recognition of gap between tenant/owner

4 General cont Break even general needs 40 years Break even Shared Ownership 17 years Surplus on staircasing re-invest Rent element cheaper than mortgage 2.75% Mortgage 4.5%

5 Repairs Houses Shared Owner responsible for all repairs Building warranty e.g. NHBC Defects including latent defects Building Insurance

6 Repairs cont Flats Internal tenant responsible Structure landlord responsible Shared Owner pays landlord share of costs

7 Repairs cont The deal Shared Owner pays 100% cost of repairs Rent akin to interest charge So far so good

8 Staircasing Buying some or all shares - What does the lease say? Qualified surveyor valuation Who pays/ arranging inspection? Comparables/Property price forecast

9 Staircasing What if you are not happy? Go back to the lease! District Valuer paying for the valuation

10 Staircasing Fraud Valuation mock-ups (low valuation) Surveyor not qualified (low valuation) Don t be a mug public funds!

11 Staircasing Registered Improvements? Replacements = improvements? Did you agree for work? Adding something that was not there before e.g. conservatory

12 Where is Jumbo?

13 Case Law Continental Property Ventures Inc v White (10/2/2006) Work delayed by landlord resulting in higher cost for work. Higher costs not reasonably incurred.

14 Garside and another v RFYC Ltd (2011) UTLC Case Number: LRX/54/2010

15 Leaseholders had got rid of managing agents using Right to Manage rules because of failure by Agents to deal with works etc. New Agent selected by residents then identified everything to be done at once. Held cost not reasonably incurred.

16 The Upper Tribunal was asked to decide whether service charges had been incurred reasonably. Key points:- Reasonably incurred means considering a) Action taken in incurring costs were reasonable b) Whether cost was reasonable

17 There is nothing which prohibits consideration of the financial impact of the service charge costs being taken into account when deciding whether it is reasonable to carry out the works in one major contract or to phase them over a period of time to spread the cost.

18 Richardson v Midland Heart Ltd When is a lease not a Lease? Presented by Jeremy Teall: PRINCE EVANS SOLICITORS LLP Craven House, Uxbridge Road, Ealing, London W5 2BS Tel: Fax: jteall@prince-evans.co.uk

19 Ms Richardson bought 50% Shared Ownership Lease in 1995 for 29, without a mortgage. The rent was 1, per annum. Her husband went to prison in She received threats and moved out. Housing Benefit stopped and rent arrears accrued.

20 She put the house up for sale in August 2005 with the property valued at 151, with Housing Association s agreement. On the 15 th September 2005 the Housing Association sent a Notice of Seeking Possession. In October 2005 the Housing Association issued possession proceedings under Ground 8 of Schedule 2 of The Housing Act 1988.

21 In January 2006 an Outright Possession Order was made on the basis the Lease was an Assured Tenancy and that the mandatory possession requirements were satisfied.

22 Ms Richardson appealed claiming: 1. There were two tenancies, one a Long Lease which had to be forfeited. 2. The 50% equitable interest was held in trust for Ms Richardson.

23 In the High Court Jonathan Grant QC said: (i)only one tenancy: an Assured Tenancy. The requirements of the Housing Act 1988 were satisfied and there was no exception that applied. (ii) There was no Long Lease as Ms Richardson did not have a total share of 100%.

24 (iii) The level of arrears meant forfeiture would not have been stopped by Section 167 of the CLRA 2002 anyhow. (iii) The 50% payment was a premium for the Lease and did not buy a share of the freehold. (iv) There was no Trust set up, just a simple Landlord/Tenant relationship.

25 Ms Richardson appealed which was due to be heard in March The Appeal did not proceed as the case was settled. 1.Housing Association gave her 50% of the original consideration. 2.Legal aid did not extend to such a rare case.

26 Consequences For Ms. Richardson and any other shared ownership leaseholders: 1. She was only a tenant and held no financial interest in the property. 2. She could be evicted on two months rent only. 3. Her premium had bought her a right to staircase when she could afford 100%. 4. She was liable for internal repairs and contributing to building repairs. 5. Her mortgage company (if she had had one) had no security (but may have the advantage of mortgage protection provision).

27 For the Landlord of a shared ownership lease: 1. Will the Finance Director be made happy by an extended portfolio of leasehold properties. 2. Will the leaseholder sue the Association for misrepresentation (and their own solicitors for negligence)?

28 3. Will the mortgage companies, finding no security, demand all the loan under the Mortgage Guarantee scheme? 4. Will the mortgage companies stop lending on shared ownership? 5. Does the Shared Ownership Scheme protect the Landlord and mortgage companies but not the buyer?

29 For possession proceedings act as if there was both a lease and a tenancy. (i) Follow Pre-Action Rent Arrears Protocol but include any mortgage company. (ii) Obtain a Money Judgement for determination. (iii) Serve both a Notice Seeking Possession and a Section 146 Notice without prejudice to each other. (iv) Issue proceedings on both in the alternative.

30 Current Position: There is still an elephant in the room, but Ms Richardson s situation is unlikely to reoccur:- 1. Check the wording of the Lease for a reference to the payment for a capital interest which may create a trust of the reversion (the freehold). 2. Raise the issue of the parties intentions. It is what it says on the tin.

31 3. Manchester City Council - v Pinnock and proportionality How can it be proportionate that a leaseholder who has two months rent arrears not only loses a right to occupy a property but all their financial interest in it but is left with a huge unsecured debt to their mortgage company. 4. Pinnock applies to public bodies carrying out a public function (Weaver v London & Quadrant Housing Trust). A Housing Association is regulated, is publicly funded and a n instrument of the Government s Social Housing Policy. What about private funded developments and private developers?

32 5. Is the Housing Association estopped from denying the leaseholders interest where the leaseholder has acted to his/her disadvantage by taking on the mortgage debt and paying for maintenance and repairs which a tenant would not have to pay? 6. If the property is subject to a possession order is it likely to be unsellable? What advice would a buyer s solicitor give when told the landlord has obtained a possession order?

33 7. Human Rights (i) Does Article 1 of the First Protocol of Human Rights apply (no one should be deprived of his possessions except in the public interest and subject to conditions provided by law and by the general principles of international law) so the leaseholder should at least seek to recover capital? (ii) Article 8: A right to a home.

34 Possible solutions: (i)add shared ownership leases to the list of exceptions to the Housing Act (ii)amend Lease precedent to include referring to the acquisition of capital interest and excluding Housing Act 1988 provisions. (iii)apply Relief from forfeiture to Shared Ownership leases.

35 Richardson v Midland Heart Ltd When is a lease not a Lease? Presented by Jeremy Teall: PRINCE EVANS SOLICITORS LLB Craven House, Uxbridge Road, Ealing, London W5 2BS Tel: Fax: jteall@prince-evans.co.uk