Consultation outcome

New model for Shared Ownership: technical consultation - summary of responses

Updated 1 April 2021

Introduction

On 19 November 2020 the Ministry of Housing, Communities and Local Government ran a consultation to capture views on how to best implement the new model for Shared Ownership.

The consultation sought views and on the following areas:

• reducing the minimum initial stake from 25% to 10%
• introducing 1% gradual staircasing and the new valuation methodology
• implementing the new 10 year period during which the landlord will support with the cost of repairs and maintenance in new build homes
• delivering the new model through Section 106 developer contributions

There were 260 total responses. Not all respondents answered every question. A full breakdown of responses can be found in Annex B.

This document provides a summary of the consultation responses received. We have considered these responses and set out the government’s position.

Summary of responses

Reducing the initial minimum stake to 10%

Question 1: What steps could we take to prevent shared owners from being exposed to unfair lending terms?

View of respondents

There was a total of 189 responses to this question. The majority of respondents suggested the government should work with lenders or providers to ensure one or more of the following:

• There is adequate availability of mortgages and shared ownership products
• Shared owners will be subject to tighter and more robust affordability checks
• Shared owners have access to independent financial advice
• There is appropriate information and education for shared owners around fees and charges prior to purchase

Some respondents also suggested shared owners should provide evidence of funds/mortgage and allow providers the discretion to refuse the application if the funds are sourced by way of unsecured lending.

Government’s response

The government is keen to ensure that those who access Shared Ownership also have access to competitive mortgage finance. We are aware that there are a number of banks and building societies who already support Shared Ownership and we will continue to engage with them, UK Finance and the Building Societies Association to ensure there is continued support in the future for those accessing the new model.

We recognise that many respondents had concerns about the affordability of Shared Ownership for those who can only access at a lower share. We are determined to ensure everyone accessing the scheme can sustain a purchase without being financially stretched. As confirmed in the consultation document, Homes England is reviewing the current affordability guidance. They are working with lenders and brokers to determine if any adjustments are needed to ensure the guidance remains fit for the new model so that purchasers will not be financially stretched.

The government does not believe applicants should be prohibited from using unsecured lending to access Shared Ownership. However, as noted above, all applicants, including those using unsecured finance, will be assessed and need to demonstrate their ability afford the purchase.

We agree that it is important for prospective purchasers to be aware of the responsibilities associated with becoming a shared owner and have a good understanding of both the initial and ongoing costs of managing a Shared Ownership home. We want all purchasers to be able to make an informed choice as to whether Shared Ownership is right for them. To support this, Homes England and the GLA will be introducing a key information document for use by providers which will highlight key responsibilities, processes and costs prior to a sale. Providers will be expected to issue this document to all new shared owners. Homes England will confirm and publish final details of this document in due course.

We are committed to promoting fairness and transparency for shared owners and believe addressing Shared Ownership lease terms is also an important part of this. We did not consult on this issue, but it was a recurring theme throughout our engagement.

The Homes England Model Lease currently has a standard 99 year term. This term results in shared owners having to undergo the complex and expensive process of extending their lease too soon after buying a share in their home. We are therefore introducing a requirement for all new build homes built under the new model to be issued with a minimum 990 year lease term. These longer leases will provide long-term security for shared owners and save them from paying for multiple lease extensions.

The one exception to this policy is homes delivered through the Home Ownership for People with Long-Term Disabilities (HOLD) scheme. For homes delivered through the HOLD scheme with funding from the AHP 2021-26, a minimum lease length term of 125 years applies. As homes delivered through the HOLD scheme are purchased on the open market, this is to ensure applicants have the maximum possible flexibility in choosing a home that meets their needs. Providers offering homes through the HOLD scheme will still be expected to offer up to the maximum possible lease term.

The government acknowledges that shared owners living in existing homes will not benefit from these longer lease lengths. This is why today we are confirming that we will be extending the statutory right to a lease extension to shared owners (by 990 years where the Shared Ownership landlord is also the freeholder). This builds on our wider leasehold reforms and recent commitment to provide longer lease extensions to other leaseholders. We are determined to ensure all shared owners can extend their lease by 990 years where possible and will be exploring options where their landlord does not have sufficient leasehold interest to issue a 990 year lease extension. We will provide further details in due course and will legislate on these measures when parliamentary time allows.

Question 2: How will a smaller initial stake impact the relationship between lenders and providers and are there any steps we need to take to address this?

View of respondents

There was a total of 119 responses to this question. Many respondents were concerned there could be an increased risk of debt and/or arrears for the shared owner if those accessing lower shares couldn’t sustain the purchase. This raised concern around the use of the Mortgage Protection Clause (MPC). Respondents were worried that an increase of mortgage arrears may result in lenders exercising the MPC at higher rates than usual. Some respondents also flagged that the new model will be less viable for either providers or lenders to deliver. For providers, the reasons given were linked to a lower capital receipt potentially resulting in less income. And for lenders, the cost of administering smaller loans was highlighted as the main issue.

Government’s response

The Mortgage Protection Clause is critical to generating lending support for Shared Ownership and it is essential it is maintained if we are to encourage continued support for the new model. As mentioned in the government response to question 1, Homes England’s affordability guidance will continue to be robust enough to ensure those accessing Shared Ownership can sustain the purchase. This should help avoid the need for increased use of the MPC and we therefore will not be making any changes to the MPC.

As we have also mentioned, we will be engaging with lenders to ensure there is continued support the new model. We expect providers to consider the additional cost of delivering the new model when applying for funding.

Introducing gradual staircasing

Question 3 & 4: Do you agree that House Price Index (HPI) valuations should be valid for 3 months, if no, then how long should they be valid? Please give your reasons.
a. Yes – 3 months
b. No – 1 month
c. No – 6 months
d. No – 12 months
e. No – Other

View of respondents

There was a total of 213 responses to question 3. 49.8% of respondents agreed the HPI valuation should be valid for 3 months. This was significantly higher than any other response. The general view was that this was the most appropriate and fair term. A full breakdown of responses can be found in Annex B.

Question 5: Are there any specific circumstances where local authority HPI data may not be appropriate and regional HPI data or other would be preferable?

View of respondents

There was a total of 136 responses to this question. Most of the respondents suggested that HM Land Registry’s (HMLR) Local Authority level HPI data would be the most appropriate or accurate. Some respondents suggested in certain circumstances such as where a development is located close to the boundary of different local authority areas, or where local data is not comparable/available regional values may be preferable.

Some also suggested due to the inaccuracies around HPI valuations, it should be replaced with a method such as a pre-set inflator or RICS valuations.

Government’s response to questions 3, 4 & 5

The government agrees that a 3 month valuation period is an appropriate and fair term, and should, in most circumstances, provide sufficient time to process a staircasing transaction. We will therefore be proceeding with this proposal.

A number of respondents suggested that a pre-set annual inflator, agreed at point of sale, would be preferable and easier to implement. The government believes this approach is likely to result in the shared owner over or under paying for additional shares, undermining the fairness of the scheme. This approach will not be pursued.

The government did not receive sufficient evidence to demonstrate that local authority level HPI data would be inaccurate or inaccessible and therefore will not be permitting use of regional HPI or other data.

Question 6 & 7: Is there a risk that 1% gradual staircasing will conflict with housing associations charitable obligation to sell assets at best value? If yes, please provide evidence.
a. Yes
b. No

View of respondents

There was a total of 170 respondents to question 6. Although the question was fairly evenly split, the general consensus was yes.

The majority of respondents suggested that HPI valuations would be less accurate than a RICS one and therefore could result in housing associations selling new Shared Ownership homes at less than best value, conflicting with their charitable obligations (if they are registered charities). Many respondents asked us to seek guidance from the charities commission on this issue. There were also other proposals such as the requirement to use a RICS valuation every 3 years to ensure values remained accurate.

Government’s response to question 6 & 7

The government acknowledges the concerns from housing associations that are registered charities and has further explored this issue. Section 117 of the Charities Act sets out clear requirements that charities must meet when they are disposing of land to ensure the transactions are managed in the charities’ best interest. This includes the requirement to obtain and consider a written report from a qualified surveyor.

However, the Charities Act also excludes certain land disposals from section 117, such as disposals given authority under an Act of Parliament or other statutory provision or scheme. Housing association disposals are governed by the Housing and Regeneration Act 2008 and therefore disposals are exempt from a number of the requirements in section 117 of the Charites Act, including the requirement to obtain and consider a written report from a qualified surveyor.

The government believes that using local authority level HPI should enable providers to continue to receive good value for their homes. However, where providers remain concerned about the value of a 1% staircasing transaction, they will be permitted to obtain a RICS valuation at their own expense. These costs should not be passed on to the shared owner.

Question 8: Do you have any further views on how best to implement the 1% gradual staircasing model?

View of respondents

There was a total of 147 respondents to this question. Some respondents suggested the process may be disproportionately costly and burdensome for the shared owner. They were concerned the legal fees and a new requirement to register 1% staircasing with HMLR could not only be a disincentive to staircase, but also dampen the consumer experience. These respondents suggested the government remove both the legal fees and any requirement to update HMLR at each 1% increment.

Some respondents also flagged the need for readily available information on 1% staircasing so that the implications of buying more of the home are transparent and shared owners can make well informed decisions.

Government’s response

The government is determined to ensure that the new model removes many of the barriers associated with staircasing. We agree that we need to explore how we can address remaining fees and processes that would make 1% gradual staircasing prohibitively expensive. Current shared owners are not required to register staircasing transactions with HMLR, so we will not expect this for 1% staircasing either, keeping the process simple and costs down. Providers will continue to issue a Memorandum of Staircasing following each transaction and registration with HMLR will be optional.

We believe legal advice should also be accessible and at a fair price. The specialist nature of Shared Ownership means that finding an experienced legal practitioner can at times be more difficult than if buying a home on the open market. The introduction of the new model provides a good opportunity for government to work with the legal sector to ensure shared owners have access to, and are receiving the right service. To that end, we can confirm we will be working closely with the Law Society to explore how we can best ensure shared owners are receiving the right information, and where possible, identify how we can streamline the legal process to help reduce fees. This work will commence shortly.

The government acknowledges that an increased number of staircasing transactions will result in increased administration costs for providers. We have prohibited fees and we do not expect these costs to be passed on to the consumer. Government expects providers to consider efficient systems and automated processes to help manage these costs.

Updates to repairs and maintenance

Question 9 & 10: Should any of the specified repairs, inside the home, not be within scope for this policy? Please give your reasons.
a. installations for the supply of water
b. installations for the supply of gas and electricity
c. installations for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity) pipes and drainage
d. installations for space heating and heating water
e. the suggested scope is fine

View of respondents

There was a total of 127 respondents to this question. The majority view was that the general scope we had proposed was fine (e). However, a few respondents suggested the installations of sanitation should be removed (c).

Many respondents agreed the suggested scope was fit for purpose. They believe it covers the repairs shared owners are likely to face during their first 10 years of home ownership. The scope is also clear and easy to understand.

Some respondents indicated any items that are subject to damage by way of wear and tear, such as installations for sanitation, should not be included within the scope. There was concern that repairs such as these could result in increased disputes and make the scheme more costly to deliver.

A few respondents expressed concern around items that require annual servicing. The view was that servicing should be the responsibility of the shared owner, and where a shared owner has failed to ensure routine serving, the provider should not be liable.

Respondents have also asked the government to provide more clarity on the policy including a list of what repairs are and are not included.

Question 11: Are there any further repairs, inside the home, that should be within scope for this policy?

View of respondents

There was a total of 148 responses to this question. The majority of respondents did not think any further internal repairs needed to be within scope.

A few respondents suggested all internal repairs, excluding cosmetic repairs, should be within scope.

Government’s response to question 9, 10 & 11

The government has been clear that the new model will protect shared owners living in new build homes from unexpected repair costs. Providers delivering the new model will be required to support shared owners with the cost of repairs for the first 10 years of the building’s life.

The majority of respondents supported the scope proposed for general repairs inside the home and did not see the need for any further inclusions or exclusions as it covered the general issues that most shared owners will face. We will therefore not be making any changes to the scope of the policy.

The landlord’s responsibility for general repairs inside the home will be limited to support with the cost of repair of faulty installations which are not covered by warranty or guarantee pertaining to the particular components. As confirmed in the consultation, this will not include wear and tear. We recognise that some providers are also concerned about misuse. We can confirm that disrepair as a result of deliberate or avoidable damage will be a breach of lease terms and will not be claimable by the shared owner. This will also include where a shared owner has failed to ensure appropriate routine servicing and maintenance arrangements (e.g. boiler servicing).

We are aware that there are calls from some providers for government to publish a definitive list of the specific repairs included within the scheme. It is understood that this could help reduce scope for dispute. The government believes a list is unlikely to be exhaustive of the issues shared owners face which could result in equal or greater dissatisfaction from shared owners. We will therefore not be adopting this approach. The scope for general repairs inside of the home is aligned with the repairing obligations set out in the Landlord and Tenant Act 1985. The vast majority of providers have experience in interpreting this so we will expect consistent and fair application when claims are made by shared owners. Disputes will be managed using the provider’s existing dispute handling process.

Question 12 & 13: Do you agree with the maximum costs (£500) that can be claimed by a shared owner for essential repairs inside of the home? If no, then what should the maximum be? Please give your reasons.
a. Yes – should be capped at £500
b. No – should be capped at £250
c. No – should be capped at £750
d. No – should be uncapped
e. No – other amount

View of respondents

There was a total of 206 responses to question 12. Over 40% were in agreement of a £500 cap. This was more than double the response rate for any other option. Those who had agreed with a £500 cap stated that this was a fair and reasonable amount.

A few respondents suggested the cap should be lifted as the cost of some repairs exceed £500.

A further few providers who responded to the question explained their modelling and data had reflected the average cost of a repair being less than £500 so the cap should therefore be reduced.

Government’s response to question 12 & 13

The government agrees that £500 is a fair and reasonable amount and will therefore be continuing with this proposal.

Question 14: Do you agree with the maximum roll over period (1 year) for unused repairs expenditure? If not, then what should the roll over period be?
a. Yes – you should be able to roll over 1 years’ worth of expenditure (i.e. £500)
b. No – repair expenditure should be used within the given 12 month period
c. No – you should be able to roll over 2 years’ worth of expenditure (i.e. £1,000)
d. No – you should be able to roll over for 3 years or more (i.e. £1,500 or more)

View of respondents

There was a total of 192 response to this question. Almost 45% of respondents suggested that the repair expenditure should be used within a given 12-month period.

The remaining 55% of respondents suggested there should be a roll over period of 1 year or more.

Government’s response

The government believes there should be a roll over period to help to support shared owners in circumstances where annual repairs costs exceed £500 and they had claimed less than £500 in the previous year. The majority of respondents agreed with this principle of a roll over period. We believe enabling shared owners to roll over 1 years’ worth of unused repairs (i.e. £500) is fair and reasonable amount so therefore will be continuing with the 1 year roll over proposal.

Question 15: What process should be put in place to enable shared owners to reclaim eligible repair expenditure from their landlord and resolve disputes?

View of respondents

There was a total of 184 responses to this question.

The responses received were varied but the general theme was for any final process to be simple, easy to manage and avoid creating additional administrative burdens for providers.

Specific suggestions included:

• Shared owners receiving clear and consistent guidance on how to claim a repair expense. Respondents informed us this could ensure transparency whilst also familiarising shared owners with the process to avoid disputes during future claims.
• Some respondents also stated they would prefer for all repairs to go through the provider in the first instance. This will allow the provider to assess the repair and if possible, carry out the repair themselves. Where this is not possible, the shared owner must provide multiple quotes to evidence value for money and the repair.
• In the event of a dispute, respondents proposed an initial disputes resolution service via providers and escalating to the housing ombudsman if necessary.

Question 16: What steps should be taken to ensure claims are genuine?

View of respondents

There was a total of 180 responses to this question.

The responses received for this question were also varied but the overarching theme is for proof of repairs. Many respondents suggested shared owners should provide some form of evidence to ensure the claims are genuine. This includes before and after photos, invoices and proof the warranty has been pursued.

Specific suggestions included:

• Providers should have a right to inspect and assess the repair. This would ensure the repair is genuine and necessary.
• Shared owners should receive multiple quotes to ensure value for money
• In the event of a repair, shared owners should only use registered and approved contractors. This will maintain a high quality and good standard of work.
• Where possible, the providers should use their inhouse repairs service.

Government’s response

The government agrees that we need a simple process to enable shared owners to claim a repair. We want to ensure this the new model enhances the experience for shared owners - a complex, administratively intensive approach would be counterproductive. The government also doesn’t want to make the scheme prohibitively difficult for providers to manage.

However, we need to ensure the £500 allowance is being used to support genuine repair claims and delivering value for money. To that effect we have published guidance on how we expect providers to manage a claim (see Annex A). In summary, shared owners will be required to use a Trustmark approved tradesperson, and evidence repair work and costs (with invoices and photos) in order to be eligible to reclaim costs. Repairs will need to be approved or rejected by providers within 7 days and paid out within 21 days of approval.

We also recognise that some providers have been calling for additional flexibility to use their internal repair service or Direct Labour Organisation where they have one in place. It has been suggested that this could result in a cheaper, more efficient service for the shared owner and would be easier for some providers to manage. We therefore confirm we will permit providers to offer the service of their internal repairs team if they have one. Use of this service will be completely optional for the shared owner who can opt to use an alternative Trustmark approved tradesperson if preferable.

Section 106 developer contributions

Question 17 & 18: Do you agree that we should apply the same transitional arrangements to Shared Ownership as the one proposed for First Homes? Please give your reasons.
a. Yes
b. No

View of respondents

There was a total of 175 responses to question 17. The majority of respondents agreed with the transitional arrangement proposed (a).

Many respondents felt that the proposed arrangements would maintain uniformity and ensure planned sites remain viable. However, some respondents called for more clarity on the arrangements and how Local Authority flexibilities will work in practice.

Conversely, some respondents believe more time is required as the arrangements proposed could result in the need for new viability assessments and delay to delivery.

Government’s response to question 17 & 18

The consultation confirmed our intention to set out in future planning policy that all new Shared Ownership homes delivered through s106 developer contributions will be required to be based on the new model.

The Secretary of State for Housing, Communities and Local Government will lay a Written Ministerial Statement before Parliament, in due course, which will outline changes to national planning policy to support implementation of the new model through s106 sites. These changes will take effect on a date to be specified.

The government recognises there have been calls for more clarity on the potential s106 transitional arrangements. We therefore can confirm that we intend to put the following transitional arrangements in place to ensure, as far as possible, that the planned pipeline of delivery will not adversely be impacted by this new expectation:

• Where significant work has already been undertaken to progress a planning application, including where there has been significant pre-engagement with a local authority on the basis of a different Shared Ownership model, we will set an expectation that the local authority will have flexibility to accept the old model, although they will be expected consider whether the new model could be easily applied instead and therefore be of benefit to new residents.

• The new requirement for the new for Shared Ownership model will not apply to sites with full or outline planning permissions already in place or determined within 6 months of implementation of the new planning policy (or 9 months if there has been significant pre-application engagement), although local authorities should allow providers to deliver the new Shared Ownership model if they wish to do so.

• Local or neighbourhood plans submitted for Examination before the implementation of the new planning policy or that have reached publication stage before implementation and are subsequently submitted for Examination within 6 months of implementation will not be required to reflect the new model for Shared Ownership.

However, there will not be any transitional arrangements for homes funded through the AHP 2021-26. As confirmed in September 2020, all Shared Ownership homes delivered through this programme must be based on the new model. This includes homes funded with Recycled Capital Grant Funding during the AHP 2021 to 26 period.

Question 19: Are there any further delivery issues we should consider ahead of implementing this approach?

View of respondents

There was a total of 158 responses for this question. Please note many respondents misinterpreted the content of this question and gave answers relating to delivery issues for the entirety of the new model rather than the transitional agreements.

The majority of respondents voiced concern that the cost of delivering the new model is likely to impact deliverability and viability.

Other suggestions included:

• Government should provide further clarity on how we expect the new model to be delivered.
• Government introduces further flexibility for the planning transitional arrangements.

Government’s response

The government remains committed to the delivery of Shared Ownership homes. Through the new £11.5 billion Affordable Homes Programme we will support the continued development of thousands of affordable homes, including Shared Ownership, and will unlock a further £38 billion in public and private investment in affordable housing.

In designing the new programme, we have considered the limited additional cost of delivering the new model and would expect providers to consider these costs when applying for funding. However, providers must also be careful to not make overestimated assumptions, particularly on new build repair costs in initial years where repairs should be a rare occurrence and would usually be covered by a warranty. Careful consideration should also be made to assumptions on initial tranche sold. Although the smaller initial stake could mean a lower capital receipt, many purchasers will continue to access Shared Ownership at a higher entry point, reducing grant required.

This consultation response provides further clarity on how we expect the new model to be delivered. For further support delivering the new model, Homes England will be publishing a new model lease in May.

Throughout the consultation there were also a number of respondents who raised concerns about dangerous cladding on existing buildings and the costs of remediation falling to shared owners.

To protect leaseholders, including shared owners, we are providing direct funding for the remediation of unsafe cladding from buildings over 18 metres in height. This is in line with longstanding expert advice on which buildings are at the highest risk.

Buildings below 18 metres will not carry the same inherent risk as a building above 18 metres, however some will need remediation, so to give residents in lower-rise buildings peace of mind, we are also establishing a generous scheme to ensure, where required, cladding removal can take place on buildings between 11 and 18 metres. Shared owners in buildings between 11-18 metres will be eligible for this scheme – we are prioritising spending where risk is the greatest regardless of the leaseholders’ background.

We are also committed to making sure no leaseholder in these buildings will have to pay more than £50 per month towards this remediation.

This provides a proportionate approach and prioritises action on buildings 6 storeys and above, where risk to multiple households is greater when fire does spread.

It will also mean mortgage providers can be confident that properties will be worth lending against where cladding removal is needed.

This builds on steps already taken to support leaseholders, including £1.6 billion of funding to remediate unsafe cladding, the £30m waking watch fund to help end excessive costs and new legislation in the Building Safety Bill which will ensure homes are made and kept safer in future.

Further, the Building Safety Bill will bring about a fundamental change in both the regulatory framework for building safety and construction industry culture, creating a more accountable system to ensure a tragedy like Grenfell can never happen again.

Annex A: Policy overview - the new national model for Shared Ownership

Overview

1. Shared Ownership aims to help people overcome the income and deposit barriers to home ownership. Under a Shared Ownership lease, the leaseholder buys a long lease but only pays for a ‘share’ of the property upfront. As the leaseholder has not paid the full market value of the property, they pay a monthly payment relating to the percentage they have not paid for. The homes are provided using the Homes England model Shared Ownership lease.

2. To be eligible for Shared Ownership purchasers must:

• Be at least 18 years old
• Have an annual household salary of less than £80,000 per annum (£90,000 in London)
• Demonstrate they would otherwise be unable to purchase a property suitable to meet their housing needs on the open market
• Demonstrate they can afford and sustain the purchase
• Not own another home in the UK or abroad

3. We have introduced 4 key changes to the new model for Shared Ownership. The changes are as follows:

• We have reduced the minimum initial stake from 25% to 10%.
• We have introduced a new 1% gradual staircasing process and a new valuation methodology. We have also reduced standard minimum staircasing from 10% to 5%.
• We have introduced a new 10 year period during which the landlord will support the shared owner with the cost of repairs and maintenance in new build homes.
• We have reduced the resale nominations period from 8 weeks to 4 weeks.

4. The new model will apply to all new grant funded Shared Ownership homes delivered through the Affordable Homes Programme 2021-2026 and Shared Ownership homes delivered through Section 106. This includes Shared Ownership delivered as part of Rural Affordable Housing, Older Persons Shared Ownership (OPSO) and Home Ownership for people with Long Term Disabilities (HOLD). Rural and OPSO restrictions will continue to apply. It is to be noted HOLD schemes are usually older homes purchased on the open market on a shared ownership basis. HOLD homes will qualify for the 10-year repair support period only if they are purchased during the first 10 years of the property being built where they will be covered for the remaining term.

5. Purchasers can buy between 10%-75% of a new build Shared Ownership home based on a percentage of the full market value of the property. Purchasers should be encouraged to buy the maximum share that they can afford. Providers must sell shares flexibly (e.g. not just to the nearest 10%). This should take into account the specific circumstances of the purchaser.

6. The rent level is set by the provider. The annual rent at initial sale must be no more than 3% of the value of the property in the ownership of the provider. Rents will then increase annually by no more than RPI + 0.5%.

7. All shared owners should have the option to increase their share in their home, should they wish to do so. Shared owners will be able to staircase to 100% ownership except where specific restrictions apply, such as in rural and OPSO schemes.

8. It is important that prospective purchasers are aware of the responsibilities associated with becoming a shared owner and have a good understanding of both the initial and ongoing costs of managing a Shared Ownership home. Providers will therefore be required to produce an easy to read, key information document prior to a sale. This will highlight key responsibilities, processes and costs. This should be issued to all new potential shared owners at an early stage during the sale process to allow them to make an informed decision. Homes England and GLA will be providing further guidance on what this should look like in due course.

9. All new leases on new build Shared Ownership homes must be issued with a minimum lease length term of 990 years. The one exception to this policy is homes delivered through the Home Ownership for People with Long-Term Disabilities (HOLD) scheme. For homes delivered through the HOLD scheme with funding from the AHP 2021-26, a minimum lease length term of 125 years applies. As homes delivered through the HOLD scheme are purchased on the open market, this is to ensure applicants have the maximum possible flexibility in choosing a home that meets their needs. Providers offering homes through the HOLD scheme will still be expected to offer up to the maximum possible lease term.

10. The next section sets out further detail on the key changes to the standard model.

Staircasing

11. Shared owners wishing to buy more of their home can do so at any time using the existing staircasing process. This process will enable shared owners to purchase 5% or more at the prevailing market value as assessed by an independent RICS registered surveyor.

12. In addition to being able to staircase in 5% or greater amounts, shared owners will have the option to buy 1% each year with heavily reduced fees. The price of each 1% share will be based on an estimated valuation linked to the original purchase price, adjusted each year upwards or downwards in line with local House Price Inflation. Landlords will be prohibited from charging administration fees on shares bought as part of this gradual staircasing model.

13. Key details are as follows:

Valuation

• Providers initially will be required to use the original RICS valuation (i.e. the original purchase price of the home) as the baseline valuation. Each year, the landlord will use the latest available House Price Index (HPI) data for the appropriate local authority and property type (published by HMLR) to adjust the valuation upwards or downwards and produce an up to date valuation for shared owners who wish to purchase an additional 1% of their home via gradual staircasing.
• Full UK HPI data can be found at landregistry.data.gov.uk. This website enables you to track the index by local authority for both monthly and annual change for all property types. Providers must ensure they use the correct local authority and property type when producing an HPI valuation.
• Landlords must provide shared owners with this updated valuation (for the purposes of 1% gradual staircasing only) at least once per year, and at any other point the shared owner requests to purchase an additional 1%. The landlord must demonstrate how the estimated valuation has been calculated.
• HPI valuations will be valid for a maximum of 3 months at which point the provider will need to produce an up to date valuation using latest available data. This is in line with the current valuations process.
• There will be no right to appeal an estimated valuation. If unhappy then the shared owner can opt to use a RICS valuation – this will be at the cost of the shared owner.
• The landlord will also have the right to use a RICS valuation where they have significant concerns about the accuracy of an HPI valuation. This will be at the cost of the landlord. This cost should not be passed on to the shared owner.
• Where a RICS valuation is used (as above) or at any point a shared owner staircases in larger amounts (5% or more with a RICS valuation) this new valuation will become the base valuation, adjusted upwards or downwards using local HPI data for the remaining years. Fees
• Providers will be prohibited from charging a fee for producing an HPI estimated valuation.
• Providers will be prohibited from charging any other administrative fees on the gradual staircasing model.
• The provider and shared owners will each remain responsible for their own legal fees if they choose to get legal advice/representation.

Property eligibility

• Gradual 1% staircasing will be applied to new Shared Ownership homes and homes where a resident has accessed Shared Ownership through the Right to Shared Ownership.
• The gradual staircasing offer must be available for a minimum of 15 years.
• Shared owners will not be able to roll over or accumulate the gradual staircasing offer to purchase in future years – it is limited to max of 1% each year.
• A full 15-year term of 1% gradual staircasing should be available on all new Shared Ownership homes funded by the Affordable Homes Programme 2021 to 2026. A new 15 year term should be offered to new shared owners on resale.

General

• Rent will be reviewed following each staircasing transaction, including 1% staircasing, to take into account the acquired percentage.
• Shared owners will receive a Memorandum of Staircasing following the purchase of each additional share.
• Providers should offer a referral to an Independent Financial Adviser when a customer wishes to purchase a 1% share

Updates to repairs and maintenance

14. We have introduced a new 10-year period, during which the shared owner will receive support from their landlord to pay for essential repairs. Following this 10-year period, or if they staircase to 100% ownership before that time, the purchaser will take on full responsibility for all repairs and maintenance.

15. Key details are as follows:

External and structural repairs

• Shared Ownership landlords will be responsible for the cost of essential repairs required to the external fabric of the building and structural repairs to walls, floors, ceiling and stairs inside of the home - but only where the repair is not covered by the building warranty or any other guarantee pertaining to the particular components. Any work required that is covered under a warranty/guarantee should be claimed through the policy by the policy holder.
• Responsibility for carrying out the structural repairs will remain with the building owner for flats or, in some cases, the shared owner for houses.
• Where applicable, service charges will still be expected to cover the cost of applicable services, general maintenance and upkeep of the building (e.g. cleaning communal areas, communal lighting and heating, concierge lift servicing, fire equipment). Shared owners will remain 100% responsible for service charges.
• Landlords will be expected to set up a sinking fund for the long-term upkeep of flats from the outset. In calculating the annual sinking fund charge, landlords should not factor in any external and structural repair work, expected or unexpected, within the first 10 years. Sinking fund contributions cannot be used for any works, expected or unexpected, within the first 10 years.

General repairs and maintenance allowance

• Shared owners will able to claim up to a maximum of £500 in repairs and maintenance costs each year to support with the repair or replacement of (if faulty and not covered by warranty):
  • installations in the flat or house for making use of the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), pipes and drainage
  • installations in the flat or house for space heating and heating water
• Any work required that is covered under a warranty/guarantee should be claimed through the policy by the policy holder.
• Any portion of repair and maintenance costs over and above £500 will be the responsibility of the shared owner.
• A maximum of £500 worth of unused repairs expenditure can be rolled over into a following year. This will help to protect shared owners in circumstances where annual repair costs exceed £500 and they had claimed less than £500 in the previous year. The accumulated allowance should be transferred on a transfer of ownership (resale).
• Shared Ownership landlords will be responsible for assessing whether repairs claimed are essential and genuine. The landlord will have the right, by exception, to inspect the property if deemed necessary.
• The landlord will not be liable for repairs where there has been a breach of lease such as deliberate or avoidable damage. This includes where shared owners have failed to ensure appropriate routine servicing and maintenance arrangements (e.g. boiler servicing) where this is their responsibility under the terms of the lease.
• The landlord will not be responsible for carrying out any cyclical works inside the home (e.g. pre-planned replacement/refurbishment of kitchen/bathroom or decorations).
• Normal health and safety requirements (e.g. gas servicing, electrical testing) will remain the responsibility of the shared owner.

In delivering the scheme, landlords will be expected to:

• Give the shared owner choice in who they can employ to carry out repairs. Shared owners will be permitted to use any Trustmark approved tradesperson. It may prove helpful for landlords to provide shared owners with a list of approved qualified professionals at point of entry. This could both help to improve the consumer experience and manage quality of work. This list may include the landlord’s in-house repairs management team or contractors but where possible, should include alternatives to encourage choice.
• Introduce systems (or use existing systems) to enable shared owners to notify their landlord of work required prior to it being carried out, and again when completed. Landlords may want to consider a digital system if it proves most efficient.
• Explain clearly and transparently to relevant shared owners what information and/or evidence is required to submit a repair claim.
• Approve/reject a repair claim within 7 days of being notified of a completed eligible repair, provided it is supported by the required information and/or evidence. Landlords will be expected to approve/reject claims in a fair and consistent manner. Landlords may also choose to include a pre-approval stage at initial notification (prior to work being carried out) to help manage disputes.
• Reimburse costs within 21 days of an approved completed repair. Landlords will have flexibility in how they wish to reimburse costs (e.g. direct to bank account, credited to a rent account ).
• Where a claim has been declined, set out why in writing within 7 days from receiving supporting information of the claim, advising of the right to dispute the decisions and setting out the complaints handling process.
• Give reasonable notice of a property inspection (if required).
• Update the shared owner of their remaining allowance following an approved claim.
• In the event of an emergency repair, the landlord should employ an alternative, streamlined process to ensure repairs are not delayed and result in further damage.
• Prior to any purchase or assignment, clearly outline the landlord’s policy on repairs management and how to claim repair expenditure within the first 10 years of the lease.

Shared owners will be expected to:

• Check warranties pertaining to particular components and claim through existing policies where covered.
• Appropriately maintain their home and ensure routine servicing and maintenance arrangements are in place (e.g. boiler servicing) and provide evidence of this as requested.
• Notify, and where applicable, seek agreement from their landlord prior to undertaking any work (this may involve sending pictures and description of work that needs to be done).
• Notify landlord once work is completed and provide invoice and any further evidence the RP requires such as full description of works completed, any photographic evidence, relevant information about contractor that completed the work. This must be done within 28 days of work being completed.
• Use Trustmark approved tradesperson or approved panel professionals (if provided & available) to carry out the repair.
• Provide access to the property where the landlord wishes to inspect a repair.

Policy exclusions

• Shared owners will not be able to claim expenditure for DIY repairs, or repairs done by non-professionals.
• Repairs where there has been a breach of lease such as deliberate or avoidable damage will not be claimable. This includes where shared owners have failed to ensure appropriate routine servicing and maintenance.
• The landlord will have the right, at their discretion, to reject repairs claims using any unapproved company which is not part of the Trustmark scheme (only if an approved panel has been provided).
• Repairs or replacements carried out to an improved specification will not be eligible unless unavoidable.

Pre-emption clause and nominations period

16. The current model gives landlords an 8-week period during which they have the exclusive right to market the property. If the landlord does not manage to identify a new buyer to purchase the seller’s share after 8 weeks, the property can then be placed on the open market and sold either through Shared Ownership or outright.

17. The new model will end the exclusive right to market at 4-weeks, giving shared owners greater control over the resales process, if they would prefer to pursue an open market sale.

Annex B: Responses detail

Total respondents

Type of respondent	Number of responses
Organisation - Housing association	86
Organisation - Local authority	54
Organisation - Other	28
Individual	92
Total	260

Question 1

Theme	Total	Percentage
Other answer	13	6.9%
Tighter regulation such as capping interest rates	25	13.2%
Work with lenders to ensure adequate availability of mortgages and shared ownership products	52	27.5%
Tighter and more robust affordability Checks	50	26.5%
Provide evidence or funds and/or mortgage advice to avoid unsecure lending	37	19.6%
Access to independent financial advise	40	21.2%
Using approved or FCA regulated lenders only	14	7.4%
Information for shared owners	26	13.8%
Total respondents	189

Question 2

Theme	Total	Percentage
Other answer	25	21.0%
No significant impact	14	11.8%
The model will result in less viable for providers and lenders	34	28.6%
An increase in debt and/or risk of arrears and possession leading to the lender using the MPC clause	46	38.7%
Lenders and providers should be encouraged to work together to ensure the model works and is fit for purpose	19	16.0%
Total respondents	119

Question 3

Theme	Total	Percentage
Yes	106	49.8%
No - 1 month	5	2.3%
No - 6 months	49	23.0%
No - 12 months	25	11.7%
No - Other	28	13.1%
Total respondents	213

Question 4

Theme	Total	Percentage
Other answer	39	22.2%
3 months is appropriate and fair	84	47.7%
Longer values allow more time in case of any market uncertainty, delays or problems along the way	60	34.1%
Longer values would create less admin burdens for providers	7	4.0%
HPI is not appropriate, it should be scrapped or replaced	7	4.0%
Total respondents	176

Question 5

Theme	Total	Percentage
Other answer (use a pre-set inflator e.g 3%)	7	5.1%
LA HPI data is accurate or most appropriate	63	46.3%
Where there is little LA HPI data or the data is not comparable	24	17.6%
In areas of high value, or areas where the property prices are disparate	14	10.3%
Where a development is located close to the boundaries of differing LA areas	7	5.1%
Where the staircasing is a part of a specialist scheme	2	1.5%
HPI is inaccurate, a different method such as RICS or pre-set inflators should be used	23	16.9%
Regional values should always be used	3	2.2%
AVM should be used for better accuracy	3	2.2%
Total respondents	136

Question 6

Theme	Total	Percentage
Yes	89	52.4%
No	81	47.6%
Total respondents	170

Question 7

Theme	Total	Percentage
Other answer *(e.g. RICS valuation every 3 years)	7	8.6%
No Evidence	42	51.9%
HPI valuations are less accurate and will not allow for homes to be sold at best value	42	51.9%
Further advice/guidance from charities commission required	31	38.3%
Total respondents	81

Question 8

Theme	Total	Percentage
Other answer	8	5.4%
The scheme will be burdensome and costly for shared owner	37	25.2%
Remove fee’s associated with shared ownership	13	8.8%
Remove legal fees or the requirement to update HMLR at every 1%	38	25.9%
Ensure information on 1% staircasing including costs and implications are available for shared owners	34	23.1%
Remove 1% staircasing, either all together or replace with 5% and higher	32	21.8%
Total respondents	147

Question 9

Theme	Total	Percentage
The suggested scope is fine	127	70.2%
installations for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity) pipes and drainage	34	18.8%
installations for space heating and heating water	5	2.8%
installations for the supply of gas and electricity	6	3.3%
installations for the supply of water	3	1.7%
Total respondents	181

Question 10

Theme	Total	Percentage
Other answer	7	5.6%
Suggested scope is fine – it fit for purpose, covers the main issues Shared Owner may face and easy to understand	45	35.7%
More clarity on the policy required	25	19.8%
Shared owner should be responsible for annual servicing of any repairs carried out or removed from scope	16	12.7%
Items liable to or damage by wear and tear (i.e. sanitation) should not be included. It can also lead to additional disputes	21	16.7%
This will increase burden and complexity	12	9.5%
Suggested repairs should be or are covered by warranty or insurance *and/or should not require repair within first 10 years	9	7.1%
All repairs should be included	6	4.8%
All repairs should be excluded (homeowners should be responsible for the upkeep of their homes)	13	10.3%
Total respondents	126

Question 11

Theme	Total	Percentage
Other answer	6	4.1%
None	104	70.3%
Specific internal repairs including floors, walls, windows, doors, ceilings, radiators and all fitting except cosmetic	26	17.6%
All repairs	9	6.1%
Fire safety, gas safety, electric safety checks	5	3.4%
Total respondents	148

Question 12

Theme	Total	Percentage
Yes - capped at £500	89	43.2%
No - capped at £250	34	16.5%
No - capped at £750	7	3.4%
No - should be uncapped	42	20.4%
No - other amount	32	15.5%
Total respondents	206

Question 13

Theme	Total	Percentage
Other answer	15	9.7%
£500 is fair and reasonable	55	35.5%
The amount should be dependent on the repair claim being made (or size/type of home)	8	5.2%
The amount being paid should be proportional to the shares owned	16	10.3%
Internal repairs of the home should not be included	9	5.8%
The cap should be lifted as repairs are likely to exceed £500	24	15.5%
The cap should be lower as our data/modelling show the average annual repair is less than £500	18	11.6%
A lower cap will reduce the potential for fraudulent claims, admin burden and make the scheme more viable	13	8.4%
Total respondents	155

Question 14

Theme	Total	Percentage
Yes – you should be able to roll over 1 years’ worth of expenditure (i.e. £500)	54	28.1%
No – repair expenditure should be used within the given 12 month period	86	44.8%
No – you should be able to roll over 2 years’ worth of expenditure (i.e. £1000)	13	6.8%
No – you should be able to roll over for 3 years or more (i.e. £1500 or more)	38	19.8%
Total respondents	192

Question 15

Theme	Total	Percentage
Other answer	17	9.2%
Evidence of the repairs, proof of more than 1 must be provided	45	24.5%
Disputes process through the landlord’s disputes process or through a process of mediation	30	16.3%
An independent 3rd party such as a RICS valuer or ombudsman to handle the claims and disputes process	46	25.0%
A clear consistent guidance for repairs to ensure transparency and avoid disputes during future claims	69	37.5%
Repairs must go through the provider in the first instance so they able to assess the repair, receive a quote, and if possible, carry out the repair or pay a contractor directly	63	34.2%
An online system or form to log a repair or complaint	17	9.2%
A property manager should be in place to oversee the process	4	2.2%
The landlord to pay the costs either upfront, through a fund or remove from the rent	13	7.1%
Total respondents	184

Question 16

Theme	Total	Percentage
Other answer	26	14.4%
Shared Owner to provide evidence of repair (photo ‘before & after’, invoice & warranty has been pursued)	88	48.9%
Use of a registered or approved contractor only	34	18.9%
Introduce a min period to reclaim costs (E.G. within 1 - 3 months of work being completed)	5	2.8%
Provider has the right to inspect	56	31.1%
Provider approval prior to repair being carried out	12	6.7%
Clear process - agreed in the lease/anti-fraud statement signed	18	10.0%
Provider carry out the repair	22	12.2%
multiple quotes - value for money	12	6.7%
Clearer definition of an essential repair	7	3.9%
Total respondents	180

Question 17

Theme	Total	Percentage
Yes	128	73.1%
No	47	26.9%
Total respondents	175

Question 18

Theme	Total	Percentage
Other answer	24	19.2%
It will maintain uniformity whilst ensuring fairness, efficiency, and viability	62	49.6%
More time is required, an immediate transition could result in a delayed build due to new viability assessments	26	20.8%
Providers will be discouraged from offering shared ownership	4	3.2%
More flexibility or clarity is required	22	17.6%
Ensures consistency between FHs and SO	9	7.2%
Total respondents	125

Question 19

Theme	Total	Percentage
Other answer	29	18.4%
Delivery of the new model will effect viability, cause additional burden and will there require more grant. This causing uncertainty in the sector	79	50.0%
The repairs model is a burden	13	8.2%
The new model should not be implemented/should be paused	3	1.9%
Implementing the new model could lead to inflation of other prices associated with purchasing a SO home	2	1.3%
The leasehold rules and requirements should be changed/reformed	15	9.5%
More transparency when purchasing the scheme, especially around charges and sustainability, lease length and extensions	9	5.7%
The terms of the new model should be applied to the current one	6	3.8%
Shared Owner should be marketed as well as other home buying schemes	1	0.6%
Shared ownership is not a good product, there should be additional reforms, or be replaced with alternative house buying schemes	5	3.2%
Further clarity on delivery is needed	23	14.6%
Further flexibility for the planning transitional arrangements	19	12.0%
Total respondents	158

Please note: in a number of the questions, the total respondents will exceed the total number of responses. This is because in some questions, respondents have given multiple answers.