Shared Ownership Social Landlords… Watch this Space

Landmark Renters Rights Bill set to transform UK housing legislation by summer 2025

The Renters Rights Bill is quickly passing through Parliament and we expect the bill to become an act as soon as summer 2025.

The bill proposes to make many changes to the current laws surrounding rented homes including abolishing fixed term assured tenancies and assured shorthold tenancies; imposing obligations on landlords and others in relation to rented homes and temporary and supported accommodation and the abolition of the Section 21 no fault eviction notice.

The effect on shared ownership leases

A shared ownership lease is where a buyer pays a percentage share of the market value of the property and enters into a lease agreement with the landlord. As they have paid for part of the value of the property, they then pay rent on the percentage share they have not paid for, to the landlord.

Shared ownership leases are currently treated as assured shorthold tenancies for the purposes of obtaining possession where there has been a breach of lease.

Currently, if there is a breach of the lease, landlords can rely on the Grounds in Schedule 2 of the Housing Act 1988 to serve a Section 8 Notice on the leaseholder (and the lender in cases where there is a mortgage).

The landlord can rely on the Section 8 notice to start possession proceedings for up to a year if the breach of lease is not remedied by the leaseholder or the lender. For example, in arrears cases, lenders often clear the arrears on their customer’s behalf to protect their security over the property.

Under the new Renters’ Rights Bill, shared ownership leases of more than seven years will no longer be classed as assured short-hold tenancies. This means landlords of shared ownership homes will no longer be able to serve a notice of seeking possession pursuant to the Housing Act 1988.

So what can landlords do?

Landlords will have to pursue the forfeiture route. This means for everything except rent arrears, they will have to go through the court or tribunal to get a determination that there has been a breach of lease and then eventually start forfeiture proceedings.

There are many considerations for landlords to make in forfeiture proceedings, even in proceedings relating to rent. For example, the landlord must be careful not do anything which would inadvertently waive its right to forfeit, such as accepting payment towards rent arrears or demanding the rent. Should the landlord do so, it is arguable that it has acknowledged the lease as continuing to exist and therefore has waived the right to forfeit for that particular rent quarter.

Now is the time to act

Firstly, landlords should be preparing for the Renters Rights Bill to come into force once passed. They need to ensure :

• their officers are prepared and ready for the changes ahead and understand the forfeiture process,
• what and how to tell their customers and,
• how to avoid the pitfalls of waiving the right to forfeit.

Secondly, the current bill proposes that any Notice Seeking Possessions served under the current laws prior to the bill becoming an act, will still remain valid for the current one year period if the breach if not remedied by the leaseholder or lender.

Now is the time for landlords to be looking at their shared ownership stock and identifying those properties where there are issues with breaches of the shared ownership lease and accumulating debt. Landlords should be following their processes and considering service of a Notice Seeking Possession as soon as possible to reserve the right to commence possession proceedings for up to one year.

The team regularly helps landlords with serving Notices Seeking Possession for shared ownership debt and other lease breaches. We aim to keep costs manageable, often recovering our fees through lease provisions.

If you’re dealing with growing debt in your shared ownership portfolio or have concerns about lease breaches or the potential impact of the Renters Rights Bill, get in touch. We’re happy to offer support and discuss any training you may need.