Question: can a shared ownership leaseholder extend their lease under the 1993 Leasehold Reform Housing and Urban Development Act?
Shared ownership is viewed by many as an affordable means of stepping onto the housing ladder. It allows leaseholders to acquire a percentage share in a residential property with the option of eventually 'staircasing' increasing percentages until 100% ownership of the property is attained. Shared ownership leaseholders generally have rights equal to those of any other leaseholder.
The 1993 Leasehold Reform Housing and Urban Development Act (the 1993 Act) gave qualifying tenants the right to acquire a leasehold extension of an additional 90 years at no ground rent. However, the 1993 Act appears to exclude a tenant from being a 'qualifying tenant' if they own less than 100% in the property. Or does it?
Defining a 'qualifying tenant' and a 'long lease' in case law
The case of Corscombe Close Block 8 RTM v Roseleb Ltd explored the meaning of 'qualifying tenant' for the purposes of the Right to Manage under the 2002 Commonhold and Leasehold Reform Act (the 2002 Act). In order to be a 'qualifying tenant' the individual must own a 'long lease' of a flat. The Upper Tribunal looked at the definition of 'long lease' in s7 of the 2002 Act, which defines it as follows:
"a lease is a long lease if—
(a) it is granted for a term of years certain exceeding 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant, by re-entry or forfeiture or otherwise,….. (e) it is a shared ownership lease, whether granted in pursuance of that Part of that Act or otherwise, where the tenant's total share is 100 per cent."
The freeholder argued that the shared ownership leaseholders did not qualify as they did not hold 100% of their lease. The Leasehold Valuation Tribunal (LVT) agreed with this argument. However, this decision was overturned by the Upper Tribunal and it was held that the lessees did qualify. David Mole QC in his judgment stated:
"The starting point is always to consider what the most natural meaning of the section is. The definitions in Section 76 (2) (a) to (f) can either be read as a series of gateways; so it is enough to pass through any gate to qualify as a "long lease"…or it can be read as a stack of sieves; so a lease can fall through (a) but then be caught by the specific mesh of (e)."
It was held that a lease could be classed as a 'long lease' if it satisfies any of the definitions listed in Section 76. Therefore, a shared ownership lease will qualify under Section 76 (a) if it is a lease granted for more than 21 years originally. It does not then also have to satisfy S76 (e).
The 1993 Act's definition of a 'long lease' comprises a list that mirrors the list in the 2002 Act definition of a 'long lease'. Therefore, it is considered that a shared ownership leaseholder who holds less than 100% of their lease could equally be a qualifying tenant provided that lease is a lease granted for more than 21 years originally (and they have been the registered proprietor for at least two years prior to serving a lease extension notice).
However, we must be cautious as this point has never been tested under the 1993 Act.