The Court of Appeal has shed some light on the question of whether a “shared ownership lease” granted for a term of more than 21 years is a “long lease”.
The appeal in Avon Ground Rents Limited and Canary Gateway (Block A) RTM Company Ltd explained whether a “shared ownership lease” granted for a term of more than 21 years is a “long lease” for the purposes of the Commonhold and Leasehold Reform Act 2002 regardless of whether the tenant’s share is 100%.
Avon Ground Rents Limited is the freehold owner of a development. The development comprises two blocks, Blocks A and B, each of which contains a number of flats. In the case of Block A, there are 97 flats. 17 of these are the subject of a head lease in favour of a housing association, Metropolitan Housing Trust Limited, and underlet on separate shared ownership leases for terms greater than 21 years.
Five of the shared ownership tenants have “staircased” (increased their shares) to 100%, but the others have not. The other 80 flats in Block A are either leased to Metropolitan and underlet to social rent tenants or leased under conventional long residential leases.
The Law Commission states that the Commonhold and Leasehold Reform Act 2002 provides that a “long lease” for the purposes of qualifying for the right to manage includes a shared ownership lease where the tenant’s total share is 100%.
In the present appeal, Lord Justice Newey said:
“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.”
The Judge stated:
“Shared ownership leases as defined in the 1993 and 2002 Acts include bespoke agreements made by landlords and tenants, with no restriction on length of term, under which a tenant (or their PRs) may become entitled to a sum calculated as a share of the value of the demised premises. Parliament was legislating for a broader class of shared ownership lease, not a limited statutory model that uses a much longer term of years.”
