- Leasehold means you own a property for a fixed term, but not the land or building it sits on.
- All Shared Ownership homes are leasehold, as this is how the scheme is structured legally.
- As a leaseholder, you’re responsible for service charges, internal maintenance, and following the terms of your lease.
- Leases typically run for decades or centuries, but it’s worth understanding what happens when a lease expires before you buy.
Shared Ownership leaseholds explained
If you’re exploring routes onto the property ladder, such as Shared Ownership, you’ve no doubt come across the term ‘leasehold’. Understanding what this means is essential to making an informed decision before proceeding with a property purchase.
Newlon Living is the Shared Ownership team within Newlon Housing Trust, a charitable housing association founded in 1968. Since 2017, we’ve developed leasehold homes available to buy through Shared Ownership across North and East London, so we know a thing or two about this tenure type.
In this guide, we’re explaining everything you need to know about being a Shared Ownership leaseholder.
What is a leasehold property?
Leasehold is a type of property ownership where you buy the right to live in the property for a fixed term, but not the building or land it sits on – these are owned by the ‘freeholder’ or ‘landlord’. Leasehold is one of the most common types of property ownership in England – most flats are leasehold, regardless of whether they’re sold through the Shared Ownership scheme or on the open market. Houses can be leasehold too, especially if they share spaces or facilities with other homes.
As the owner of a leasehold home, you’ll have a legal agreement, called a ‘lease’, with the freeholder. It sets out:
- The length of the lease (which is usually decades or centuries).
- The leaseholder’s rights and responsibilities.
- The freeholder’s responsibilities.
- Associated costs and fees, including the service charge and any ground rent.
Why are Shared Ownership homes always leasehold properties?
Shared Ownership homes, whether houses or apartments, are always leasehold because you only buy a percentage of the property, usually between 25% and 75% of the full value, and pay rent on the unsold share. The housing provider – such as Newlon Living – owns the remaining percentage, retaining a legal interest in the property.
Offering the homes on a leasehold basis allows for inclusion of the Shared Ownership terms in the lease, such as the rent on the unsold share and the rules for staircasing. When you buy a home from us, you can usually staircase in a maximum of three stages, in addition to the share you initially buy. Find out more in our guide to staircasing.
If you staircase up to 100% ownership, the apartment will no longer be Shared Ownership but will remain a leasehold.
What are the leaseholder’s responsibilities?
In the first instance, you should always refer to your lease to clarify your responsibilities, as lease agreements can vary from development to development. In general, your responsibilities include, but are not limited to:
Service charge
The service charge covers the cost of things like buildings insurance, cleaning and maintaining communal areas, and a contribution to the ‘sinking fund’, which pays for cyclical works, such as decorating shared areas. The actual services covered will depend on your specific building.
Numerous areas of the law govern what service charges we can recover. The Landlord and Tenant Act 1985 outlines what a service charge is, how you must be consulted and how you can query charges levied. Additionally, your lease details when you must pay the service charge. As the leaseholder, you’re required to pay it promptly by direct debit, standing order or any other agreed payment method.
Property maintenance and repairs
As the owner of a Shared Ownership home, you’re responsible for maintenance and repairs within the property. This includes the electrical wiring/fuses, plumbing and heating system.
Council tax and utilities
You’re responsible for contacting the local authority to set up your council tax payments, as well as arranging utilities with the water company and your chosen energy provider.
Contents insurance
While buildings insurance is covered through the service charge, you’ll need to arrange your own contents insurance to protect your belongings.
Using the property as your private residence
You must use the property as your home. You can’t sublet it (unless you own it outright) or use it for Airbnb or any other short-term rental scheme.
Following the terms of your lease
As the leaseholder, you’re required to follow the terms of your lease. This includes the aspects listed above and rules around making alterations and keeping pets. You should always review your specific lease carefully, as failing to follow its terms could result in forfeiture of the lease, meaning the lease is ended and we are within our rights to take back the property.
Visit Newlon Housing Trust’s website for more information, including an overview of your responsibilities as a homeowner and our leaseholders’ handbook.
What are the freeholder’s responsibilities?
Generally, our responsibilities as the freeholder include:
- Structural repairs: Including the foundations, roof, rainwater gutters, drains and communal pipes.
- Communal maintenance: Cleaning and taking care of entrance halls, shared corridors and communal areas.
- Cyclical decorations: Repainting and maintaining shared spaces on a regular schedule (usually every seven years).
- Buildings insurance: Arranging insurance for the building structure and common parts.
Whilst we’re responsible for carrying out some repairs, we’ll recharge you via your service charge for your proportion of the costs of communal repairs.
How does leasehold differ from freehold and commonhold?
In the UK, there are three ways to own a home: leasehold, freehold and commonhold.
Leasehold gives you the right to occupy and own your home for the length of your lease, but the freeholder retains ownership of the building and land.
Freehold means you own the property and the land it sits on, with no time limit and no landlord. This is the most common tenure for houses sold on the open market.
Commonhold is a less-used form of ownership, typically for flats, where each owner holds their unit as freehold and collectively manages the shared areas through a commonhold association, with no overall landlord involved.
FAQs about leasehold and Shared Ownership
What happens when the lease expires?
When a lease expires, ownership of the property reverts to the freeholder. We encourage leaseholders with 80 years or less remaining on their lease to consider extending it. We also recommend seeking independent financial advice before a lease extension. Visit the Leasehold Advisory Service for further guidance.
Can I extend my Shared Ownership lease?
Yes, it’s possible to extend the lease on a Shared Ownership home. Owners who’ve staircased to 100% have the legal right to a lease extension. However, the Leasehold and Reform Act 2024 grants shared owners the legal right to extend a lease, even if they haven’t staircased to 100%. Although the Act has passed, further consultation and secondary legislation are due to take place before this commences.
If you would like to find out more about the Shared Ownership lease extension process with Newlon Living, contact us on 020 7613 7480 or email lease-extension@newlon.org.uk.
Do I need a solicitor when buying a Shared Ownership home?
Yes, you should appoint a solicitor who specialises in Shared Ownership, as they’re experienced in the nuances of the scheme. They’ll review the terms of the lease and help you understand your obligations as a Shared Ownership leaseholder before the purchase becomes legally binding.
Ready to find your Shared Ownership home?
Now that you understand what leasehold means and what it involves in practice, you can approach your Shared Ownership search with confidence. Browse our current developments and speak to our team to take the next steps.
