Shared Ownership and the Right to Manage

Summary 

In Avon v Canary Gateway (Block A) RTM [2023] EWCA Civ 616, the Court of Appeal held that a shared ownership lease is a long lease within the definition in Section 76 of the Commonhold and Leasehold Reform Act 2002. The Court of Appeal rejected the appeal by the landlord that 12 shared ownership leaseholders were excluded from participating in the statutory right to manage.  

When a shared ownership leaseholder has not ‘staircased’ to 100% but has a lease which was granted in excess of 21 years, they will now likely qualify to take part in the statutory RTM. It is also expected that this decision will extend to leaseholders’ rights under the Leasehold Reform Housing and Urban Development Act 1993 to extend their lease and participate in collective enfranchisement. 

 

What was the case about? 

In November 2020, the Upper Tribunal (Lands Chamber) was of the view that the 12 shared ownership leases were “long leases” within the meaning of s.76(2) of the Commonhold and Leasehold Reform Act 2002. The Upper Tribunal (Lands Chamber) did, however, dismiss the application for the right to manage on other grounds. 

The Court of Appeal considered whether the shared ownership leases, which were not ‘staircased’ to 100%, fell within the definition of a ‘long lease’ in section 76(2) of the Commonhold and Leasehold Reform Act 2002. LJ Newey concluded that: –  

“A lease will be a “long lease” if any of paragraphs (a) to (f) is in point. That suggests that, as the Company contends and the Judge held, a shared ownership lease for a term of more than 21 years will be a “long lease” whether or not the tenant has a 100% interest: paragraph (e) will not be applicable, but paragraph (a) will, and that will suffice… Tenants with long shared ownership leases who have not staircased to 100% will still have an obvious interest in how the premises are managed…” 

 

What is the impact of the case? 

The factors in Section 76 of the Commonhold and Leasehold Reform Act 2002 represented a “series of gateways” in the view of the Court of Appeal. This means that when a leaseholder satisfies one of the factors there is no requirement to meet the others. A shared ownership leaseholder who has not staircased to 100% but has a lease which was granted in excess of 21 years, will now likely qualify to take part in the statutory RTM. 

Right to Manage aside, the case is likely to have wider impacts given the definition of “long lease” in section 76(2) of the Leasehold Reform Housing and Urban Development Act 1993 is identical that in the Commonhold and Leasehold Reform Act 2002. This means that shared ownership leaseholders will now likely be considered to have the right to extend their leases and participate in collective enfranchisement. 

 

What changes could this mean for the sector? 

This case is a significant development for the shared ownership model at a time when the Renters (Reform) Bill 2023 also provides that shared ownership leases will no longer be capable of being assured-shorthold tenancies at law. At the same time, the government appears to have softened on its plan to abolish leasehold property as a tenure with ambitions instead to reform the leasehold sector. 

What the changes present is uncertainty. Uncertainty over long-term sustainability of existing shared ownership stock and uncertainty over potential reforms to come in the future. It will remain to be seen whether this may delay or deter RPs from investing in new low-cost homeownership building projects. 

 

Where can I find the judgment? 

A copy of the judgment is here: https://www.bailii.org/ew/cases/EWCA/Civ/2023/616.html and the Renters (Reform) Bill 2023 is here https://bills.parliament.uk/bills/3462.