Housing and Building Control Act 1984

Section 12.

SCHEDULE 3Terms of a Shared Ownership Lease

Tenant’s initial share

1(1)Subject to sub-paragraph (2) below, the tenant’s initial share in the dwelling-house shall be as stated in his notice under section 13(1) of this Act.

(2)The tenant’s initial share in the dwelling-house shall be a multiple of the prescribed percentage and shall not be less than the minimum initial share.

(3)The lease shall state the tenant’s initial share in the dwelling-house.

(4)In this paragraph “minimum initial share” means 50 per cent. or such other percentage as the Secretary of State may by order prescribe.

(5)In this paragraph and paragraph 3 below “the prescribed percentage” means 12.5 per cent. or such other percentages as the Secretary of State may by order prescribe.

Tenant’s initial contribution

2(1)The consideration for the grant of the lease (in this Part of this Act referred to as the tenant’s initial contribution) shall be determined by the formula—

(2)The value of the dwelling-house at the relevant time shall be taken to be the price which, at that time, it would realise if sold on the open market by a willing vendor—

(a)where the dwelling-house is a house and the landlord owns the freehold, on the assumptions stated in subsection (3) of section 6 of the 1980 Act;

(b)where the landlord does not own the freehold or (whether or not the landlord owns it) the dwelling-house is a flat, on the assumptions stated in subsection (4) of that section.

and (in either case) disregarding any improvements made by any of the persons specified in subsection (5) of that section and any failure by any of those persons to keep the dwelling-house in good internal repair.

Additional shares

3(1)The lease shall contain provision enabling the tenant to acquire additional shares in the dwelling-house; and the right so conferred shall be exercisable at any time during the term of the lease on the tenant serving written notice on the landlord.

(2)Subject to sub-paragraph (3) below, an additional share shall be as stated in the tenant’s notice under sub-paragraph (1) above.

(3)An additional share shall be the prescribed percentage or a multiple of the prescribed percentage.

(4)Where the tenant claims to exercise the right to acquire an additional share, the landlord shall, as soon as practicable, serve on the tenant a written notice stating—

(a)the amount which, in the opinion of the landlord, should be the amount of the consideration for that share determined in accordance with paragraph 4(1) below on the assumption that the share is as stated in the notice under sub-paragraph (1) above; and

(b)the effective discount on an acquisition of that share for that consideration determined in accordance with paragraph 6(3) below

(5)Where the dwelling-house is a house and the landlord owns the freehold, the lease shall also provide that, on his acquiring an additional share such that his total share will be 100 per cent., the tenant shall be entitled to require the freehold to be conveyed either to himself or to such other person as he may direct; and the right so conferred shall be exercisable at any time during the term of the lease on the tenant serving written notice on the landlord.

(6)As soon as practicable after such a right as is mentioned in sub-paragraph (5) above has become exercisable, the landlord shall serve on the tenant a written notice—

(a)informing the tenant of the right; and

(b)stating the provisions which, in the opinion of the landlord, should be contained in the conveyance.

(7)A conveyance executed in pursuance of such a right as is mentioned in sub-paragraph (5) above—

(a)shall conform with Parts I and II of Schedule 2 to the 1980 Act (terms of conveyance);

(b)shall preserve the effect of the covenant required by paragraph 6(1) below; and

(c)where the lease contains any such covenant as is mentioned in section 19(1) of the 1980 Act, shall preserve the effect of that covenant.

(8)A notice required by this paragraph may be withdrawn at any time by notice in writing served on the landlord.

(9)Any reference in this Part of this Act to a tenant’s total share is a reference to his initial share plus any additional share or shares in the dwelling-house acquired by him.

Additional contributions

4(1)The consideration for an additional share (in this Part of this Act referred to as an additional contribution) shall be determined by the formula—

(2)The said assumptions are that—

(a)the shared ownership lease had not been granted and the secure tenancy had not come to an end; and

(b)the tenant was exercising the right to buy and his notice under paragraph 3(1) above were a notice under section 5(1) of the 1980 Act.

(3)The value of the dwelling-house at the time when the notice under paragraph 3(1) above is served shall be taken to be the price which, at that time, the interest of the tenant would realise if sold on the open market by a willing vendor on the assumption that any mortgages of that interest and any liability under the covenants required by paragraphs 6(1) and 7(1) below would be discharged by the vendor and disregarding—

(a)any interests in or rights over the dwelling-house created by the tenant;

(b)any improvements made by the tenant or any of the other persons specified in section 6(5) of the 1980 Act; and

(c)any failure by the tenant or any of those persons—

(i)where the dwelling-house is a house, to keep the dwelling-house in good repair (including decorative repair);

(ii)where the dwelling-house is a flat, to keep the interior of the dwelling-house in such repair.

Rent

5(1)The lease shall provide that, for any period for which the tenant’s total share is less than 100 per cent., the rent payable under the lease shall be determined by the formula—

(2)The lease shall also provide that, for any such period, if the Secretary of State by order so provides—

(a)the rent payable under the lease as so determined; or

(b)any amount payable by the tenant under the lease which is payable, directly or indirectly, for repairs, maintenance or insurance,

shall be adjusted in such manner as may be provided by the order.

(3)The lease shall provide that, for any period for which the tenant’s total share is 100 per cent., the rent payable under the lease shall be £10 per annum.

(4)In making a determination under sub-paragraph (1) above, the landlord shall take into account all matters which appear to it to be relevant including, in particular, where comparable dwelling-houses in the locality are let on secure tenancies, the rents payable under those tenancies.

(5)The Secretary of State may by order under sub-paragraph (2) above provide for such adjustment as he considers appropriate having regard to the differing responsibilities for repairs, maintenance and insurance of a tenant under a shared ownership lease and a secure tenant.

(6)In this paragraph “rates” includes charges for services performed, facilities provided or rights made available by a water authority.

Repayment of discount on early disposal

6(1)The lease shall contain a covenant binding on the tenant and his successors in title to pay to the landlord on demand the amount specified in sub-paragraph (2) below if, within a period of five years commencing with the acquisition by the tenant of his initial share or the acquisition by him of an additional share, there is a relevant disposal which is not exempted by sub-paragraph (5) below; but if there is more than one such disposal, then only on the first of them.

(2)The amount payable under the covenant is the aggregate of the following amounts, namely—

(a)an amount equal to the effective discount (if any) to which the tenant was entitled on the acquisition of his initial share; and

(b)for each additional share acquired by the tenant, an amount equal to the effective discount (if any) to which the tenant was entitled on the acquisition of that share,

but reduced, in each case, by 20 per cent. of the discount for each complete year that elapses after the acquisition and before the disposal.

(3)The effective discount to which the tenant was entitled on the acquisition of his initial share or an additional share shall be determined by the formula—

(4)A disposal is a relevant disposal for the purposes of this paragraph and paragraphs 7 to 9 below if it is—

(a)an assignment of the lease; or

(b)the grant of a lease or sub-lease for a term of more than twenty-one years otherwise than at a rack rent,

whether the disposal is of the whole or part of the dwelling-house; and for the purposes of paragraph (b) above it shall be assumed that any option to renew or extend a lease or sub-lease, whether or not forming part of a series of options, is exercised, and that any option to terminate a lease or sub-lease is not exercised.

(5)A relevant disposal is exempted by this sub-paragraph if—

(a)it is a disposal of the whole of the dwelling-house and an assignment of the lease and the person or each of the persons to whom it is made is a qualifying person;

(b)it is a vesting of the whole of the dwelling-house in a person taking under a will or on an intestacy;

(c)it is disposal of the whole of the dwelling-house in pursuance of an order under section 24 of the [1973 c. 18.] Matrimonial Causes Act 1973 or section 2 of the [1975 c. 63.] Inheritance (Provision for Family and Dependants) Act 1975;

(d)the property disposed of is acquired compulsorily or by a person who has made or would have made, or for whom another person had made or would have made, a compulsory purchase order authorising its compulsory purchase for the purposes for which it is acquired; or

(e)the property disposed of is land included in the dwelling-house by virtue of section 3(4) or 50(2) of the 1980 Act.

(6)For the purposes of sub-paragraph (5)(a) above a person is a qualifying person in relation to a disposal if he–

(a)is the person or one of the persons by whom it is made;

(b)is the spouse or a former spouse of that person or one of those persons; or

(c)is a member of the family of that person or one of those persons and has resided with him throughout the period of twelve months ending with the disposal.

(7)Where there is a relevant disposal which is exempted by sub-paragraph (5)(d) or (e) above—

(a)the covenant required by sub-paragraph (1) above shall not be binding on the person to whom the disposal is made or any successor in title of his; and

(b)that covenant and the charge taking effect by virtue of sub-paragraph (10) below shall cease to apply in relation to the property disposed of.

(8)The reference in sub-paragraph (4) above to a lease or sub-lease does not include a mortgage term.

(9) For the purposes of this paragraph and paragraphs 7 to 9 below the grant of an option enabling a person to call for a relevant disposal which is not exempted by sub-paragraph (5) above shall be treated as such a disposal.

(10)Subsections (4) to (6) of section 8 of the 1980 Act shall apply in relation to the liability that may arise under the covenant required by sub-paragraph (1) above and that required by paragraph 7(1) below as they apply relation to the liability that may arise under the covenant required by subsection (1) of that section.

Payment for oustanding share on disposal

7(1)The lease shall contain a covenant binding on the tenant and his successors in title to pay to the landlord on demand for the outstanding share an amount determined in accordance with sub-paragraph (2) below if, at a time when the tenant’s total share is less than 100 per cent., there is—

(a)a relevant disposal which is not exempted by sub-paragraph (5) of paragraph 6 above; or

(b)a relevant disposal which is exempted by sub-paragraph (5)(d) of that paragraph (in this paragraph and paragraph 8 below referred to as a “compulsory disposal”).

(2)The amount payable under the covenant shall be determined by the formula—

(3)The value at the time of the disposal of the dwelling-house or the part of the dwelling-house disposed of shall be taken to be the price which, at that time, the interest of the tenant therein would realise if sold on the open market by a willing vendor on the assumption that any mortgages of that interest and any liability under the covenants required by paragraph 6(1) and sub-paragraph (1) above would be discharged by the vendor and disregarding—

(a)any interests in or rights over the dwelling-house created by the tenant;

(b)any improvements made by the tenant or any of the other persons specified in section 6(5) of the 1980 Act; and

(c)any failure by the tenant or any of those persons—

(i)where the dwelling-house is a house, to keep the dwelling-house in good repair (including decorative repair);

(ii)where the dwelling-house if a flat, to keep the interior of the dwelling-house in such repair.

(4)The lease shall also provide that, on the discharge of a liability arising under the covenant required by sub-paragraph (1) above,—

(a)except in the case of a compulsory disposal of part of the dwelling-house, the rent payable under the lease shall be £10 per annum; and

(b)in the said excepted case, the rent payable under the lease so far as relating to the part of the dwelling-house disposed of shall be £10 per annum.

(5)Where the dwelling-house is a house and the landlord owns the freehold, the lease shall also provide that on the discharge of a liability arising under the covenant required by sub-paragraph (1) above,—

(a)except in the case of a compulsory disposal of part of the dwelling-house, any person in whom the tenant’s interest in the dwelling-house is vested; or

(b)in the said excepted case, any person in whom the tenant’s interest in the part of the dwelling-house disposed of is vested,

shall be entitled to require the freehold thereof to be conveyed either to himself or to such other person as he may direct; and a right so conferred on any person shall be exercisable at any time during the term of the lease on that person serving written notice on the landlord.

(6)As soon as practicable after such a right as is mentioned in sub-paragraph (5) above has become exercisable by any person, the landlord shall serve on that person a written notice—

(a)informing him of the right and

(b)stating the provisions which, in the opinion of the landlord, should be contained in the conveyance.

(7)A conveyance executed in pursuance of such a right as is mentioned in sub-paragraph (5) above—

(a)shall conform with Parts I and II of Schedule 2 to the 1980 Act (terms of conveyance); and

(b)where the lease contains any such covenant as is mentioned in section 19(1) of the 1980 Act, shall preserve the effect of that covenant.

(8)A notice required by sub-paragraph (5) above may be withdrawn at any time by notice in writing served on the landlord.

No disposals of part while share outstanding

8(1)The lease shall contain a covenant binding on the tenant and his successors in title that there will be no relevant disposal of part of the dwelling-house, other than a compulsory disposal, at any time when the tenant’s total share is less than 100 per cent.

(2)Any disposal in breach of the covenant required by sub-paragraph (1) above shall be void.

Supplemental

9(1)The lease shall provide that, in the event of a relevant disposal which is exempted by sub-paragraph (5)(a), (b) or (c) of paragraph 6 above, references to the tenant in the provisions of the lease required by this Schedule shall include references to the person to whom the disposal is made.

(2)The lease shall also provide that, in the event of a relevant disposal which is exempted by sub-paragraph (5)(d) of that paragraph, being a disposal of part of the dwelling-house, references to the dwelling-house in the provisions of the lease required by this Schedule shall be construed as references to the remaining part of the dwelling-house.

10(1)Any power to make an order under this Schedule shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(2)Any order under this Schedule—

(a)may make different provision with respect to different cases or descriptions of case, including different provision for different areas; and

(b)may contain such transitional provisions as appear to the Secretary of State to be necessary or expedient.