Affordable and Social Rented Tenants – Can You Buy A Stake Of Your Home

Affordable housing options are growing!

There is a new Right to Shared Ownership route. Similar to the Right to Buy, tenants of affordable rented and social rented homes can apply to buy an equity stake in their home. Tenants can opt to buy between 10-75% of the equity, with the option to staircase to 100% (save for those houses that restrict staircasing to 100%). Registered providers are required to actively notify their tenants of their RTSO.

Eligibility

Not all houses will be eligible and must have been built with grant funding from the Affordable Homes Programme 2021-2026.

There are various exemptions to the scheme, including where the landlord is a local authority and homes within remote rural areas.

There is also a comprehensive eligibility list, as stipulated on the government website, for the tenant:

1. you are over 18 years old
2. you live in a home where the Right to Shared Ownership applies (see above)
3. hold an un-demoted secure tenancy, an assured tenancy (including an assured shorthold tenancy), or a Localism Act fixed-term tenancy (either an assured shorthold tenancy or a flexible secure tenancy with a fixed-term of a minimum of 2 years). The type of tenancy you have should be clearly stated as part of your tenancy agreement. If you are unsure of what type of tenancy you hold, you should contact your landlord
4. you have been living in your current home for at least 12 months
5. you have been a tenant of a home for Social Rent or Affordable Rent for at least 3 years (this need not have been with the same landlord, or for 3 years in a row)
6. you are not in rent arrears
7. you are not subject to legal proceedings (e.g. a notice of seeking possession has been served)
8. you are not subject to a court order for possession of your home
9. you are not subject to legal proceedings on the grounds of anti-social behaviour
10. you are not subject to bankruptcy proceedings or unfulfilled credit arrangements
11. you meet the Shared Ownership eligibility requirements, including the income requirement (currently an annual gross household income of £80,000 or less outside of London, or £90,000 or less in London), and do not already own a property
12. you are unable otherwise to purchase a home suitable to meet your housing needs on the open market
13. you satisfy immigration requirements

Procedure

There is a clear route to apply for RTSO as follows:

1. Tenant contacts their RP to register their interest in RTSO
2. RP must reply within 4 weeks to state whether or not the home is eligible
3. If eligible, Tenants can apply for the RTSO via the RtS01 form
4. The RP then access the Tenant’s application against the eligibility criteria and must respond with their decision within 8 weeks of receipt of the RtS01 explaining their reasons
5. If the application is successful the RP will invite the Tenant to a meeting to discuss how RTSO works and an estimate of the house price will be given based on comparable properties in the local area
6. The Tenant will then be referred for independent financial advice where an affordability assessment will be carried out to include what equity stake the Tenant can afford
7. The RP must then have a RICs valuation carried out on the property
8. Within 4 weeks of the valuation, an offer notice should be issued and will state:
   a. the value of the home
   b. the size and value of the initial equity stake the Tenant will buying, as confirmed by their affordability assessment
   c. the total rent payable on the equity stake in the home the Tenant is not acquiring
   d. an estimate of the annual service charge, including any sinking fund contributions for major works
   e. the length of the lease term.
9. The Tenant then has 4 weeks to decide whether to accept the offer
10. Instruct solicitors

The type of lease that must be used for all RTSO is the new form of shared ownership lease.

Further details for both tenants and registered providers are available from the government website and the Capital Funding Guide:

• The Right to Shared Ownership: A guide for tenants 
• Right to Shared Ownership: initial guidance for registered providers

If you require further advice on RTSO please get in touch with the Legal 500 recognised Social Housing team at Wilson Browne.