Shared ownership tenants who do not own 100% of their homes can nevertheless fully participate in the acquisition of rights of management under the Commonhold and Leasehold Reform Act 2002. The Upper Tribunal (UT) ruled that, on a correct interpretation of the act, shared ownership interests should be viewed as long leases if granted for terms in excess of 21 years.
Tenants of a block of flats had applied under the act to acquire the right to manage the property. Four of the flats in the block were held on shared ownership sub-leases granted by a housing association for periods of 125 years. The sub-leases contained provisions for tenants to acquire increasing proportions of the ownership of their flats over time. However, at the time that the application was made under the act, the sub-tenants owned less than 100% of their homes.
At first instance, the Leasehold Valuation Tribunal (LVT) ruled that invitations to participate in the proposed acquisition should have been served on the housing association, as superior tenant, rather than the shared ownership sub-tenants. That decision was made on the basis that the latter did not qualify as participating tenants under the act as their interests could not be viewed as ‘long leases’ within the meaning of section 72(2).
Differing from the LVT on that issue, the UT acknowledged that the provisions of the act were ‘confusing’. Shared ownership tenants appeared to fall within section 76(2)(a) if the terms of their leases exceeded 21 years. However, shared ownership leases were specifically dealt with by section 76(2)(e) and, under that provision, such tenants would apparently only be viewed as qualifying tenants if they owned 100% of their homes.
The UT found that, on their natural meaning, the provisions should be interpreted as ‘a series of gateways’ through which a right to participate could be established. Thus, if a shared ownership tenant qualified under section 76(2)(a), he was not precluded from doing so by section 76(2)(e). “The tenants under the shared ownership leases held ‘long leases’ under section 76(2)(a) and were the qualifying tenants who needed to be and were served with notice”, the UT concluded.
The tenants’ application to take over management of the block nevertheless failed on the conceded ground that insufficient time had been allowed for the freeholder to serve a counter notice. However, the UT’s ruling that the shared ownership tenants can participate in the process will greatly strengthen the leaseholders’ hand if a further application is made.