Shared Ownership & Block Management: Complete Guide
A comprehensive guide to shared ownership service charges, staircasing shared ownership, management responsibilities, and shared ownership rights in blocks of flats. Understand how shared ownership block management works, what your shared ownership management company is responsible for, and how to navigate service charges, repairs, and selling your shared ownership property.
What Is Shared Ownership?
Shared ownership is a government-backed scheme that allows people to purchase a share of a property, typically between 25% and 75%, and pay rent on the remaining share to a housing association. It is designed to help those who cannot afford to buy a home outright on the open market, including first-time buyers, existing shared owners, and those returning to home ownership after a relationship breakdown. The scheme applies to both houses and flats, but in the context of shared ownership block management, it is most commonly encountered in purpose-built blocks of flats.
The housing association retains ownership of the share that the buyer does not purchase and acts as the landlord under the terms of a long lease. This lease sets out the obligations of both parties, including the requirement to pay rent on the unowned share and a service charge towards the costs of managing and maintaining the building. The housing association may manage the building itself or appoint a shared ownership management company to carry out day-to-day management on its behalf.
To qualify for shared ownership, applicants must typically have a household income below a specified threshold (currently £80,000 outside London, £90,000 in London), be unable to afford to buy a suitable home without assistance, and not currently own another property. The scheme is regulated by Homes England, and the terms of shared ownership leases have been standardised in recent years to improve transparency and protect buyers. Understanding how shared ownership works in a block management context is essential for making informed decisions about purchasing, budgeting, and exercising your leaseholder rights.
Service Charges in Shared Ownership Properties
The shared ownership service charge is one of the most important ongoing costs that shared owners need to understand. Unlike the rent, which relates to the share you do not own, the service charge covers the actual costs of running and maintaining the building. Here is what you need to know about how service charges work in a shared ownership context.
Who Sets the Service Charge?
The shared ownership service charge is set by the freeholder or the managing agent appointed to run the building. In many shared ownership developments, the housing association is also the freeholder, so it may set the service charge directly or appoint a shared ownership management company to administer it. The charge must reflect the actual costs of managing and maintaining the building and is subject to the reasonableness requirements of the Landlord and Tenant Act 1985. Leaseholders have the right to request a breakdown of the costs and to challenge any charges they consider unreasonable.
Differences From Full Ownership Service Charges
A common misconception is that shared owners pay a reduced service charge in proportion to their ownership share. This is not the case. Regardless of whether you own 25% or 75% of your property, you are responsible for 100% of the service charge. The service charge covers the cost of maintaining the building, not the individual flat, and these costs are the same whether you are a shared owner or a full owner. The only financial difference between shared ownership and full ownership is the rent element paid on the unowned share.
What Is Included?
The shared ownership service charge typically covers building insurance, maintenance and repairs to the structure, roof, and exterior, communal area cleaning and lighting, grounds maintenance, lift maintenance where applicable, fire safety equipment and compliance, management fees charged by the managing agent, accountancy and audit costs, and contributions to a reserve or sinking fund for future major works. Your lease will define the specific items covered, and the managing agent should provide an annual budget and year-end accounts so that you can see exactly how the charge is calculated.
Rent vs Service Charge
It is essential to understand that rent and service charge are two entirely separate obligations. The rent is paid to the housing association on the share of the property you do not own and is typically capped at 2.75% of the value of the unowned share per year. The service charge is your contribution to the running costs of the building. Both are payable under your lease, but they are calculated differently and serve different purposes. When budgeting for a shared ownership purchase, you must account for mortgage payments, rent, and the full service charge to understand your true monthly outgoings.
Staircasing: Buying More Shares
Staircasing shared ownership is the process by which a shared owner purchases additional shares in their property from the housing association. This is one of the key benefits of shared ownership, allowing you to gradually increase your stake in your home over time. Understanding how staircasing works, what it costs, and how it affects your ongoing obligations is important for any shared owner considering this step.
The Staircasing Process
To staircase, you must notify your housing association of your intention to purchase additional shares. The housing association will then instruct an independent valuer to assess the current market value of the property. The price you pay for the additional share is based on this valuation, not the price you originally paid. You can usually staircase in increments of 10% or more, depending on the terms of your lease. Once you have agreed the price, your solicitor will handle the legal process, which involves a variation to your existing lease. The whole process typically takes between eight and twelve weeks.
Costs of Staircasing
Staircasing shared ownership involves several costs beyond the purchase price of the additional share. You will need to pay for an independent valuation, solicitor's fees, and potentially a mortgage arrangement fee if you are borrowing to fund the purchase. Stamp Duty Land Tax (SDLT) may also apply, depending on the value of the transaction and whether you elected to pay SDLT in stages at the initial purchase. It is important to factor in all of these costs when deciding whether and when to staircase, as they can add several thousand pounds to the total expense.
Impact on Service Charges
A question that many shared owners ask is whether staircasing shared ownership reduces their service charge. The answer is no. The shared ownership service charge is based on the actual costs of managing and maintaining the building, and these costs do not change when you increase your ownership share. What does change is your rent, which reduces in proportion to the additional share you have purchased. So while your total monthly outgoings may decrease after staircasing (because your rent is lower), the service charge element remains the same.
Final Staircasing to 100%
When you staircase to 100% ownership, you become the full leaseholder of your property and are no longer required to pay rent to the housing association. Your lease may be varied or replaced at this point, depending on the terms of the original agreement. You will continue to pay the full service charge as any other leaseholder in the building would. In some developments, final staircasing also opens up the possibility of participating in collective enfranchisement or exercising the Right to Manage alongside other leaseholders in the block. It is worth noting that not all shared ownership leases permit staircasing to 100%, particularly in designated protected areas where housing stock must be preserved for future shared ownership purchasers.
Your Rights as a Shared Ownership Leaseholder
Shared ownership rights are broadly the same as those enjoyed by any other long leaseholder under English law. The Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002 apply to shared ownership leases just as they do to standard long leases. Understanding your rights is essential for holding your housing association and managing agent to account.
Right to Information
As a shared ownership leaseholder, you have the right to request a summary of the service charge costs incurred under Section 21 of the Landlord and Tenant Act 1985. You also have the right to inspect the invoices, receipts, and other documents supporting the service charge under Section 22. These rights apply regardless of the size of your ownership share. The managing agent or housing association must provide this information within a reasonable timeframe, and failure to do so can affect the recoverability of the service charge. For a full explanation of your leaseholder rights, see our dedicated guide.
Challenging Service Charges
If you believe your shared ownership service charge is unreasonable, you have the right to apply to the First-tier Tribunal (Property Chamber) under Section 27A of the Landlord and Tenant Act 1985 for a determination on whether the charges are payable and reasonable. The Tribunal can examine whether the costs were reasonably incurred, whether the standard of work was reasonable, and whether the charges comply with the terms of your lease. This right is available to all leaseholders, including shared owners, and the Tribunal process is designed to be accessible without the need for legal representation. You should first raise your concerns directly with your managing agent or housing association before making a formal application.
Right to Manage Considerations
Shared ownership leaseholders can participate in a Right to Manage (RTM) claim on the same basis as any other qualifying leaseholder. The RTM allows leaseholders to take over the management of their building by forming an RTM company, without needing to prove fault on the part of the current manager. However, in buildings where the housing association is both the landlord and the provider of the shared ownership scheme, exercising the RTM can be more complex. The housing association may retain certain obligations under the shared ownership lease that continue even after an RTM transfer, and navigating the relationship between the RTM company and the housing association requires careful planning and, ideally, professional advice from an experienced block management specialist.
Management and Maintenance Responsibilities
Understanding who is responsible for what in a shared ownership block is essential for ensuring the building is properly maintained and that costs are fairly allocated. The division of responsibilities between the housing association, the managing agent, and the individual leaseholder is defined by the lease and, where applicable, the management agreement.
Housing Association vs Managing Agent
In many shared ownership developments, the housing association is the freeholder or head leaseholder of the building. It may manage the building directly using its own staff and contractors, or it may appoint an external shared ownership management company to handle day-to-day management. The managing agent is responsible for collecting service charges, arranging repairs and maintenance, managing contractors, arranging building insurance, and providing financial accounts. The housing association retains overall responsibility for ensuring that the building is properly managed and that the terms of the lease are complied with. If you are unhappy with the standard of management, your first point of contact should be the managing agent, escalating to the housing association if necessary.
Repairs and Maintenance
The lease will typically define the landlord's repairing obligations and the leaseholder's repairing obligations. In most shared ownership blocks, the landlord (housing association or freeholder) is responsible for the structure, exterior, roof, and communal areas of the building, with the costs recovered through the service charge. The leaseholder is responsible for the interior of their own flat, including decorations, fixtures, and fittings. Major works to the building, such as roof replacement or external redecoration, are subject to the Section 20 consultation process under the Landlord and Tenant Act 1985 if the cost exceeds a specified threshold per leaseholder. This consultation process gives leaseholders the opportunity to comment on proposed works and suggest alternative contractors.
Communal Areas
Communal areas such as hallways, stairwells, entrance lobbies, car parks, gardens, and bin stores are maintained by the managing agent or housing association and funded through the shared ownership service charge. The standard of maintenance in communal areas directly affects the quality of life for all residents and the value of individual properties. If communal areas are not being maintained to an acceptable standard, leaseholders should report the issue to the managing agent in writing and, if the problem persists, escalate the matter through the housing association's complaints procedure or seek a determination from the First-tier Tribunal on the reasonableness of the service charge in light of the standard of services provided.
Good shared ownership block management depends on clear communication between the housing association, the managing agent, and leaseholders. At Block Management Company, we work closely with housing associations across the country to deliver transparent, professional management that meets the needs of both shared ownership and full ownership leaseholders in mixed-tenure blocks.
Selling a Shared Ownership Property
Selling a shared ownership property is not the same as selling a standard leasehold flat. The process involves additional steps and obligations that are specific to the shared ownership scheme. Understanding these requirements will help you plan your sale and avoid unnecessary delays.
The Nomination Period
Most shared ownership leases require you to notify the housing association before putting your property on the open market. The housing association then has a nomination period, typically between four and eight weeks, during which it can nominate a buyer from its waiting list. This nomination process gives priority to people who qualify for shared ownership and helps maintain the availability of affordable housing. If the housing association does not find a suitable buyer within the nomination period, you are free to market the property on the open market, usually through a standard estate agent.
Buyback and Resale
In certain circumstances, the housing association may exercise a buyback option, purchasing your share back from you at the current market value. This option is more commonly exercised in areas where there is strong demand for shared ownership properties. If the housing association does not buy back your share, the property is sold as a resale to a new shared owner (if you have not staircased to 100%) or on the open market (if you have staircased to full ownership). Resales can be more complex than first sales because the buyer is purchasing an existing lease with its own history, service charge accounts, and potential issues. Having clear, transparent management records makes the resale process smoother for all parties.
The Management Pack
When selling any leasehold property, including a shared ownership flat, the buyer's solicitor will require a management pack (also known as an LPE1 pack). This pack contains essential information about the management of the building, including current service charge levels, the most recent accounts, details of any planned major works, insurance information, and any outstanding disputes or arrears. The management pack is prepared by the managing agent and is a critical part of the conveyancing process. Delays in obtaining the management pack are one of the most common causes of hold-ups in leasehold sales. For a comprehensive guide to selling a leasehold flat, including what the management pack contains and how to obtain it, see our selling a leasehold flat guide.
Frequently Asked Questions About Shared Ownership
Who pays the service charge on a shared ownership flat?
In a shared ownership arrangement, the leaseholder is responsible for paying the full service charge regardless of what percentage share they own in the property. Even if you only own 25% of the property, you are liable for 100% of the service charge. This is because the service charge covers the cost of maintaining and managing the building and its communal areas, and these costs do not reduce simply because you own a smaller share. The service charge is separate from the rent you pay to the housing association on the share you do not own. Your lease will set out the obligation to pay the service charge and define what it covers, which typically includes building insurance, communal cleaning, grounds maintenance, repairs to the structure and exterior, and contributions to a reserve fund. It is important to understand this distinction before purchasing a shared ownership property, as the combined cost of rent and service charge can be significant.
Can I challenge shared ownership service charges?
Yes, shared ownership leaseholders have the same statutory rights to challenge service charges as any other leaseholder under the Landlord and Tenant Act 1985. You can apply to the First-tier Tribunal (Property Chamber) under Section 27A for a determination of whether the charges are reasonable and payable. Before making a formal application, you should request a summary of costs and inspect the supporting invoices, which is your right under Sections 21 and 22 of the Act. You should also write to your housing association or managing agent setting out your concerns and giving them an opportunity to respond. If the charges relate to major works costing more than a specified threshold, the landlord must follow the Section 20 consultation process, and failure to do so limits the amount that can be recovered from each leaseholder. The Tribunal process is designed to be accessible and affordable, and you do not usually need legal representation to bring a case.
What happens to my service charge when I staircase?
Staircasing, the process of buying additional shares in your shared ownership property, does not directly change the amount of your service charge. The service charge is based on the actual costs of managing and maintaining the building, and your obligation to pay it in full exists regardless of the percentage you own. However, when you staircase, the rent you pay to the housing association on the unowned share reduces proportionally. So while your service charge remains the same, your overall monthly outgoings will change because the rent element decreases as you acquire a larger share. If you staircase to 100% ownership, you will stop paying rent entirely but will continue to pay the full service charge. At that point, your financial obligations are the same as any other full leaseholder in the building. It is important to factor in the ongoing service charge when calculating the affordability of staircasing, as this cost does not diminish as your ownership share increases.
Can shared ownership leaseholders exercise the Right to Manage?
Shared ownership leaseholders can participate in a Right to Manage (RTM) claim in the same way as any other qualifying leaseholder. The Right to Manage, established by the Commonhold and Leasehold Reform Act 2002, allows leaseholders to take over the management of their building without having to prove fault on the part of the current landlord or managing agent. To exercise the RTM, qualifying leaseholders must form an RTM company and serve the appropriate notices. At least half of the flats in the building must be let on long leases, and at least half of those qualifying leaseholders must participate in the RTM company. Shared ownership leases are long leases for the purpose of the RTM legislation, so shared ownership leaseholders count towards the qualifying threshold and can be members of the RTM company. However, the practical dynamics can be more complex in buildings where the housing association is both the landlord and the provider of the shared ownership scheme, and it is advisable to seek specialist guidance before proceeding.
What is the difference between rent and service charge in shared ownership?
In a shared ownership arrangement, rent and service charge are two entirely separate payments that serve different purposes. The rent is paid to the housing association on the share of the property that you do not own. For example, if you own 40% of the property, you pay rent on the remaining 60%. This rent is set by the housing association and is typically capped at 2.75% of the value of the unowned share per year, with annual increases usually linked to RPI or CPI plus a fixed percentage. The service charge, on the other hand, is your contribution towards the costs of managing and maintaining the building and its communal areas. It covers items such as building insurance, repairs, cleaning, lighting, and management fees. The service charge is determined by the actual costs incurred in running the building, not by the housing association alone, and is subject to the reasonableness requirements of the Landlord and Tenant Act 1985. Both payments are obligations under your lease, but they are calculated differently and cover entirely different things.
How do I sell my shared ownership flat?
Selling a shared ownership flat involves a process that differs from selling a standard leasehold property. In most cases, your lease will require you to notify the housing association of your intention to sell before marketing the property on the open market. The housing association typically has a nomination period, usually between four and eight weeks, during which it can find a buyer from its waiting list. If the housing association does not find a buyer within the nomination period, you are then free to sell on the open market through an estate agent. In some cases, particularly where you have not staircased to 100%, the housing association may have a buyback option. When selling, you will need to obtain a management pack from your managing agent, which includes information about service charges, insurance, accounts, and any known issues with the building. This pack is provided to the buyer and their solicitor as part of the conveyancing process. Selling a shared ownership property can take longer than a standard sale due to the nomination period and the additional paperwork involved, so it is advisable to plan ahead and instruct a solicitor experienced in shared ownership transactions.
Need Help With Shared Ownership Block Management?
Whether you are a shared ownership leaseholder seeking clarity on your shared ownership service charge, a housing association looking for a professional shared ownership management company, or a director exploring the Right to Manage for your block, Block is here to help. Our experienced team manages mixed-tenure blocks across the country, providing transparent and professional shared ownership block management services that protect leaseholder rights and maintain building standards.