The updated model leases for the 2021-2026 Affordable Housing Programme were first published in May 2021 and many in the sector are now at the stage of fully considering the practical implications of the new model leases.
So how have the changes been received? The overall response has been positive and, from a user perspective, the new formatting (especially the expanded particulars and the definitions at the start of the lease) is much appreciated. It is also very welcome that the broader changes to the suite of leases have been carried forward to the updated versions of the 2016-2021 model leases as published on the 21 September 2021, creating a more consistent approach across the two programmes.
Whilst some of our clients have been keen to be early adopters of the new model on a voluntary basis, the additional responsibilities created by the 2021-2026 AHP funding requirements in particular the 1% staircasing and the 10 year initial repair period are yet to be introduced at scale.
To help with some of the internal conversations we know are ongoing around the new leases, we have set out below answers to some frequently asked questions which we have received over the last few months.
What are the changes?
A summary of the changes introduced in the new model leases can be found here: https://www.trowers.com/insights/2021/july/the-shared-ownership-leases---affordable-homes-programme-2021-to-2026
Can I still use the old 2016-2021 AHP model leases?
Yes, provided the scheme is part of the 2016-2021 AHP or not grant funded.
You should bear in mind, as flagged above, that the 2016-2021 model leases were also updated on the 21 September 2021, including a slightly updated rent review clause (as indeed were the new model leases) and so you should ensure that the latest version of the relevant lease is used.
Do I need to update older 2016-2021 AHP leases to the new version published in September 2021?
Whilst Homes England recommend adoption of the updated versions from September 2021 onwards, the previous forms remain compliant and providers have not been asked to reissue updated leases where scheme documentation was already prepared prior to the publication of the updated versions.
Do I need to use the new Key Information Documents with 2016-2021 AHP leases?
Whilst it might be considered good practice to do so given that the new Key Information Documents provide more detailed customer focused information, the new, more detailed Key Information Documents found at paragraph 11.3 of the Capital Funding Guide (CFG) do not need to be used on 2016-2021 schemes.
The old Appendix 3 (containing standardised key information in the older model leases) has been removed from the updated versions of the 2016-2021 model lease published in September 2021. However, unlike the new 2021-26 format, the Key Information Document for use with the new form of 2016-21 leases (which can be downloaded at paragraph 11.2.2 of the CFG) currently mirrors the wording of the previous Appendix 3.
When must the new 2021-2026 model leases be used?
All AHP 2021-2026 grant funded schemes (included nil grant schemes under that programme) should use the relevant new form.
What about for Section 106 schemes?
Properties developed as part of new Section 106 Schemes may also be caught. On 24 May 2021 a Ministerial Statement was made to clarify when Section 106 Schemes would be caught. The full statement can be found online and (https://questions-statements.parliament.uk/written-statements/detail/2021-05-24/hlws48) which includes the following:
We recognise that many developers will have been preparing planning applications under different assumptions. The new requirement for the new Shared Ownership model will not apply to sites with full or outline planning permissions already in place or determined (or where a right to appeal against non-determination has arisen) before 28 December 2021 (or 28 March 2022 if there has been significant pre-application engagement).
Where a Section 106 precedent stipulates the form of lease to be used (typically by reference to the Homes England model form of lease) Written Ministerial Statements and the National Planning Policy Framework are material planning considerations rather than binding rules. So local planning authorities would be able to depart from this if they wanted to. There is therefore discretion on the part of local planning authorities.
In general, the new model leases should only start to apply to Section 106 Schemes where the planning was determined after 28 December 2021 (or 28 March 2022 if there has been significant engagement pre-application) and only then if the local planning authority requires it.
It will be worth having an eye on how this develops in practice in the areas you operate in.
Where can I find the HPI index to calculate the value of the 1% additional share?
The UK House Price Index (HPI) datasets can be downloaded from https://landregistry.data.gov.uk/app/ukhpi. You should be wary that the published datasets could vary (both up and down) as and when more sales data becomes available to the Land Registry and so evidence of the index as recorded on the date of the calculation should be kept (e.g. by printing the website as a pdf and saving the same).
The HPI data used should be for the relevant local authority and also the relevant property type (i.e. flat/terraced house/semi-detached/detached). It is important to ensure that the relevant type of property is recorded where provided in the definition of "HPI Index" in the 1% Staircasing Schedule of the lease so that when it comes to preparing the calculation, the person doing so can check which subset index to obtain without having any wider knowledge of other than as included in the lease and any supplementary valuations since the start of the lease.
