The recent County Court judgment in Sovereign Network Homes v Vanessa East has put the spotlight on whether rent demands for shared ownership leases need to comply with the legislation applicable to long leases.
The legal status of shared ownership leases has been the subject of significant legal debate ever since the High Court's 2008 decision in Richardson v Midland Heart, which ruled that a shared ownership lease was a form of assured tenancy.
The Court of Appeal most recently considered this question last year in the context of the statutory right to manage in Avon Ground Rents v Canary Gateway (Block A) RTM [2023]. In Avon, the Court of Appeal ruled that a shared ownership lease met the definition of a long lease set out at section 76 of the Commonhold and Leasehold Reform Act 2002 for the purposes of the right to manage.
In the latest County Court decision of Sovereign Network Homes v East, the implications of the judgment in Avon have been applied to rent demands under shared ownership leases. The shared owner successfully applied to set aside a possession order that had been obtained on the grounds of rent arrears, on the basis that the specified rent had not been correctly demanded using the prescribed form of rent demand required by section 166 of the Commonhold and Leasehold Reform Act 2002 in relation to long leases. This form of demand is more commonly seen in the context of ground rent due under a long lease, with the rent not being lawfully due unless the correct form of demand is used.
It is important to note that as a County Court case, the judgment in Sovereign v East is not technically binding on any other Court. It remains to be seen whether a different County Court Judge, or a higher court, would be persuaded that section 166 was not intended to apply to specified rent payable under a shared ownership lease. However, this decision may be persuasive, particularly as the Circuit Judge who heard the appeal is an experienced housing law expert and it highlights the risk that such claims could be defended unless the prescribed form of section 166 notice has been served when the rent is demanded.
In light of this latest decision, shared ownership landlords may wish to revisit their existing policies and procedures on rent demands.
