Can shared owners lose all of their investment in their home if they don’t pay their rent?

If a shared owner is unable to pay their rent then they should contact their housing association directly and they will support and advise them on this. 

If a shared owner is not willing to pay their rent then there are measures in place for the landlord to take possession. Similar processes are in place for when people don’t make repayments on mortgages or loans. 

Legal view: Trowers & Hamlins 

We have explained the status of a shared ownership lease above and noted the potential for the Landlord to enforce their rights where arrears arise by seeking possession using Ground 8 of Schedule 2 to the Housing Act 1988. If the Landlord does get to the stage of a court hearing and can demonstrate that the level of arrears set out in Ground 8 (the equivalent of two months non-payment of rent) is still outstanding as at the date of the court hearing, then the Court is required by law to order possession of the property. In the unlikely event this happens then the shared owner would lose their interest in the property and ownership would return in full to the landlord. They would also lose any capital payment made when the lease was granted.

This is however a very unlikely scenario for a number of reasons:

Firstly as noted above, when using the standard form of shared ownership lease, the Landlord is required to notify the shared owner's mortgage lender before taking any action under Ground 8. The mortgage lender has a primary interest in protecting the lease (as their security for the money they have lent to the shared owner) and will normally in such circumstances step in to reduce the arrears and stop the court proceedings. You should be aware however that any cost incurred by the lender in doing this will be added to the monies owed by the shared owner to its mortgage lender (and the lender may ultimately choose to take steps to repossess the property itself in the case of problem arrears)

Increasingly, shared ownership buyers are requesting that the standard form lease be amended to confirm that the Landlord will not take action to recover their arrears using Ground 8 – the Landlord may instead choose to reply on Grounds 10 and 11 -  which are also linked to non-payment of rent but does allow the Court to consider any surrounding circumstances in choosing whether to award possession of the property to the Landlord; and
 
The majority of shared ownership Landlords will work very hard with their Leaseholders to resolve arrears situations and view the use of Ground 8 very much as a last resort. In addition, standard protocols for possession action followed by both shared ownership landlords and lenders do build in additional notification stages to ensure that all parties are aware of the situation and that there is an opportunity to take action to resolve any issues. Finally, Homes England grant funding agreement prohibits the use of Ground 8 in Shared Ownership leases and will cover all leases funded under the current programme.

As the NHF we are of the view, this ground 8 clause is not unique to shared ownership, it covers significant amount of the general leasehold market, for leasehold properties with ground rents are over £1,000 per year in London and £250 per year outside of London. Housing associations as landlords with a social purpose will act to support residents above and beyond what is provided outside of our sector. For example, the NHF and the Building Societies Associations have come together to highlight support for shared owners during the coronavirus crisis.