The essentials

1. Know which model lease you are on

Which form of lease applies? This should be one of the first questions on any SO scheme. There are numerous live Homes England model leases in general circulation, but under two principal “umbrellas”: the “old” SOAHP 2016 to 2021 form (16/21) and the “new” combined AHP 2021 to 2026 and SAHP 2026 to 2036 form (21/26). The answer usually turns on funding status, but the date and contents of the relevant planning documents for the site can also be the deciding factor.

Grant funded schemes. The applicable lease follows the date of the grant allocation. An RP delivering under SOAHP 2016 to 2021 can still choose to use the 21/26 form, but if it does, it must offer all of the new model provisions. Providers cannot cherry-pick some and not others.

Section 106 schemes with no grant. Read the planning agreement carefully. If it specifies a particular model lease, that is the lease to be used, absent a variation of the planning document. Difficulty arises where the agreement simply requires something less clear, such as “the current form of model lease published by Homes England”: where planning permission was granted before the end of March 2022 the 16/21 form can usually still be used, but where permission came after that date, the 21/26 form must be used.

Non-grant, non-section 106 schemes. No statutory or contractual overlay, but there may be other ‘pressures’, e.g. the requirements of the SO Code (see below at point 9). Ultimately the SO lease must be acceptable to “high street” residential lenders who will naturally expect the SO lease to contain all of the so-called “fundamental clauses”.

Getting this wrong is not a trifling matter - the two forms differ on repairs, staircasing, term, share thresholds and nomination periods, and the differences are all visible to the buyer and their conveyancer, as well as in terms of the provider being in breach of potential grant funding, regulatory and/or private funding requirements.

The 21/26 form introduced:

The new model applies across the AHP 2021 to 2026 and SAHP 2026 to 2036 variants too, including HOLD, OPSO, homes in Designated Protected Areas (see further comments below, including at point 6) and homes bought through the Right to Shared Ownership (subject to the below), and to SO homes funded from 1 April 2021 using Voluntary Right to Buy receipts.

One important change in relation to rented homes funded under the SAHP 2026 to 2036 is that the Right to Shared Ownership is not available – see below at point 12.

The Levelling Up, Housing and Communities Committee warned in 2024 about a two-tier market emerging between 2016 to 2021 stock and 2021 to 2026 stock. With SAHP 2026 to 2036 now underway, the risk is arguably closer to three tiers. So, managing agents, sales teams and income teams all need to know which cohort a given SO home sits in.

2. London is a different regime

The Homes England Capital Funding Guide applies to England outside London. SO in London falls to the Greater London Authority, which publishes its own Capital Funding Guide with its own fundamental clauses. The differences are real and easy to miss on a portfolio deal spanning the boundary:

Anyone bidding, structuring or drafting across both regimes needs to check which guide governs the scheme before assuming a figure.

3. Rent and rent review

Initial rent on the unsold equity is capped at 3 percent of the value of the provider’s retained share at the point of initial sale (2.75 percent in London). The provider’s proposed rent percentage is fixed as part of the initial funding allocation and must be maintained through to completion and initial sale.

Note that SO rents are not subject to the Regulator of Social Housing’s Rent Standard or the government’s policy statement on rents for social housing. The controls come from the funding guidance and the lease, not the rent regime.

On review, the position depends on when grant was allocated:

An RP with a pre-12 October 2023 allocation can still elect to use CPI plus 1 percent.

Homes England’s rules here are more complicated than they look. The answer depends on the funding regime, how the allocation date is fixed (particularly under Continuous Market Engagement or Strategic Partnership arrangements), and the detail in the Capital Funding Guide. Where a portfolio spans several allocations, providers should not assume a single answer applies across it.

Rent review is also where affordability complaints tend to land. A CPI linked uplift on the rent, sitting alongside service charge inflation and a mortgage, is what pushes households past the 40 percent of net income marker used in most affordability assessments.

4. The Initial Repair Period

One of the defining features of the 21/26 lease, and a common source of dispute in practice. During the Initial Repair Period, which runs for a maximum of ten years from the lease start date:

The detail sits in Schedule 6 of the model house lease and Schedule 9 of the model flat lease, and in the Key Information Documents.

Three practical points. First, the sinking fund carve-out has a real balance sheet consequence and needs to be reflected in budget setting, not just in the lease. Second, the interface with NHBC and other new build warranties needs to be actively managed: the RP carries the cost and the administrative burden of pursuing the warranty provider. Third, in practical application, the use of the word “essential” in this context needs proper attention in its practical application - clear internal policies on what works qualify, communicated to residents at the point of sale, go a long way to managing expectations and preventing arguments.

Note also the HOLD exception at point 6 below: where a second-hand home is bought on the open market, the Initial Repair Period is reduced to reflect the age of the property, and is removed from the lease entirely where the home is already more than ten years old. Similarly, where the Right to Shared Ownership is exercised the Initial Repair Period available for the former tenant will need to be reduced or removed altogether based on the home’s build completion date.

5. Staircasing, valuations and resales

The 21/26 lease introduced a 1 percent Staircasing Period of 15 years, running from the later of the lease date and the date on which the lease is assigned to a new shared owner. That second limb matters: the clock restarts on a resale, in which case a purchaser of an existing SO home can acquire a fresh 15-year window.

The 1 percent option uses its own valuation method, based on the Land Registry House Price Index rather than a RICS valuation, though either party can call for a RICS valuation if the index-derived figure is disputed. Standard staircasing sits alongside it, with a minimum tranche of 5 percent under the 21/26 and SAHP forms, and 10 percent under older leases. The lease defines the minimum through the “Portioned Percentage”.

When a RICS valuation is required. The consolidated valuation guidance in the Capital Funding Guide is clear that a RICS Red Book valuation is required for new sales, for resales within the nomination period, where interim staircasing of 5 percent or more is requested, and where staircasing takes place as part of a resale. Outside those scenarios, and subject to the lease, no RICS valuation is required. Once the nomination period expires or is waived, the provider loses the ability both to nominate a buyer and to control the price.

Some points that repeatedly cause difficulty, in our experience, are:

A 2025 county court decision is a useful warning that process failures on staircasing carry a direct financial consequence. The court found the shared owner's valuation and staircasing process had complied with the lease and ordered the landlord to repay the rent it had received during the period the owner was prevented from staircasing.

Further, staircasing above 80 percent triggers a further SDLT charge where a market value election was not made at the outset, so the SDLT position taken on the original grant needs to be on file and accessible years later. And ‘downward’ staircasing, or ‘buyback’, is increasingly used as a route out of financial difficulty: another situation where it is crucial to maintain a clear policy, and check that lease documents and any funder consents permit this.

6. The variant forms: OPSO, HOLD, Designated Protected Areas and rural exception sites

SO is arguably not one product line. The Capital Funding Guide permits several variants, each with its own rules, and each capable of tripping up a transaction that assumes the standard model. These are mentioned below.

Older Persons Shared Ownership (OPSO). Available only to those aged 55 or over. The maximum equity that can be purchased is 75 percent, and once the shared owner reaches 75 percent no rent is payable on the remaining 25 percent. Somewhat surprisingly, a buyer that acquires less than 75 percent has to pay rent on the difference between the percent acquired and 100 percent - e.g. a buyer who acquires 50 percent must pay rent on the remaining 50 percent. OPSO is exempt from the Designated Protected Area requirement to permit staircasing to at least 80 percent. Providers must not sell to anyone under 55: the Housing Ombudsman Service has ruled that a sale to someone not meeting the age restriction could itself be a breach of the terms of the lease. SO Code adopters must explicitly tell OPSO buyers at reservation stage that rent stops at 75 percent, and private providers must explain how rent and other occupancy costs work at and beyond 75 percent, including whether rent continues.

Home Ownership for people with Long-term Disabilities (HOLD). A route for buyers with a long-term disability to acquire a suitable home on the open market where no suitable standard SO home is available. It is discretionary for providers, not a right for applicants, and Homes England expects applicants to look first at standard SO. Key features:

Rural exception sites. Providers may restrict staircasing on grant funded SO in these locations to a maximum of 80 percent, with rent continuing on the retained 20 percent. It can be combined with the rural repurchase option. Many providers will be familiar with and/or specialist in providing rural SO homes, but our experience is that they often return to us to take strategic and/or specific advice in this context – for example, being alive to the narrower range of mortgage products available where staircasing is restricted.

Designated Protected Areas (DPAs). These are the settlements listed in the Housing (Right to Enfranchisement (Designated Protected Areas) (England) Order 2009 (SI 2009/2098), broadly those with a population under 3,000 and exempt from the Right to Acquire. There are DPA maps and lists of ‘parishes’ in the applicable legislation – however, we utilise a useful search feature when undertaking due diligence in respect of such matters, which helps save clients time in getting these things right.

The DPA regime exists because of an enfranchisement problem. Historically, restricting staircasing on a SO house carried the risk of “early” enfranchisement, because providers were only protected from the Leasehold Reform Act 1967 where the lease allowed the tenant eventually to reach 100 percent. The Housing (Shared Ownership Leases (Exclusion from Leasehold Reform Act 1967) (England) Regulations 2009 (SI 2009/2097), in force from 7 September 2009, closed that gap by setting out criteria under which a SO lease where the tenant cannot acquire 100 percent is excluded from the 1967 Act. The problem was confined to houses: for flats, the tenant’s share must be 100 percent before the lease counts as a long lease for collective enfranchisement.

A claim for collective enfranchisement, including by a shared owner, should in any event be reviewed on its merits and on a case-by-case basis. This area is currently subject to change, and we anticipate the implementation of elements of LFRA 2024 will provide clarity on this area, as it confirms that SO leaseholders will generally be excluded from a right to participate in a collective enfranchisement claim in accordance with Schedule 8 of LFRA 2024, which will introduce a new Schedule 5A exclusion. Nevertheless, where a registered provider is the SO leaseholders’ direct landlord, a SO may be excluded from a collective enfranchisement claim in any case, due to the property being held by a Charity Housing Trust in line with its Charitable Purposes. Such matters should be considered on their merits and on a case-by-case basis.

In practice this means:

Self-build shared ownership. In this version of the SO model, the self-builder’s notional labour cost during construction is converted into equity. Schemes must demonstrate a cost to value relationship of no more than 80 percent, and the self-build group must be registered with the Registrar of Friendly Societies on National Housing Federation model rules, with an appropriate development agreement in place.

Other consequences that apply across the different variants. Valuation - where the lease does not permit staircasing to 100 percent, whether because of OPSO at 75 percent or a DPA restriction at 80 percent, the valuer must be told, so that the restriction is reflected in the figure. Allocation is generally on a first come, first served basis, subject to the priority categories/local connection criteria and any cascade set out in a section 106 agreement or other relevant property or grant/private funding documentation - priority can be applied in this way for qualifying Armed Forces personnel, and in National Parks, Areas of Outstanding Natural Beauty and rural exception sites.

7. Shared ownership leases are no longer assured tenancies

Section 31 of the Renters’ Rights Act 2025, in force from 27 December 2025, provides that a fixed term tenancy of more than 21 years cannot be an assured tenancy. It applies automatically to existing leases as well as new ones, regardless of when the lease was granted.

Accordingly, the previous position as set out in the case of Richardson v Midland Heart Ltd [2008] L&TR 31, which prescribed that a SO leaseholder who was yet to staircase fully to 100 percent ownership was treated as holding a fixed term assured tenancy under the Housing Act 1988 no longer applies.

What this means for RPs:

And for Code adopters. The Code requires providers to follow the Homes England guidance updated as at 31 July 2026 (“Shared Ownership: guidance for lenders, landlords, and conveyancers”) and the UK Finance and NHF guidance on handling arrears and possessions of SO properties, whether or not the home is grant funded. It also requires providers to notify or consult the mortgage lender where rent arrears exceed three months’ payments, and to consult the lender where service charge arrears exceed three months. Most significantly, possession must not be sought where a reasonable alternative exists, the decision must be taken at an appropriately senior level, and the lender must be informed at least 28 days before notice is served.

Read alongside the Renters’ Rights Act change, that produces the following sequence - a documented senior decision; consideration of notices under s166 CLRA 2002; lender notification; then the section 168 determination and section 146. SO rental income recovery policies, arrears escalation processes, staff training and lender communication all need to reflect this.

10. Building safety and the shared owner’s share

Grenfell was primarily a human tragedy. However, shared owners were among those caught by a post-Grenfell saleability crisis, finding that they were unable to sell or staircase while facing full service charge liability on a partial share.

Paragraph 6(5) of Schedule 8 of the Building Safety Act 2022 addresses this proportionality point directly. Where a qualifying lease is a SO lease and the tenant’s total share was less than 100 percent at the qualifying time, the value of the lease is determined as if the share were 100 percent, but the permitted maximum is reduced to the tenant’s total share of what it would otherwise be. So a 25 percent shared owner faces 25 percent of the applicable cap. The share is fixed as at 14 February 2022 - staircasing after that date does not push the cap up.

There are two traps to watch here and which require a close reading of the legislation:

On transactions, the Capital Funding Guide contains specific valuation guidance for affected homes, including RICS’s cladding valuation guidance and the UK Finance industry statement on cladding, and a requirement that where the nomination period expires or is waived, providers must consider sub-letting, back-to-back staircasing and repurchase using the Recycled Capital Grant Fund as alternatives. Code adopters must extend the Secretary of State’s January 2022 subletting guidance across all government-backed SO stock.

11. The leasehold reform interface

SO sits (some would say uncomfortably) inside the leasehold reform programme, and the position keeps moving.

Long lease status. In a 2023 case, the Court of Appeal confirmed that an un-staircased SO lease granted for more than 21 years is a long lease for the purposes of the Commonhold and Leasehold Reform Act 2002, with implications for right to manage, enfranchisement, lease extension and possession.

Lease extension. The Leasehold and Freehold Reform Act 2024 is intended to give shared owners the right to a 990-year extension on payment of a premium, and to remove the requirement that the shared owner pay the landlord’s costs as well as their own. Much of the Act awaits commencement, so the informal route remains the practical one in many cases for now. Readers should note the interaction with point 10 above.

The Code has, arguably, moved ahead of the statutory commencement here. Adopters must support informal lease extensions up to the provider’s own interest and must adopt and publish one of three policies: a nil premium; a premium reflecting the proportion of the property the shared owner owns; or treating the extension as an improvement for Capital Funding Guide purposes, so that subsequent staircasing valuations are based on the market value the property would have had without the extension. The third option is the most technically interesting and the least used. The Code operator’s worked example is a 50 percent owner of a flat worth £200,000 with 85 years unexpired who pays to extend to 990 years, taking the value to £215,000; on a later staircasing the valuer must value as though 85 years remained, so the owner does not pay twice. Adopters are also not expected to pass on their own share of legal costs, in anticipation of the 2024 Act.

Enfranchisement of houses. This is mentioned in the DPA discussion at point 6 above. The 2009 regulations remain the mechanism by which a restricted-staircasing SO house is kept outside the Leasehold Reform Act 1967.

Ground rent. The Leasehold Reform (Ground Rent) Act 2022 bites on the leaseholder’s share, but the specified rent on the unsold equity is outside the ban. This remains a routine source of buyer confusion and occasional complaint.

Commonhold. The draft Commonhold and Leasehold Reform Bill and the HCLG Committee’s pre-legislative scrutiny have exposed an unresolved question: how, if at all, SO works in a commonhold world. There is no obvious mechanism for a part-owned commonhold unit and at present the proposal is for an SO lease exemption from the commonhold proposals. Anyone planning long term on new build flatted schemes should be watching the development of this area closely. See also point 14 below on this aspect.

12. Funding, section 106 and the direction of travel

The Social and Affordable Homes Programme 2026 to 2036 has reset the policy backdrop. At least 60 percent of homes funded through it must be for Social Rent, with the remainder across other tenures including SO. SO remains a funded route, along with OPSO and HOLD, but it is arguably no longer the growth priority it was under the 2021 to 2026 programme.

Two specific changes to note:

SAHP also introduces customer facing expectations for SO providers, including greater consideration of long-term affordability, more transparency and fairness on costs, and the ability for customers to opt out of fees for optional services.

For anyone structuring disposals or portfolio transactions involving SO stock, it is important to remember the surrounding machinery: for grant funded SO, the grant recycling through the Recycled Capital Grant Fund or Disposal Proceeds Fund and applicable consent regime(s), including any funder or security trustee consents.

13. Investors, for-profit providers and the capital case

SO has often been the principal point of entry for institutional capital into English affordable housing. The unsold equity generates a long dated, index linked income stream from a residential asset where the occupier carries the repairing obligation on legacy stock, historic repossession rates are very low, and the underlying homes have residual value. Add ESG credentials, and the appeal to pension and insurance capital is obvious. For-profit registered providers including Sage, Legal & General Affordable Homes, Heylo, ReSI and vehicles run by M&G and Man Group, as well as CBRE IM’s Affordable Housing Fund, have built portfolios concentrated in low-cost home ownership.

Registration is not always required. Under SAHP, partners who will be landlords of homes funded for Social Rent, Affordable Rent or Rent to Buy must be registered with the Regulator of Social Housing, and registration can take at least six months. That requirement does not apply to grant funded homes built for SO. Unregistered bodies can bid for rented funding but must pass ownership and management to a registered provider on completion. This distinction shapes how investor structures are put together, and it also determines which grant recovery regime applies: registered providers recycle through the RCGF under chapter 7 of the Capital Funding Guide, while unregistered bodies fall under chapter 8. Note too that Code adoption is open only to registered providers, so an unregistered structure cannot use the badge.

Regulation applies equally where it applies. The Regulator updated Regulating the Standards in March 2022 to explain how it grades for-profits, recognising their different capital structures, cash flow dynamics and group arrangements, but the standards themselves are the same. All registered providers must be members of the Housing Ombudsman Service.

The 2021 model arguably changed the investment case, not just the consumer offer. The key features referred to above at point 1 each have a balance sheet consequence. The 10 percent minimum share depresses first tranche receipts and leaves more unsold equity to be funded and held. The Initial Repair Period transfers a maximum ten-year repairing liability to the landlord and takes external and structural work out of the sinking fund for that period. The 1 percent staircasing option flattens both the timing and the quantum of staircasing receipts against legacy 10 percent tranches.

Appraisals and portfolio models built on pre-2021 assumptions therefore need rebuilding, with scenario bands rather than single paths for rent, service charge and staircasing take-up. Where the acquiring entity is or intends to become a Code adopter, the appraisal must also carry the Code costs identified at point 9.

The minimum share offer rules now activate on first tranche income. Under the Capital Funding Guide, providers must offer the full range of shares from 10 percent to 75 percent on at least 25 percent of homes on any development or phase, applying to all SAHP funded homes and capable of being applied to AHP 2021 to 2026 homes that are not yet reserved and where no applications are in progress. Review points at 25 percent, 50 percent and 75 percent reserved allow the minimum share on remaining homes to be adjusted where achieved sales income is behind the assumed figure, using a defined calculation. Marketing material must explain that only certain homes are available at the full range, records must be kept for compliance audit, and grant will not be reclaimed where the assumed initial tranche percentage is exceeded in compliance with the guidance. For anyone underwriting first tranche receipts, this is now the governing mechanic.

Unsold stock has a defined route out. Where homes cannot be sold, Homes England will consider a permanent or temporary change of use to Rent to Buy, and in exceptional circumstances to Affordable or Social Rent. Expect a minimum of six months’ marketing and a business case to the contract manager covering marketing history, actions taken and local authority support. A change of use is a relevant event for grant recycling purposes.

Regulatory attention on sales risk. The Regulator’s quarterly surveys have repeatedly flagged close engagement with providers whose cashflows rely on asset sales for loan covenant compliance, and 2025-26 accounts saw record estimated losses on joint ventures and non-registered subsidiaries with a substantial minority of providers anticipating impairment.

14. Bonus section: What to watch

Portfolio due diligence checklist. As will be clear from the above material, on any acquisition or forward funding of SO stock, there is much to establish, including:

Going forward, in the wider context, there is also lots to keep an eye on with regard to SO:

Want to find out more? Get in touch. We would be happy to talk through anything relating to your new and established SO portfolios.

This document is part of Devonshires’ ‘It's the law’ series, tailored for people working in development and regeneration. All reasonable precautions have been taken to ensure that the information contained is materially accurate. However, this document is not intended to be legally comprehensive, and no action should be taken on the matters covered without seeking specific legal advice.