18 August, 2021
What is the "repair free" period?
A new 10 year "repair free" period has been introduced by the new shared ownership model lease, during which time shared owners of new builds will receive support from their landlord to pay for essential repairs. Following this 10 year period, or if they staircase to 100% ownership before that time, the purchaser will take on full responsibility for repairs and maintenance.
What are "essential repairs"?
Landlords will be responsible for assessing in advance of works whether repairs claimed are essential and genuine. There is no definition within the model lease of essential and genuine, only that the landlord is to act reasonably in its assessment.
External and structural repairs are distinguished from general repairs and maintenance.
External and structural repairs
Shared ownership landlords will be responsible for carrying out and bearing the cost of essential repairs required to the external fabric of the building and structural repairs to walls, floors, ceiling and stairs inside of the home - but only where the repair is not covered by the building warranty or any other guarantee.
General internal repairs and maintenance
Shared owners will remain responsible for internal repairs but will be able to claim up to a maximum of £500 in repairs and maintenance costs each year to support with the repair or replacement of:
There is no limit on the number of claims that a shared owner can make in one year, provided the total does not exceed the annual allowance. Any portion of repair and maintenance costs over and above £500 will be the responsibility of the shared owner.
What if the whole £500 is not claimed in one given year?
A maximum of £500 worth of unused repairs expenditure can be rolled over into a following year. If it is not used in that rollover year, it cannot be rolled over again.
Can sinking fund contributions be used towards repair costs?
Any expenditure relating to structural repairs during the repair free period can not be deducted from sinking fund contributions.
Landlords will however be expected to set up a sinking fund for the long-term upkeep of flats from the outset. In calculating the annual sinking fund charge, landlords should not factor in any external and structural repair work, expected or unexpected, within the first 10 years.
What about warranty claims?
Any work required (internal or external) that is covered under a warranty/guarantee should be claimed through the policy by the policy holder.
The shared owner is not required to contribute to the cost of any excess or administration fees payable under the terms of a warranty.
Shared owners will be expected to check and claim through existing warranties where covered for internal repairs and to inform their landlord immediately if they become aware of an external or structural repair or repair that may be claimed under an insurance policy or warranty.
Could we just give shared owners under the new model £500 each year towards general repairs?
We consider this may be possible, but it would need carefully thinking through and developing. Consideration should be had to the number of properties it would affect and the administrative cost of processing repair claims against the amount otherwise saved from those who don't claim the full £500 each year. Also, how would the landlord know if the money was spent on essential repairs, and could the cost have been claimed against a warranty or against the builder during the defects liability period? We think there would need to be heavily detailed policies and procedures to implement such an idea.
Our Housing Department regularly drafts policies and procedure documents and would be happy to assist.