7.4. Leasehold ownership

A Leasehold Ownership Co operative has a lease granted to it by a housing association or another partner organisation which owns the freehold of the properties.

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Overview

A lease of over seven years transfers the assets to the co‑op’s balance sheet, which, if the partner organisation had arranged scheme financing, would not be appropriate for the partner’s lenders. A lease of under seven years retains the assets on the partner organisation balance sheet and legal and regulatory responsibility rests with the partner organisation.

Terms of the lease

The terms of the lease would need to require the co-op to meet the partner’s legal and regulatory responsibilities.  A seven-year lease can recur and it may be possible for a co-op to build its governance skills and viability during the first seven years so that it could raise its own finance, buy the freehold, and if necessary register with the Government regulator. A leasehold co-op can buy some services from the partner landlord.

Under a lease, the co-op can issue tenancies in its own right.  This would be helpful if freehold ownership is to be transferred to the co-operative at a later date.  The CCH can provide a model lease for this arrangement.