Background
At the time the ad appeared, the website was owned by the National Housing Federation. Ownership of the website was transferred to Keaze Ltd in May 2021.
Summary of Council decision:
Three issues were investigated, of which two were Upheld and one was Not upheld.
Ad description
Claims on sharedownership.net, appearing in March 2021, promoted Shared Ownership as “another way to buy your home. You buy a percentage and pay rent on the rest”.
The homepage included a list of questions and answers, including “Part mortgage / part rent. How does that work? Shared ownership is part buy, part rent. This means you will have a mortgage on the share you own, and pay rent on the remaining share … You'll have a lease, which is essentially the contract for the share you've bought. It means you've got the right to keep your home for a certain number of years (usually at least 125) …”.
A page entitled “What it means” included a number of further questions and answers. One section entitled “Why should I consider shared ownership?” stated, “It’s an investment … It’s a way of putting your money into property, even if you can’t afford to buy on the open market … It’s yours. Shared ownership properties don’t have a lot of the same restrictions as private renting. You can decorate, sometimes stay for at least 125 years, buy more shares when you want, and sell when you want”.
Another section was called “What is ‘staircasing’?”. Text stated, “‘Staircasing’ is a term that refers to increasing the share of the property you own. You can do it gradually over time, to eventually own your home 100% …”. A section entitled “How much of the property do I own” stated, “Over time, you can usually staircase (buy more shares of the property) all the way up to 100%”.
Other sections included “What are the costs?” and “What is a leaseholder?”. The latter included text which stated, “Most leases are between 99 and 125 years. Shared ownership leases can be extended once you purchase 100% of the home, however some housing associations allow you to extend before this. Your lease will contain all the details and costs for this process”.
The ad invited consumers to take a quiz to see if shared ownership could be right for them and also featured a search tool which enabled consumers to search for shared ownership properties for sale.
Issue
Shared Ownership Resources, a campaigning platform, challenged whether:
1. the claims “…part rent, part buy…” and “It’s yours” were misleading because they exaggerated the level of ownership attained by those who took on a shared ownership arrangement;
2. the claim “You can usually staircase … all the way up to 100%” was misleading because they understood that “staircasing” was uncommon; and
3. the ad misleadingly omitted information relating to the costs of extending a lease, particularly once there were fewer than 80 years remaining.
Response
1. Keaze Ltd explained that Shared Ownership was one of the government’s flagship affordable home ownership products, supporting home ownership among groups of people who would otherwise struggle to own a property. The product was largely delivered in partnership with housing associations that bid for funding to build Shared Ownership houses and flats through the Affordable Homes Programme.
Shared Ownership had existed for over 40 years, but public knowledge and understanding of the product had typically been low. Sharedownership.net and the National Housing Federation’s Shared Ownership campaign were established to raise awareness about the product and to support consumers as they began their journey of understanding which home ownership options might be right for them. The website was not designed to create a transaction, but was intended to support members of the public to understand more about a product which was relatively complex. To achieve that aim, the campaign focused on the key information and facts. The language and terminology used on sharedownership.net closely mirrored phrases used by the Ministry of Housing, Communities and Local Government (MHCLG), the Greater London Authority (GLA) and Homes England to ensure alignment with the government’s own approach. Throughout sharedownership.net, visitors were also advised to check terms and conditions and seek legal advice in recognition that no purchase of that kind was risk-free.
They said Shared Ownership properties were usually leasehold, meaning that shared owners were leaseholders. The lease stated how many years it lasted, what the costs and fees were and the responsibilities of the homeowner, and made a shared owner the homeowner, regardless of how many shares they owned, and as such, they were responsible for all the repairs and maintenance in their home. They believed that describing Shared Ownership as “part buy”, and stating “It’s yours” was not misleading, was in line with how the Government referred to the product, and was legally correct.
Keaze said that the key difference between owning and renting a home was being registered with the Land Registry as the legal owner of the registered title of the property. With Shared Ownership, the property was always initially bought on a long leasehold basis, with the buyer paying somewhere between 25% and 75% of the full market value of the property they were buying, and in return being registered as full legal owners of the long leasehold title for the property. Therefore, the shared owner purchased a full legal title to the property with the lease documenting the equity sharing arrangements which were put in place to enable the shared owner to purchase the property at less than 100% of its value at the point of purchase. The lease document set out the monthly rental payment due to the Landlord in lieu of paying for the full 100% price for the property at the outset. The monthly rental amount could be reduced if the shared owner chose to make a further payment to the landlord for a further percentage of the value of the property (referred to in the lease as staircasing). In some cases, the shared owner would, over time, purchase 100% of the property, which was referred to as final staircasing.
Keaze said, due to a quirk in current leasehold law, Shared Ownership leases were classed as Assured Shorthold Tenancies with an initial fixed-term equal to the term of the lease (usually 125 years for a shared ownership lease) for the purpose of possession proceedings (in the case of default). They said that did not mean that the leaseholder under a Shared Ownership lease was in the same positon as a short-term rental tenant, but it did mean the landlord had the same statutory rights to take action in the case of a breach of the lease, including failure to pay rent, as those used by a landlord under a fixed-term shorter rental tenancy.
They maintained that the risk of possession proceedings in the case of default of payment of the rent was not a risk that was limited to Shared Ownership properties – it also applied to consumers who purchased a leasehold property outright. Specifically, that risk arose in relation to any long lease entered into with an annual ground rent in excess of £250 (or £1,000 for London).
They pointed out that there were mitigating factors common to shared ownership leases which helped to minimise the practical risk of a landlord seeking possession, notably the Mortgagee Protection Clause and the Homes England prohibition on the use of Ground 8 (which was set out in Schedule 2 of the Housing Act 1988 and was the mandatory possession ground in the case of rent arrears) in relation to grant-funded properties built through the latest Affordable Homes Programme. In addition to those legal protections, housing associations worked with their leaseholders to resolve arrears situations and viewed the use of Ground 8 as a last resort.
They said the technical nature of the application of this area of law was not something that could be effectively paraphrased in short-form website copy and, because of that, they had highlighted the importance of any potential buyer of a Shared Ownership property seeking properly qualified legal advice to ensure the product was suitable for them.
2. Keaze said the claim “usually” was referring to the fact that in some cases, such as when local restrictions applied, consumers would never be able to own 100% of the property. Since those were exceptions to the general rule, shared owners could ‘usually’ carry on buying shares all the way up to 100%. That would depend on their own financial circumstances, which they said was stated on their website.They noted a report shared by the complainant, showing that 2-3% (between 3,000 and 5,500 shared owners) ‘staircased’ to 100% ownership each year over the period 2012/13 to 2018/19. They said it was important to recognise that this was a figure for each year, and was not inconsequential, because they would add up over time. They referred to the Statistical Data Returns for 2017/18 and 2018/19, published by the Regulator of Social Housing, which, they believed, showed that for a notable proportion of the total Shared Ownership homes managed by housing associations, the purchaser owned 100% of the equity, but not the freehold interest. Each year other shared owners would also be increasing their shares without hitting 100%.
3. Keaze said the legislation relating to lease extensions was complex and the position differed depending on whether the property was a flat or a house. The costs for renewing a lease varied considerably depending on the remaining term of the lease and the approach taken by the landlord to any voluntary lease extension application. For example, they understood that the concept of a ‘marriage value’ (an additional premium to pay when a lease had dropped below 80 years) would not automatically apply to a voluntary lease extension. They were unable to speculate, therefore, what the associated costs could be. Since they were not in the position to offer financial advice, when referring to the costs of extending a lease, they advised that owners referred to their lease for details on the cost and process, and that a solicitor would be best placed to advise on their lease because it was a legal agreement.
They believed it was a reasonable approach to point out there were additional costs associated with a Shared Ownership lease and recommend that prospective purchasers seek legal advice in relation to potential costs, given the complexity of the law in that area and the fact that the website had been designed to provide an overview of the concept of Shared Ownership rather than promoting any specific property or scheme.
Assessment
1. Upheld
The ASA considered that, by inviting consumers to fill out a quiz to see if Shared Ownership might be suitable for them and by including a search tool which enabled consumers to search for Shared Ownership properties for sale, the website went beyond merely introducing the concept of Shared Ownership and was therefore likely to influence consumers’ transactional decisions.
We considered consumers would understand from the claims “part rent, part buy” that they would, as part of a Shared Ownership scheme, own part of the property based on the proportion of the total price they paid and would pay rent on the remaining share of the property. We considered that it would be clear from the ad that they would not own the property outright, and we noted that it specifically stated that consumers could, for example, buy a 25% share of a property. Therefore, the level of ownership was likely to be clear in that sense.
However, we considered that consumers would understand from the claim “It’s yours” that they would have the same rights as a consumer who had bought the property in full in relation to the part they had ‘bought’ (their equity share), notwithstanding that the housing association would also have certain rights in relation to owning the remainder. We noted text that stated “Shared ownership properties don’t have a lot of the same restrictions as private renting”, though that was not elaborated on beyond decorating, staying for the length of the lease, and buying and selling property shares. We considered that the ad, on that point, drew a distinction between private renting and Shared Ownership, and was likely to be seen as implying that although rent was paid on part of the property, Shared Ownership was more akin to full ownership in terms of restrictions and rights. We understood that while Shared Ownership leases were sometimes free from some of the usual tenant obligations associated with private renting, they nonetheless had their own restrictions not commonly applicable to property which was purchased outright. For example, before a buyer had reached 100% ownership of the property, there were additional restrictions on selling or sub-letting to ensure it continued to be used as affordable housing, including a landlord’s right of first refusal in such transactions.
We also understood that there were potential risks that existed with Shared Ownership which would not exist for those purchasing a property outright. Specifically, Shared Ownership schemes were, in the eyes of the law, considered to be ‘assured tenancies’. That significantly reduced a buyer’s protection in repossession proceedings where there had been a breach of the lease, such as where a consumer defaulted on their payment to the landlord. Moreover, where a landlord repossessed a property subject to a Shared Ownership lease, the buyer was at risk of losing their equity in the property (the amount they had paid to date to ‘buy’ a share of the property, including any additional share purchased via staircasing). Therefore, while it was the case that if consumers did staircase to reach 100% ownership of the property, the previous shares would have been a step in (or a ‘part’ of) that buying process, they were exposed to a significant risk up until that point. We acknowledged that there were some cases where leaseholders who owned their property outright also had that risk if their annual ground rent exceeded the threshold levels. However, that did not negate that it was a potential risk that applied to all shared ownership properties (until such time as the purchaser had staircased to reach 100% ownership).
We noted that there were mitigating factors that could help to prevent a situation where a shared owner forfeited their equity share in a property after defaulting on their rent. However, while those mitigating factors were helpful, they did not guarantee that such a situation would never occur.
While we would not expect the ad to have set out all of the risks or differences involved in Shared Ownership compared to outright ownership, we considered that such information on the above risks was likely to be material to consumers when deciding whether or not to participate in the Shared Ownership scheme. We therefore considered that the ad should have made those risks clear when describing the scheme as “part rent, part buy”, or stating “It’s yours” and by omitting that material information, the claims exaggerated the level of ownership and proprietary rights attained by those who took on a Shared Ownership arrangement.For those reasons, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising).
2. Not upheld
We noted that the homepage stated, “You buy a percentage, and pay rent on the rest … Buying a percentage means a smaller deposit and smaller mortgage. It’s a sooner first step on the ladder for lots of people. Usually, you can also carry on buying shares, to own it 100%”. Other pages repeated similar claims, for example, “Usually, you can also carry on buying shares, to own it 100%”.
We considered that consumers would understand in the context of the ad, that “usually” referred to the fact that, in most cases, the relevant scheme would allow consumers to purchase 100% of the property, and that there might be some exceptions where the maximum percentage allowed would be lower. We understood from the advertiser that this was the case, and that local restrictions applied which meant, for example, 75% was the maximum purchasers could own in some cases.
The complainant understood that the figures for those reaching 100% were low. We noted the advertiser’s view on those figures, and that they would add up over time. Given that we considered the claims would be interpreted as referring to the potential for buying more shares to 100% ownership rather than how often consumers managed to achieve that, we did not consider those figures to be relevant to the likely interpretation of the claims.
For those reasons, we concluded that the ad was unlikely to mislead consumers on that basis.
On that point, we investigated the ad under CAP Code (Edition 12) rule 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), but did not find it in breach.
3. Upheld
We noted that the website included sections entitled “What are the costs?” and “What is a leaseholder”. We considered that consumers would expect significant cost implications to be mentioned in those sections. We noted that the latter did include text stating, “Your lease will contain all the details and costs for this process” but did not go into any further detail. However, we understood, it was unlikely that a Shared Ownership lease would go into any such detail, as the process for statutory lease renewal was set out in legislation. For example, the model lease published by Homes England (a public body that sought to boost affordable housing), which housing providers were strongly recommended to adopt, contained no provisions on the process and cost of lease renewal.
We understood that mortgage lenders often placed a limit on the number of years which could be left on a lease when offering a mortgage, which could affect how easy it would be for the purchaser to sell on the property, and that extending a lease, especially one which had a short life, could be both costly and time-consuming, with the cost tending to rise as the lease length reduced. Once the number of years left on a lease dropped below 80, an additional premium applied when renewing the lease, referred to as the 'marriage value', which could significantly increase the cost of that renewal. Even where there was more than 80 years left on the lease and the marriage value did not apply, the leaseholder would still need to pay a sum representing the decrease in value of the landlord’s interest in the property, and any compensation for the landlord’s losses arising from the lease extension.
We understood that the law on how the statutory process for lease extension applied to Shared Ownership was unclear. The relevant legislation had been commonly interpreted to mean that leaseholders in Shared Ownership schemes did not have the automatic right to extend the lease, via a statutory process, until they owned 100% of the property. There was case law to suggest that Shared Ownership leases may in fact qualify for the statutory process notwithstanding the fact that the leaseholder did not hold 100% ownership, so long as the lease was granted for 21 years or more. However, those cases had been decided in the lower courts and related to collective enfranchisement rather than individual lease extensions. Until there was a clear and binding judgment, the ability to extend a lease would, in practice, depend on the individual policies of housing associations. Although we understood they might be able to extend the lease via a voluntary lease extension, that depended on negotiating and agreeing terms with the landlord. In addition, whilst some landlords might charge Shared Ownership leaseholders the usual premium in proportion to their share for a leasehold extension, others would charge the (higher) normal premium. Many of those issues were discussed in a Law Commission consultation in 2018 on Leasehold home ownership: buying your freehold or extending your lease, with the Commission’s report in 2020 making clear that (as the Government accepted) reform was necessary.
We considered that the cost of renewing the lease would potentially be significant, and while costs would be different in each case, information on those costs was likely to be material to consumers when deciding whether or not to participate in the Shared Ownership scheme. Given that the site had dedicated sections relating to what costs were involved and what was a leasehold property, and given the potential significance of the costs of renewing a lease, the ad could and should have included information making clear that those costs could be significant, as well as information relating to the marriage value and the increasing cost of renewal as the lease length reduced. We noted that Homes England had introduced a new recommended model lease in September 2021 which provides for a term of 990 years, which would (if adopted) eliminate the costs of extending a lease for Shared Ownership leases in future, but that did not apply at the time the ad was seen.
Because the ad did not include material information relating to the costs of extending a lease, we concluded that it was likely to mislead.
On that point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising).
Action
The ad must not appear again in the form complained of. We told Keaze Ltd not to mislead by omitting information that was likely to be material to consumers from their ads, such as information related to the potential risks and costs involved in participating in Shared Ownership schemes.
