Section 5: Prohibited rent: shared ownership leases
Section 5 makes special provision for shared ownership leases in which the landlord retains a share.
	Section 5(2) provides that for the tenant’s share in the premises, the only permitted rent is a peppercorn rent but that landlords can continue to charge any rent on their share.
	Since April 2006 it has been a condition of all shared ownership schemes funded by Government that the amount of rent and any annual increases is capped. This is also usually the case for shared ownership properties delivered through agreements entered under section 106 of the 1990 Town and Country Planning Act. Providers are generally required to cap rent at 3% of the capital value of their retained equity, with an overall target of 2.75%. Rents can vary across different schemes. The rent on the unsold share increases over time. Annual rent increases are also limited as a condition of grant funding to the Retail Price Index (RPI) plus 0.5%. By way of example: if a tenant has a total share of 60% of the value of the premises and the landlord has a share of 40% of the value of the premises, the landlord would be permitted to charge the tenant rent on their 40% share, in line with the above rent caps.
	Section 5(7) provides that where the lease does not distinguish between rent on the tenant’s share and rent on the landlord’s share, any rent payable under the lease is to be treated as payable in respect of the landlord’s share.