CTM40415 - Particular bodies: housing associations: co- operatives: background

The aim behind co-operative, or ‘co-ownership’, housing associations is to give tenant-members some of the benefits enjoyed by owner-occupiers by treating them collectively as such. It is a relatively small sector. There are only about 10,000 cooperative housing associations compared to some 1.6m other housing associations.

A co-ownership housing association normally consists of a number of persons who collectively own a group of houses or flats, the cost of which has been financed on mortgage. The association holds the legal title to the land and is mortgagor; the members occupy the dwellings under short tenancy agreements or leases from the association. All members of the association have to be tenants or prospective tenants and all tenants have to be members of the association. Rents payable to the association are fixed at a figure to cover the member’s share of the total annual outgoings, including mortgage interest payments and repayments of capital.

On joining the association, a member will normally have purchased a share of nominal value and sometimes also repayable loan stock to the value of, say, 5 per cent of the cost of the house or flat. On leaving, the tenant surrenders the lease to the association and is repaid any loan capital. If the property was occupied by the tenant for not less than three years, the tenant will receive a premium which takes into account his share of the capital repayment made by the association and any increase in the market value of the property at the date of leaving. The premium is regarded as consideration for the disposal of an interest in the property previously occupied by the outgoing member and therefore within the scope of chargeable gains. In most cases, however, exemption will be due under TCGA92/S222 (private residence relief - see CG64200 onwards).