www.cobbetts.co.ukBirmingham I Leeds I Manchester

THE HOLY GRAIL AND HOW TO OBTAIN IT (?)

Ian Moran

What is the Holy Grail?

(a) A balance of:-

* Permanent Affordability

* Meeting local need

* Keeping Lenders happy

* Satisfying Section 106 terms

What is the Holy Grail?

(b) Lawyers must be mindful of the interests of:-

The Seller The CLT The CLT’s own Lender The Individual Buyer The Individual Buyer’s Lender

Section 106 Agreements

Cascade arrangements

Lender’s requirements

Eligible occupiers

Prohibition on buyers acquiring an outright interest

Allocations policies

Methods of Disposal

(a) Re-sale price covenant

Property sold in its entirety at a percentage of OMV – buyer covenants only to re-sell at same percentage

Policed by RSL/CLT Nominations and pre-emption possible House – freehold transfer; Flat – lease

Methods of Disposal (cont)

Drawbacks: Inflexible – no staircasing CLT does not retain equity stake Used on discounted units only

Advantages: Track Record Simple to operate

Methods of Disposal (cont)

(b) Shared ownership• At present can’t deliver permanent affordability – full

staircasing rights required

• BUT• Possible amendments to Housing & Regeneration Bill • (i) Restricted staircasing shared ownership lease

specifically excluded from Leasehold Reform Act• (ii) Protected Area status• (iii) Exemption from all Affordable Housing Providers,

not just RSLs

Methods of Disposal (cont)

(c) Declaration of Trust:-

Lease of house or flat by landlord to landlord and tenant jointly with Declaration of Trust

Methods of Disposal (cont)

Advantages:- Flexibility – staircasing, possibly restricted CLT retains equity share Nominations and pre-emption possible

Drawbacks:- Untested, though HBOS accept it Discussions with Nationwide Building

Society, Ecology Building Society, Barclays Bank PLC

Methods of Disposal (cont)

(d) Equity purchase

(e) Rent to purchase/Tenancy Plus

(f) Mutual Home Ownership

OTHER ISSUES

• Resale Values• Market value• Percentage of market value• Link to earnings

• Housing Corporation Grant• Only available through partner RSL• Guidelines criteria yet to be finalised but administration

equivalent to RSL• Other roles for RSLs in CLT process