Funding Shared Ownership in Protected Areas
With regard to funding the Registered Provider’s repurchase of a shared ownership property in a Protected Area, the Government have said that the Homes and Communities Agency (“HCA”) prioritises grants for the repurchase of properties funded under its rural programme if the Housing Association is very small or new and does not have recycled capital grant funding (RCGF) available to it or is unable to raise additional private finance, but this funding cannot be guaranteed.
The HCA Affordable Housing Capital Funding Guide (AHCFG) states at Section 9 that where the landlord has robustly exhausted all other funding routes including the use of and/or transfer of RCGF, HCA will positively consider applications for grant to fund the repurchase of the shared ownership property so long as the property was funded under the HCA Protected Areas Policy and the Shared Ownership lease contains the HCA Protected Area fundamental clause obliging the tenant to sell the property back to the landlord or its nominee.
Under Article 9.3 of the AHCFG in order to qualify for the Protected Area repurchase arrangements the property must be located in a Protected Area, must have been grant funded as part of the NBHB Protected Area policy and be held on a lease granted after the 7 September 2009. The lease must contain the HCA Protected Area Fundamental Clause enabling the shared ownership lessee to purchase in excess of 80% of the equity and the other additional requirements of the 2009 Regulations as mentioned in the accompanying article on `Shared-Ownership – Protected Areas`. It is stated in the AHCFG that the HCA do not intend to be overly prescriptive with regard to its requirements and it is not their intention for these to be fundamental. However if a lease of a property in a Protected Area has been HCA funded then the grant will potentially be recoverable if the lease does not comply with the Regulations.
With regard to funding shared ownership lessee acquisitions of properties in Protected Areas, it has been said that the HCA and the DCLG fully recognised that Lenders can be reluctant to lend on properties with restrictions as they want to be able to sell on the open market if they repossess if the shared ownership lessee defaults. The HCA feel that mortgage lenders will have greater assurance now that the legislation requires the housing provider to buy-back the property (unless the lease contains the 80% restriction on staircasing).
The Council of Mortgage Lenders (CML) have said in the context of shared ownership leases with restricted staircasing to 80%, that not all Lenders are prepared to lend in these circumstances but those who have been prepared to do so include the Abbey, the Britannia, HBOS, HSBC, Nationwide and the Woolwich.
The CML have said with regard to Protected Areas that the restriction on staircasing limits the attractiveness of the shared ownership schemes to potential buyers and lenders. Restrictions on who can buy a property and under what terms must have some impact upon its value and on the prospect of realising that value through sale within a reasonable timescale. This will have an impact on the loan to value percentage allowable on that property.
For Lenders there is the additional risk that as Mortgagees in Possession their own ability to sell the property and recoup arrears within a reasonable period is compromised. Some Lenders will not be willing to lend under these conditions and no lender wishes to be over exposed in a single market such as shared ownership or in any one development.
The CML believe that the extension of Protected Area status into new areas carries the risk that mortgage finance may become less easy to access in these areas. They have suggested to the DCLG that they should only seek to further extend Protected Areas status to a very limited extent if at all.
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