F2 -04/02 Shared Ownership - Mortgage lenders' requirements
Distributed to: All registered social landlords (excluding co-ownership societies, almshouse charities and Abbeyfield societies).
1 Introduction
1.1 Mortgage lenders need to ensure that adequate security exists at all times for their lending on properties purchased on shared ownership terms from Registered Social Landlords (RSLs). Although lenders can rely on the standard form of shared ownership lease as security for lending, there are circumstances in which a lender will view their security as being at risk - for example, where an RSL is considering possession or forfeiture proceedings under the provisions of Schedule 2 to the Housing Act 1988 (Grounds for Possession of Dwelling-Houses let on Assured Tenancies).
1.2 To ensure mortgage lenders have a reasonable opportunity of remedying a breach of the lease (which could result in an RSL taking legal action under the provisions of 1988 Housing Act), lenders will require RSLs to provide a written undertaking to give reasonable notice before legal proceedings are commenced.
1.3 This circular gives guidance on a standard form of undertaking an RSL will be required to provide a mortgage lender. The advice provided has been the subject of consultation between the Housing Corporation, the National Housing Federation and Council of Mortgage Lenders.
2 Form of Undertaking
The form of undertaking required by mortgage lenders requires an RSL to give reasonable notice in the event of the RSL wishing to take possession or forfeiture proceedings. The period of notice is intended to allow the lender sufficient time to resolve the problem thus avoiding the need for the RSL to take legal action, which could result in the loss of the mortgage security.
2.1 The Council of Mortgage Lenders has agreed a model undertaking which should be acceptable to RSLs, without adversely affecting their legal rights under schedule 2 to the Housing Act 1988. The model form of undertaking is set out below
- Leaseholder:
- Borrower
- Landlord:
- Property:
- Lease:
- Lender:
- Mortgage Acc No:
(a) giving the lender not less than 28 days notice in writing of their intention to commence proceedings; and
(b) if within such a period of 28 days (or within such other period specified in the notice period, if longer), the Lender indicates in writing to the Landlord that it wishes to remedy such breach, or is going to take such action as may be necessary to resolve the problem complained of by the Landlord, giving the Lender such time as may be reasonable (in view of the nature and extent of the breach/problem) to take such action
Signed.....................................
Dated.......................................
2.2 There must be a separate notice to the lender from the landlord informing the lender about the possible possession proceedings under the Housing Act 1988, and the grounds on which such action will be based. This requirement will not be met by serving a copy of the section 8 notice on the lender.
2.3 All new shared ownership leases granted by RSLs must provide that a landlord will give the tenant's lender at least 28 days written notice of the landlord's intention to commence possession proceedings under the Housing Act 1988.
2.4 RSLs should provide a signed undertaking in the agreed format on every grant and assignment of a shared ownership lease
Printable version
Email
