4 Grant Liability

4.1 Apportionment of Grant : Rented Properties

4.1.1 Grant must be allocated between properties on a reasonable basis

For examples of what the Agency believed to be reasonable bases, follow the asterisk.  
 
  

4.1.2 The total amount of Capital Grant to be apportioned must  include:

1. Capital Grant (SHG or RCGF) paid on the initial development;
2. Capital Grant paid to clear the loan on a scheme originally approved under S.41 of the Housing Associations Act 1985, and the works funded under later legislation;
3. Capital Grant paid for re-improvement, Major Repairs, and Minor Miscellaneous Works;
4. Capital Grant paid on any previous scheme on the site, which has been demolished whose Recovery has been deferred  (i.e. previous Grant less any Capital Grant already Recovered);
5. Simple interest. (interest arising for late payment of Capital Grant to the RSL)

4.2 Apportionment of Grant : Shared Ownership Properties

4.2.1 For shared ownership schemes approved on or after 1 April 1993, Capital Grant is apportioned according to the market values of the Dwellings at practical completion of the scheme. 

4.2.2 For shared ownership schemes approved before that date, the Capital Grant calculations take into account the percentage of equity initially sold - see Deemed Loan Debt in the Glossary.

4.3 Initial Sales of existing rented stock into shared ownership

4.3.1 A Dwelling forming part of an RSL's existing rented stock may be sold voluntarily on Shared Ownership terms.  The Capital Grant attributable to the initial share sold will be all the Capital Grant attributable to the Dwelling (including that Capital Grant relating to interest arising after the Relevant Date). 

4.3.2 If the initial Net Sale Receipt is insufficient to Recover all of the Capital Grant, the shortfall will be deferred until staircasing takes place. 

4.4 Shared ownership staircasing sales

4.4.1 A shared owner may ‘staircase’ by purchasing a further share, or shares, of the Dwelling.  The Capital Grant attributable to the staircased share will be the appropriate percentage of all the Capital Grant attributable to the property, including that Capital Grant paid on interest arising after the relevant date.  It will also include any Recoverable Capital Grant deferred from previous staircasing within the same scheme.

For a worked example, click on the asterisk.  

 

4.5 Leasehold Schemes for the Elderly (LSE), Rural Restricted Equity, and Rural Buyback.

4.5.1 In all cases the RSL should refer back to the procedures under which the scheme was developed for the special features relating to disposal and Capital Grant Recovery.   The special features relating to Recovery of Capital Grant are summarised below.

4.5.2 For LSE (without staircasing) schemes where the units were sold outright at a discounted sale price, the Capital Grant funded discount is not Recoverable.

4.5.3 For LSE (with staircasing), the Recoverable Capital Grant is the total Capital Grant paid less 25% (or the specified percentage) of the cost of providing that Dwelling at final cost stage.  For these Dwellings, Capital Grant will never be Recovered in full unless the whole Dwelling is disposed of, in which case the procedures for outright sale will apply. For an Example click on the asterisk.  

 

4.5.4 For Rural Restricted Equity property, a cap is placed on the proportion of equity that the shared owner can purchase, e.g. restricting the shared owner to 80% ownership.  The whole of the Capital Grant paid on the property is Recoverable, if possible, from the proceeds of that restricted staircasing.

For an example, click on the asterisk.  

 

4.5.5 For Rural Repurchase schemes, the Recovery of Capital Grant is calculated on a unit basis rather than a scheme basis i.e. a shortfall on one dwelling in the scheme is NOT rolled forward to other dwellings in the scheme.  

4.5.6 When the final staircasing of this Dwelling takes place, there will be an immediate write off of any shortfall in the Recovery of Capital Grant; it is not deferred to the next staircasing sale within that scheme.

4.5.7 However, when considering how to apportion Grant between the properties in the scheme, it is apportioned to dwellings in accordance with market value (as for shared ownership), and not on other bases (as rented properties can be)

4.6 Apportioning Grant on  Land

4.6.1 When an RSL sells the land or buildings that make up an entire scheme no apportionment of Grant is necessary, as the Recoverable Grant will be the entirety of the Grant paid.

4.6.2 However, RSLs may sell land that is a part of a Grant-funded scheme under the following scenarios:

Scenario 1. "Spare" land that is part of a completed development;
Scenario 2. Land swap or sale, using land from a completed development, to enable site assembly undertaken either by the RSL or another body.
Scenario 3. land and / or part-completed properties sold or swapped prior to completion of the development;
Scenario 4. land and/or existing buildings which are sold or swapped prior to the start of building works

It is necessary to apportion Grant to cater for these scenarios.

Spare Land – Scenario 1:

4.6.3 Capital Grant will not be Recovered when an RSL disposes of ‘spare’ land associated with a scheme.  ‘Spare’ land includes:

• part of a garden or general landscaping;
• plots of land for electricity sub-stations or similar utilities;
• land swaps to regularise boundaries; and
• rights of way, access, or easements.

4.6.4 Spare land excludes any area of land designated at scheme approval for any future phase or phases).  If in doubt about whether land is spare, consult the Agency’s field office

4.6.5 Land Swaps & Sales (completed developments) – Scenario 2:

Because the scheme has been completed, the Grant should have already been apportioned between the Properties. There will therefore be no Grant apportioned to the parts of the scheme that are landscaping, roads etc.  The disposal by sale or barter of this land is a Relevant Event, but the attributed Grant to be Recovered is £NIL.

4.6.6 Land Swaps & Sales (partially completed developments or before building work starts) (Scenarios 3 & 4):
 
If, after disposing of part of the site, or some of the partially completed dwellings, the RSL is still able to deliver the number of units housing the agreed number of people, and comply with all other Funding Conditions, then the Capital Grant can be apportioned to the Properties, rather than being apportioned between land and Properties.  There will therefore be no Grant attributed to land (as opposed to Properties) and although a Relevant Event will have occurred, the amount of Grant to be Recovered is £NIL.

If, after disposing of part of the site or some of the partially completed dwellings, the RSL is unable to deliver the required number of units etc, they must seek confirmation from the Corporation whether or not the Agency is willing to continue to fund the scheme.  If not, it will be cancelled, which is a Relevant Event, triggering Recovery (by immediate Repayment) of all the Grant paid on the scheme.

Exceptionally, the Agency may be willing to allow a (reduced) scheme to proceed at lower level of Grant.  The first scheme would be cancelled and a new scheme funded if it meets the criteria in place at that time for new schemes. 

If the Grant payable for the new scheme is less than had already been paid for the cancelled scheme, the difference will be Recoverable.