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7 After Sales
7.1 General
7.1.1 This section outlines the Requirements relating to events after the Initial Sale.
7.2 Staircasing
7.2.1 The purchaser may increase their percentage share of the equity at any time during the term of the shared ownership lease. This is known as staircasing.
7.2.2 The price paid for further shares is based on the full open market value of the property in accordance with the Requirements set out at sub section 2.3.
7.2.3 Under the terms of the Agency’s sample lease, the leaseholder has three months to complete the staircasing purchase from the date the RSL received the valuation from the valuer.
7.2.4 RSLs have discretion to extend the 3 month period to 6 months where there has been a delay which is outside the control of the leaseholder and the RSL, for example if documents were lost in the post or there were legal delays.
7.2.5 Where RSLs apply discretion, they must retain on file documentary evidence explaining the reasons for waiving the 3-month validity period.
7.2.6 Except on:
- Shared Ownership schemes for the Elderly and
- Rural Restricted Staircasing schemes
the staircasing provisions must allow staircasing to 100% where the properties have been provided with assistance from SHG.
Details of the staircasing requirements are set out in the shared owner’s lease. The lease makes provision for the resolution of disagreement or dispute that may arise, between the landlord and the leaseholder, in respect of the valuation.
7.3 Rural Repurchase
7.3.1 The Rural Repurchase scheme is described at para 1.3.18 and section 8 .The lease and freehold arrangements (once the leaseholder has staircased to outright owner and acquired the freehold) must ensure the RSL has the opportunity to repurchase the property.
7.4 Mortgage Difficulties
7.4.1 As a last resort option when a shared owner has got, or is about to get, into mortgage arrears and potentially lose their home, RSLs may use their Recycled Capital Grant Fund to act as a ‘safety net’ and offer flexible tenure. Flexible tenure is designed to enable a shared owner to remain in their home. For further information see REC 6.6.
7.4.2 Mortgage Default
For an explanation of what lenders do when a shared owner defaults follow the asterisk.
7.4.3 The RSL must seek its own legal advice before replying to the lenders’ solicitor.
7.5 Review of Key Worker Eligibility
7.5.1 It is a Funding Condition that RSLs must establish robust mechanisms whereby they are able to regularly review and confirm the qualifying employment status of key public sector workers and are able to implement speedy Grant recovery procedures whre appropriate.
7.6 Additional Borrowing
7.6.1 There is limited opportunity for leaseholders to increase their borrowings above their contribution to their shares initial purchase price, based on the possible increased value of their home. If property prices increase and the value of the leaseholder's interest also increases the leaseholder will be able to borrow more against an asset increasing in value. In a falling market the mortgagee may need to seek to rely on the Mortgagee Protection Clause (please see NBHB section 5.2 for further information)
Those wishing to borrow additional funds must contact their RSL and lender to discuss the options and implications. Please follow the asterisk for further guidance.
7.7 Lease Extensions for Property still in shared ownership
7.7.1 The Agency's model shared ownership leases were first issued in the late seventies/early eighties. Many of these leases would have been issued for a term of 99 years, and the remaining term would now be, or would be approaching, less than 70 years. The Agency is aware that this may create difficulties for those shared owners now wishing to sell their share.
7.7.2 Leases with less than 70 years remaining are not an attractive option to some mortgage providers. This can make it difficult for prospective purchasers to obtain a mortgage. Also it may have the affect of reducing the value of the lease.
7.7.3 Whilst shared ownership leaseholders have no statutory right to a lease extension, the Agency recommends RSLs consider granting extensions to shared ownership leases wherever possible. However in doing so the Agency requires RSLs to seek their own legal advice to ensure any obligations under Leasehold Legislation are met.
7.7.4 As lease extension is not subject to a fundamental clause (5.2) there is no requirement for RSLs to seek the Agency's consent to extend a lease. Also as the shared ownership lease is a form of assured tenancy any extension of the lease, and therefore an extension of the assured tenancy, will not require s9 consent.
7.7.5 Extending leases will have implications for both RSLs and leaseholders and the Agency recommends RSLs take the following issues into account when discussing extension with shared ownership leaseholders. Please click on the asterisk to view these issues.
7.8 ReSales – Key Worker Leases
7.8.1 As explained in KWL 2.3 until March 2008 key public sector workers accessing NBHB solely by virtue of their employment were subject to clawback, upon leaving their qualifying employment. Since April 2008 clawback has no longer applied and new key public sector worker applicants have been provided with standard NBHB leases.
7.8.2 However prior to April 2008 a number of key public sector workers would have been provided with a Key Worker NBHB lease which would have contained a fundamental clause relating to clawback.
7.8.3 When an existing shared owner who was provided with a Key Worker NBHB lease wishes to sell their share, their lease will contain a fundamental clause relating to clawback which is no longer relevant. The continuing inclusion of the clawback clause in the lease may adversely impact on the assignment of that lease. For reasons click here
7.8.4 There is no requirement to vary the Key Worker NBHB lease prior to resale, but the leaseholder may find it beneficial to do so to avoid the situations as described above.
7.8.5 To assist leaseholders who do wish to vary their Key Worker NBHB lease prior to a resale the Agency has produced a proforma variation. The use of this proforma variation is intended to have the effect of varying the Key Worker NBHB lease into a form substantially in line with standard NBHB leases by removing the occupation and assignment restrictions. The document which can be used for both houses and flats contains explanatory notes which RSLs should refer to.
7.8.6 The drafting of the proforma variation has been kept as simple as possible; has been produced on the basis that the RSL and the Leaseholder are still the original parties; and has been based on the Agency’s model leases.
7.8.7 Where there has been a change in the original parties or RSLs have used their own leases, before completing a variation RSLs must satisfy themselves, by seeking their own legal advice as appropriate, that a variation would not result in any breaches of covenants, consents or similar. In such cases RSLs are required to apply the same principles as contained in the proforma variation taking into account any amendments and cross referencing differences as necessary.
7.8.8 It is anticipated that requests to vary a Key Worker NBHB lease will not arise until such time as the leaseholder wishes to sell their share. For further information click here
7.8.9 As explained above in paragraph 7.8.1 clawback no longer applies and is no longer a fundamental clause. However, varying a Key Worker NBHB lease in the manner described above will involve a variation to what was an Agency fundamental clause and proposed variations are to be governed by Housing Corporation Circular 03/08. Providing the Agency’s proforma variation is used, or the principles contained in the proforma variation applied where the Agency’s model lease was not originally used, formal consent to vary the lease will not be required unless a ‘restriction’ still appears on the title registered at Land Registry. See Housing Corporation Circular 03/08 for further information regarding ‘restrictions’ registered at Land Registry.
7.8.10 If a restriction is still registered at Land Registry then the Agency’s formal consent to vary the lease will be required. In which case RSLs should approach their Regional Investment Team in writing requesting formal consent to vary the lease in accordance with Housing Corporation Circular 03/08 and the Capital Funding Guide’s NewBuild HomeBuy section 7.8. Provided the request contains a statement as above consent will not be unreasonably withheld.
7.8.11 Exceptionally where RSLs wish to seek a variation that does not follow the proforma variation or its principles a written explanation containing full details is required to be submitted to the Regional Investment Team.