Section 106 Variation restricting sale to those that earn less than £29.5k

reverend

Hello all,

I am in the process of selling my Shared Ownership 1 bed, which I bought in December 2006 as a new build. The full price was £260k and I bought 40% of it. I live in a large block, and a few of the apartments (mostly 1 bed and all about 50 sq. meters) have been re-sold over the last 3 years.

Oddly, (well I thought it odd until i read some posts here indicating Abbey always look to the 106) my buyers lender (Abbey) made a fuss about a January 2008 Variation to the Section 106 agreement that was made in November 2004 between the developer and the local authority. I have not been able to get a hold of the original 106 from November 2004 (I've not given up yet. Will have to go to the local authority and find it myself!), but the Variation basically changes the Definition of 'Affordable Housing' to:

"Housing which is attainable for purchase and/or rental to households who are unable to buy or rent housing lcoally on the open market and in the case of Shared Ownership housing shall refer to housing which is attainable for purchase by households whose total income does not exceed £26,500 per annum in respect of each studio apartment; or £28,700 in respect of the 1 bedroom dwellings for which the market value is less than £255,000, or £29,500 in respect of the 1 bedroom dwellings for which the market value is equal to or exceeds £255,000 PROVIDED THAT in all cases the households total annual expenditure upon rent mortgage and service charges in respect of the Shared Ownership Housing should not exceed one third of the net husehold income and FURTHER PROVIDED THAT all income levels referred to in this definition shall be increased annually from the date of this Deed in accordance with annual percentage increases in the Consumer Price Index..."

My buyers lender is interpreting this to mean that my buyer, who earns more than £29,500, is not eligible to buy the property. This is a bit of a conundrum because the qualification criteria set by the Housing Association, which my buyer had to meet, was an annual salary of at least £42k ! I need not say that anyone earning £29.5k would probably not pass the lenders or the H.As means test.

It is even more odd because I can't see what the purpose of the Variation is. It reads as wholly unrealistic. I don't think I actually know anyone amongst my peers living in central London who does not spend at least half their net income on their accomodation costs. The Housing Association have so far not been able to tell me what the purpose of the Variation is and whether it actually applies to me and my buyer or not, or whether they have actually ever abided by it.

It is in the third odd because when we moved in to the property in 2006, the Housing Assocation required me to have a salary of at least £24k. There was no upper limit set by the H.A, and at the time I was earning more than £29.5k. I can't imagine that I would have passed the financial checks if I had been earning less than £29.5k. There is also nothing in my lease regarding the earnings of any potential buyer that I might sell the apartment on to.

My buyer is quite rightly reluctant to purchase my apartment now, even though he has been offered a mortgage by another lender, because he does not want to be faced with the same problem that I am now when he comes to sell.

Any advice gratefully recieved. I realise that advice is difficult to give without reference to the original 106. I have seen some templates online though, and I think i have a general idea of what they contain in terms of Affordable Housing. I expect it is something along the lines of, "Developer: You must allocate one third of the development as Affordable Housing and promise not to use it for anything else."

Thanks for reading all.

/rev

Mandog

Can't help but giving you a bump in the hope someone else comes along.

Silliest thing I ever heard and as a S/O owner I'm interested. The specified limits are too low - no-one earning 29500 should be taking on 255K worth of property, in whatever combination of rent and mortgage.

Was the developer the Housing Association - if so sounds like their problem? If not, is your solicitor on the case?

Richard_Webster

If the variation was entered into after OP bought flat I can't see how he is bound by it. This is like a builder buying some land from a landowner, and the builder having built and sold a number of houses, then the landowner comes along and says "I forgot to impose some restrictive covenants to protect my nearby land - please enter into a deed to agree to them." Would bind people who bought houses from builder after he entered into new deed but not those who bought before.

Problem will be persuading others (new mortgage lenders) that it cannot bind landowners (including OP) who were not a party to it.

It may bind the Housing Association in deciding whether to approve potential buyers of the 40% share under their nomination rights. However usually a person selling has to offer it to the HA to see if either it will buy it back or nominate someone who can buy it. If they can only put people on their list who qualify then hardly anyone will qualify and OP simply waits out the period until their nomination rights have expired and then offers it on open market.

Why on earth did the HA sign such an agreement? I know a solicitor who does a lot of work for HAs and he says that Councils are forever trying to get HAs to sign unreasonable as106 agreements and he is forever having to point out that such terms would make the properties unsaleable. perhaps they weren't properly advised?

OP should create a stink with his local councillors and his MP (and other party prospective candidates).