Shared Ownership: Right of First Refusal

Jacob's_Dad

danslenoir wrote: »

.The problem with your position, and the removal of the housing association's pre-emption rights, is that you enjoyed a range of benefits by purchasing an affordable share in a housing association property and staircasing your equity. Why, therefore, is it right that you should be allowed to sell it freely on the open market, and in turn deprive others of the benefits you enjoyed by contributing to a reduction in housing association stock, without the housing association having the opportunity to purchase the property from you at a fair price to mitigate this?

Housing association properties should not be seen as investment vehicles, they should be seen as affordable homes. You knew the rules when you decided to buy one.

It is true that we did benefit from reduced rent that meant we could live in a property that suited our needs and weren't stuck in a dank studio flat struggling to save up a deposit. Beyond that, I'm not sure of the benefits that are outside the realm of normal home ownership?

Why should people who are in shared ownership properties not be allowed to make an 'investment'? The government has created schemes for affordable home ownership. Should those who are in these schemes be shackled because they are not affluent enough to get onto the property ladder without any help? They have invested, likely based on our situation, every last penny to afford the deposit on a portion of a property, rather than a whole one. While the rent on the subsequent proportion is subsidised, the existence of a mortgage means the tenant has no rights, as a tenant. When you take on a shared ownership property you become 100% liable for your property and everything within it, regardless of your level of ownership. As such, if your boiler blows up, you pay for a new one; if your water leaks, you cover the costs of repair; if the communal hallway lighting breaks you foot the bill. I wouldn't say that is a benefit.

On top of this, I did not say they shouldn't be able to purchase it for a fair price. In fact, I'm arguing that they should pay a fair price. A fair price would be what it is worth on the free market. Nothing is stopping them making an offer on the properties that they have seen staircased to 100%.

danslenoir

It is true that we did benefit from reduced rent that meant we could live in a property that suited our needs and weren't stuck in a dank studio flat struggling to save up a deposit. Beyond that, I'm not sure of the benefits that are outside the realm of normal home ownership?

Sounds like a pretty major benefit, no?

Why should people who are in shared ownership properties not be allowed to make an 'investment'? The government has created schemes for affordable home ownership. Should those who are in these schemes be shackled because they are not affluent enough to get onto the property ladder without any help?

The government has created schemes for affordable home owership to enable, as you acknowledge, people to avoid being stuck renting a dank studio flat in perpetuity and unable to ever enjoy the financial security of home ownership and the removal of their shackles to landlords. The schemes are not created for spivs and speculators to gain a subsidised route to profit in a bloated housing market environment where demand far exceeds supply. I’m not calling you a spiv or a speculator, but as someone who has benefited substantially from such a scheme, do you not feel an obligation to help ensure that your benefit is not at someone else’s expense? That someone being someone in exactly the same situation as you were when you were stuck renting your dank studio flat. It’s all good and well to say that the housing association is free to purchase your house at an (inflated) open market price, but if housing associations have to compete on the open market with property speculators and others prepared to pay over the odds , inevitably this will contribute to a reduction in housing association stock, and in turn reduced opportunity for others stuck renting dank studio flats because they can’t afford to buy on the open market.

On top of this, I did not say they shouldn't be able to purchase it for a fair price. In fact, I'm arguing that they should pay a fair price. A fair price would be what it is worth on the free market. Nothing is stopping them making an offer on the properties that they have seen staircased to 100%.

That’s the problem with the free market, and your position. You see what the markets dictate as being ‘fair’. If there was a food shortage in this country and the cost of a loaf of bread shot up to £10 and the cost of a pint of milk to £20, would you consider those fair prices too, even if it left many people struggling to put food on the table? An independent valuation already takes into account the cost of comparable properties in the locality, and seems pretty fair to me.

Jacob's_Dad

danslenoir wrote: »

Sounds like a pretty major benefit, no?

Yes, yes it is a good benefit, but don't ignore the rest of the situation - that fact doesn't sit in a vacuum. There are significant risks and pitfalls, it's not some easy subsidised cash cow.

danslenoir wrote: »

The schemes are not created for spivs and speculators to gain a subsidised route to profit in a bloated housing market environment where demand far exceeds supply.

They aren't, and really, perhaps naively, I don't see how you could. Your financial situations are assessed and you would be hard pressed to get around it. I'm sure there are ways to fraudulently access the schemes but the masses can't be held accountable for the so called spivs.

danslenoir wrote: »

I’m not calling you a spiv or a speculator, but as someone who has benefited substantially from such a scheme, do you not feel an obligation to help ensure that your benefit is not at someone else’s expense? That someone being someone in exactly the same situation as you were when you were stuck renting your dank studio flat. It’s all good and well to say that the housing association is free to purchase your house at an (inflated) open market price, but if housing associations have to compete on the open market with property speculators and others prepared to pay over the odds , inevitably this will contribute to a reduction in housing association stock, and in turn reduced opportunity for others stuck renting dank studio flats because they can’t afford to buy on the open market.

I think there is an argument both ways in these cases, and neither are without merits. From a personal point of view, my family is better off in a situation where we can gain from the open market; from an outward-looking perspective, we should take the hit on profit (assuming the markets hold out and there are any in the future) so that others can too take a go at it.

danslenoir wrote: »

That’s the problem with the free market, and your position. You see what the markets dictate as being ‘fair’. If there was a food shortage in this country and the cost of a loaf of bread shot up to £10 and the cost of a pint of milk to £20, would you consider those fair prices too, even if it left many people struggling to put food on the table? An independent valuation already takes into account the cost of comparable properties in the locality, and seems pretty fair to me.

Admittedly, I have really used the term free/open market without the depth of consideration for its dangerous effects on the little man, but that's another conversation. In this case, I would say the issue lies not in the removal of housing stock by individual families (of which there aren't that many - shared ownership is a bind for the majority of tenants). I would say it lies in the lack of interest or true effort by the government and housebuilders to build enough houses that everyone might one day be home owners. Take right to buy/acquire, for example. You can't say that allowing people who have been living in council housing for years the right to buy their home is bad, but by your logic it is, as it removes housing stock.

arthurk

Sorry for digging this out, but does "Right of First Refusal" carry on with sale? Flat I own was 50% shared ownership under previous owners, final staircasing was agreed and I bought 100% on the open market via Estate Agents. Can the 21 years still apply to me as current owner?

denial2010

arthurk wrote: »

Sorry for digging this out, but does "Right of First Refusal" carry on with sale? Flat I own was 50% shared ownership under previous owners, final staircasing was agreed and I bought 100% on the open market via Estate Agents. Can the 21 years still apply to me as current owner?

Short answer... Depends when you purchased it. Pre or post April 2015. Check the lease.

honeybean

I at one time owned a shared ownership and proceeded to buy the property outright and once I did the HA did not have first refusal I sold it on the open market .

arthurk

Short answer... Depends when you purchased it. Pre or post April 2015. Check the lease.

September 2014 so I'm guessing I don't qualify for any change in the law. I'm trying to get a solicitor to confirm. So far I got confirmation from the HA that account for the property was closed on the final staircasing.

denial2010

arthurk wrote: »

September 2014 so I'm guessing I don't qualify for any change in the law. I'm trying to get a solicitor to confirm. So far I got confirmation from the HA that account for the property was closed on the final staircasing.

You should... Although it's not law so to speak. The HCA have issued guidance (note it's only guidance not law), that HA's should support the removal of pre-emption rights for those properties that staircased before April 2015. Basically leasehold flats require a variation of deed to remove it.

It's a little different with freehold houses as they require an RX3 form filed with the land registry to remove the restriction against the title. However, this does exactly that... It only removes the restriction on title and it does not actually remove the pre-emption right contained in the freehold transfer (TP1). Only a deed variation will do that. I think the HCA's guidance is flawed in this area because of.

The restriction on the title will basically say something like: "Until {specify date 21 years from date of transfer} no disposition of the registered estate (other than a charge) by the proprietor of the registered estate or by the proprietor of any registered charge is to be registered without a certificate signed by the proprietor for the time being of the estate registered under title number {specify title number} or their conveyancer that the provisions of Clause {specify clause} of the transfer dated {specify date of transfer} made between {specify housing association} expressed to be made by the Transferee are made by such persons jointly and severally".

In English, it simply means the freehold cannot be sold and re-registered with the land registry unless the clause (which contains the pre-emption right) in the freehold transfer (TP1) has been complied with and you have a certificate from the HA's solicitor to prove it. All the RX3 form does is ask the land registry to remove this restriction from the title. The pre-emption clause will still be in the freehold transfer (TP1) and in theory can still be acted upon (although unlikely). Some lenders and certainly some buyers won't like this. It just seems like a cheap fix.

See the HCA Capital Funding Guidance - 5.3.28.
https://www.gov.uk/guidance/capital-funding-guide/11-shared-ownership