Section 106 agreement help required... can they be amended?

Chrisl

Hi Everyone,

This is an unusual one here but I am looking for some help with regards to a Section 106 agreement….

To summarise, my family live in a housing association development in a rural village, the development is made up of 5 properties, 4 which are for affordable rent and the remaining house for shared ownership. The development is 6 years old and at the time we missed out on the shared ownership house which we would have liked.

Over the last 5+ years we have be saving hard however realistically we will never be able to afford the full market price on a house in our area, which is where we work, school based etc. I have been to various mortgage brokers however we are still well short of where we need to be, and even then very few houses come up on the market in the area.

Taking all of this into consideration, we love our home and in an ideal world we would like to buy under the ‘right to buy scheme’ however realistically this will never be rolled out and even if it was it wouldn’t include us as we live in a ‘rural parish’

Over the last 6 months or so I am been in talks with the housing association in regards to converting our house to shared ownership, after a lot of research I am sure this has never been done. The housing association as enquired with Homes England who have said this is acceptable and has also been agreed by the chief executive at the HA. They were checking through the section 106 for development to ensure that there is no stipulation on the mix of tenure, they scanned through and said all looked fine until I had an email yesterday to say it wasn’t, as you can understand after getting my hopes up I almost cried (literally!)

It appears that contrary to what they first thought, the section 106 does stipulate the requirement of mix of tenure allowing for one shared ownership home and the remaining rented. This means that permission would need to be requested from the local authority to convert the property to a shared ownership home.

The housing association are looking into this for me but have said if its possible, it will be costly and timely, I really do not want them to give up as this may be our only chance to build up a share in own home which we would want to stay for life..

I need help, does anyone have any experience with Section 106 agreements, can they be amended, I really have no idea but hope is fading fast…..

Many thanks

Sachs

Section 106 agreements are legal agreements between the local planning authority and the landowner/developer which legally binding the planning decision to the land. In this case, as is typical in rural areas, the local planning authority (LPA) has ensured that below market rent dwellings are available for people in your village.

They can be modified and doing so would be financially beneficial to the HA but the LPA may not wish to. Shared ownership are Ultimately a form of home ownership but rural locations often struggle more for affordable rented dwellings.

If you believe that your HA are doing all they can then leave then to it but accept that it may not be possible. Your best bet to positively influence the outcome would be to contact the housing officer at the council and/or contact your local councillor and see if they will advocate for you.

Chrisl

Hi Sachs, many thanks for the reply, the more information I can get with this the better. Yes, I fully understand that the local planning authority has agreed to the terms to ensure that there are below market dwellings in the village, I fully appreciate this.

The property which is for shared ownership, I believe the max share is 50% therefore I would guess if our property could be converted, this would be the same. Taking this into consideration the HA will still have the overall say/entitlement on the property therefore after we are long gone will still be available with the HA in the village for those who still cant afford the full market value in the area.

Good advice, I will establish who the local housing offer is and write to them, hopefully if we explain our position this could help :-)

Sachs

Are you clear on why you are doing this?

When you add in maintenance and I insurance costs on top of the mortgage and rent you'll pay will you actually be better off? A cap of 50% seems quite low and without the option to eventually own this home I'm not entirely clear if the effort will be worth it.

letsbetfair

Agreed that - if you already have a quite secure tenancy - it's well worth thinking about whether SO would make sense for you. People often go for shared ownership if they can't afford to buy where they want and have no chance of a social housing tenancy - the fact you already have this is a big factor. Also, can you chat to the current SO owner about how things are working for them - and if they're happy to talk about service charge, rent etc that would be ideal...

Chrisl

I have thought long and hard about things and am absolutely sure I would go ahead with shared ownership in our home if we get the go ahead from the local authority

We live in a rural area, we work within the area, have family in the area and children go to school in the area. We have lived in the house for 6 years since it was built, its perfect for our needs, we have great neighbours and on the open market we would never be able to afford to buy the equivalent home outright, prices are very high in and around the village

As we do not plan on leaving the home, if we get the opportunity to buy a share in the home it makes perfect sense, I have spoken to other people who also have shared ownership homes so understand the pros and cons. I have also gone though the figures, it will cost around £100 more per month and in long term if we can build up some equity in the property than just paying rent makes sense. I also fully understand I have to take on maintenance costs, luckily I am handy with spanners and good at DIY and it’s a modern property so the structure/roof etc are all in great condition.

The choices are slim for us, either continue paying rent as we are or pay a small bit more to actually buy a part of the home

I am just so worried the HA will say it’s too much hard work to go down this road however I really hope, before the issue with the Section 106 agreement, the HA were with us on this. The HA are having a meeting on Thursday to discuss so I really do have everything crossed…

Cakeguts

Chrisl wrote: »

I have thought long and hard about things and am absolutely sure I would go ahead with shared ownership in our home if we get the go ahead from the local authority

We live in a rural area, we work within the area, have family in the area and children go to school in the area. We have lived in the house for 6 years since it was built, its perfect for our needs, we have great neighbours and on the open market we would never be able to afford to buy the equivalent home outright, prices are very high in and around the village

As we do not plan on leaving the home, if we get the opportunity to buy a share in the home it makes perfect sense, I have spoken to other people who also have shared ownership homes so understand the pros and cons. I have also gone though the figures, it will cost around £100 more per month and in long term if we can build up some equity in the property than just paying rent makes sense. I also fully understand I have to take on maintenance costs, luckily I am handy with spanners and good at DIY and it’s a modern property so the structure/roof etc are all in great condition.

The choices are slim for us, either continue paying rent as we are or pay a small bit more to actually buy a part of the home

I am just so worried the HA will say it’s too much hard work to go down this road however I really hope, before the issue with the Section 106 agreement, the HA were with us on this. The HA are having a meeting on Thursday to discuss so I really do have everything crossed…

What I don't understand about this is why you think building up equity in a house that is going to cost you £100 a month is better than just putting the £100 a month into a savings account? This doesn't make sense to me because with shared ownership you are still paying rent and if you have a mortgage you are paying interest. It seems to me to be a very expensive way of getting some savings. You can't get the equity out of a house unless you sell the house and shared ownership houses are not that easy to sell if they aren't completely owned by the seller.



You may find that if housing is very expensive where you live that you can't staircase to 100% of the shared ownership. Not all shared ownership can be owned outright some has a maximum of around 85% or 90% that you can staircase to. It is designed to make sure that the housing is kept affordable so that other local people in your position have somewhere to live.



I just can't see why going from a secure rented house to a non secure shared ownership house makes any difference to you? It is the same house you don't have to move. So why not just put the extra £100 a month that the shared ownership will cost you plus the maintenance costs into a savings account and keep your secure accommodation. There are no benefits to pay a mortgage so if you change your house to shared ownership and you need a mortgage you are putting your home at risk if anything changes in your life and you can't work.

Chrisl

Trouble is when I retire the mortgage will be paid off on the 50% and I could afford the remaining 50% on rent using pension/little savings I may have whereas I wouldn't be able to afford the full rent in retirement if I do not have any equity in the property

Cakeguts

Chrisl wrote: »

Trouble is when I retire the mortgage will be paid off on the 50% and I could afford the remaining 50% on rent using pension/little savings I may have whereas I wouldn't be able to afford the full rent in retirement if I do not have any equity in the property

When the children leave home and you retire you will probably want to do what many people do which is downsize. What a lot of people also do then is to move areas. You won't need to stay close to schools or work because you won't need them.



If you have been saving and investing your £1200 a year you should have enough to give you a lot of choices about what to do and you won't have wasted money on interest and on the rent of the part of the shared ownership house. It is also possible that you will have more money in savings than you have in equity in the shared ownership house especially if you can afford to put away more than the £1200 a year.

Sachs

To be fair to Chrisl, is she's looking long term staying in this property then it's probably not a bad idea. Paying a Mortgage is a really simple, un complicated way of investing over the long term and may be appropriate. If you had ambitions to truly own your home in the next day 5 years I would probably be looking at the various government help to buy savings schemes and staying rented until then but if you're genuinely set on this house for life, it's not the worst idea.