Unexpected issue with owning / selling my affordable home

Snuggles

14 years ago when I was single I bought a leasehold house. The freeholder is a housing association. I paid 60% of the open market value at the time, and when I sell I can only sell for 60% of the open market value. The HA always describe this as a shared equity scheme - in reality I think it's actually a discounted/restricted sale under a Section 106 agreement. As well as the price restrictions, for the first few months of marketing, the property can only be sold to someone with a local connection. After that it can be offered on the open market. This is all set out in the lease. I am not permitted to buy the property outright, and I don't pay any rent to the HA, other than a nominal ground rent.

There are a number of properties in my street which were purchased under the same scheme. Over the years a number of them have been resold, but it tends to take much longer than a normal sale, with sales falling through before they eventually sell.

My circumstances now are completely different. I have changed jobs, been promoted, doubled my salary, met and married someone who is a on a very good salary. Due to this the mortgage was paid off 18 years early (I had taken a 30 year term at the time to make the repayments affordable for my then circumstances).

At the time I purchased, eligibility to purchase under this scheme, as advertised by the HA, also included that your household income had to be below £40k and that you didn't already own another property. Clearly I would no longer be eligible for affordable housing if I was applying today, as we can easily buy on the open market, and indeed we are very much wanting to do so (this property is a very small starter home type and we are bursting out at the seams).

We feel that trying to sell and buy at the same time in a chain will be nigh on impossible, especially in the current fevered housing market. We will not be attractive buyers when we are encumbered with a complex sale which might take a long time and has a high chance of falling through. We have therefore looked into the viability of buying a new home, if we see something we love, before selling my affordable home. We have savings which would allow us to do this as we have enough for a deposit on a new home without releasing the equity from this one. We have factored in all the extra costs (2nd home SDLT, council tax on two properties etc etc), and it is easily affordable for us. 

I checked the lease and it does not contain any clause preventing us from leaving my property empty. However I was concerned about buildings insurance implications so contacted the HA to check. They replied the next day confirming that after consulting with their solicitor, there is nothing to stop me leaving the property empty.

However, completely unexpectedly, they have told me I simply cannot purchase another property on the open market before selling this one:

"You would not be able to retain ownership of [my address] and purchase another property on the open market. The property is affordable housing and if you purchase another property, you would no longer be eligible for affordable housing and therefore could not own the property at [my address]".

They gave no explanation of what this actually means in practice - how it would be enforced and by whom. I have checked the lease and there is nothing whatsoever which says I cannot purchase another property.  If this isn't stated in the lease, then what possible means could be used to prevent me from buying another property, or to prevent me from continuing to own my current property if I bought another? It's as though they are saying that whatever eligibility criteria were in place at the time I purchased, I must continue to meet whilst I own the house, which seems ridiculous. By that logic I'm already no longer eligible to carry on owing the property (which I've paid for) because my household income is too high.

I went straight back to them stating there is no such condition in the lease and asking them to clarify the legal basis on which this could be enforced. They said they would ask their solicitor again and get back to me. Five days on and they haven't yet responded.

I've tried researching this, but all I can find with any affordable housing schemes are references to not being allowed to own another property in order to meet the eligibility criteria to apply to purchase the property. I've found nothing to suggest that the eligibility criteria must continue to be met for evermore. 

I know it's probably unlikely that anyone can definitively answer this, but can anyone suggest if there may be a way for this to be enforced, even though it's not in the lease? I don't see how else "not being able to retain ownership" of my home could come about, unless buying another property causes the lease to be forfeited. But is that possible if there is no such clause set out in the lease?

user1977

I suspect they're confused.

Besides, by the time you own another property, you'll already (presumably) be actively marketing the old one. And when you sell, that'll solve their problem (if they actually have a problem). Might be different if you were retaining the old property and e.g. letting it out.

Snuggles

user1977 said:

I suspect they're confused.

Besides, by the time you own another property, you'll already (presumably) be actively marketing the old one. And when you sell, that'll solve their problem (if they actually have a problem). Might be different if you were retaining the old property and e.g. letting it out.

This is my suspicion (and hope) too. I suspect no one else has ever proposed doing this before (with this particular HA), so it's not a question they have previously had to answer. Some of my former neighbours have left their properties empty and gone into rented whilst trying to sell their affordable home (because they needed more space after having kids etc), but none have purchased another home before selling. 

Yes, it's clearly stated in the lease that I'm not allowed to rent out the property, I'm just proposing to leave it empty until it sells. I'll get no benefit from doing it (other than it allowing us to move on). It will obviously cost us significantly more than if we sold and bought simultaneously in the usual way.

AnotherJoe

Seems like confusion on their part as you say, where does it say that in the lease.
take this asa lesson, usually  better to ask for forgiveness than permission. You could have avoided the property being empty by being in there one night a month or whatever 
Also there's  nothing to stop you buying and selling on the same day and just not tying the two deals together. That would help you with SDLT as well.
BTW when you say buyinga new house did you mean new to you or a new build?

steve866

Why does it have a high chance of falling through? I sold my house to someone selling a shared ownership property and whilst it took slightly longer, the delays in searches etc. could have held the sale up even longer. I would just try and sell and get under offer then start looking.

Snuggles

AnotherJoe said:

Seems like confusion on their part as you say, where does it say that in the lease.
take this asa lesson, usually  better to ask for forgiveness than permission. You could have avoided the property being empty by being in there one night a month or whatever 
Also there's  nothing to stop you buying and selling on the same day and just not tying the two deals together. That would help you with SDLT as well.
BTW when you say buyinga new house did you mean new to you or a new build?

I'm not sure what you mean by buying and selling on the same day and not tying the deals together. The issue we have is that it will probably take us a long time to find a proceedable buyer, and we don't want to lose out on being able to buy a suitable new property if our sale falls through.

I mean buying a house that's new to us, not a new build. 

Snuggles

steve866 said:

Why does it have a high chance of falling through? I sold my house to someone selling a shared ownership property and whilst it took slightly longer, the delays in searches etc. could have held the sale up even longer. I would just try and sell and get under offer then start looking.

Because, as far as i'm aware, there is a limited pool of lenders who will lend on properties with Section 106 resale restrictions, and those that do may require larger deposits, and this is very a much a FTB type property. (If this has changed, perhaps the mortgage brokers who post on these forums might kindly advise what the current state of play is with obtaining mortgages on properties with 106 resale restrictions).

As I mentioned in my OP it's also based on my knowledge of what has happened when people in my street in the exact same scheme have tried to sell their property. As I said, some have ended up having to go into rented because they needed the extra space and just couldn't sell their property, despite receiving offers, as the sales kept falling through due to the 106 restrictions. They do eventually sell, it just takes ages. 

sheramber

Do the HA  appreciate that you will be marketing your property while you buy the other house?  

Snuggles

sheramber said:

Do the HA  appreciate that you will be marketing your property while you buy the other house?  

Yes, I made that clear when I asked them about the insurance implications of leaving it empty.

deannagone

I think you will find you were speaking to someone who was in over his/her head and what they said was wrong.  To be honest, what this person proposed would be complicated and expensive, not something the HA would want to do.  I'd put that conversation behind you and just proceed with selling the HA property. I wonder if a good broker would be more use advising you on how to handle/what expectations to have from the Section 106 complications?  Perhaps they might be able to advise which lenders will deal with this situation so you can discuss this with interested buyers to make it a bit easier for them.

I wonder if posting on the mortgages board would help?  Plenty of brokers on there.

Snuggles

deannagone said:

I think you will find you were speaking to someone who was in over his/her head and what they said was wrong.  To be honest, what this person proposed would be complicated and expensive, not something the HA would want to do.  I'd put that conversation behind you and just proceed with selling the HA property. I wonder if a good broker would be more use advising you on how to handle/what expectations to have from the Section 106 complications?  Perhaps they might be able to advise which lenders will deal with this situation so you can discuss this with interested buyers to make it a bit easier for them.

I wonder if posting on the mortgages board would help?  Plenty of brokers on there.

Apparently it came from their solicitor (although not directly - the person I was dealing with said they had checked with their solicitor). I will have to clear this up before (and if) we go ahead - I'm not someone who could sleep at night without knowing it was above board and there was no great unknown risk involved (hence me contacting them to check about the insurance!).

Thank you for that suggestion. I'm fairly certain there are three or four likely lenders for these type of properties - I believe Leeds Building Society, Nationwide (who my mortgage was with) and Halifax. So it's not impossible at all but I think some people are put off when they find their mortgage choices are limited and others are spooked by the resale restrictions. I agree though, it's far better to point any potential buyers in the right direction.