Oaklee Housing Association / Owning Your Property
Co- own Your Home with Oaklee
From 31 December 2008, eligible tenants of both the Northern Ireland Housing Executive and Registered Housing Associations will be able to apply to purchase a part of their home. They will receive a discount off the cost of the home.
The aim of the policy is to provide an Equity Sharing option for those tenants who wish to buy their homes but are unable to afford the full cost. . The extension, which was announced by the Minister for Social Development in February 2008, will allow tenants to buy part of their home in conjunction with their social landlord. For the part of the dwelling that is still retained by the landlord a rent will be payable. The policy has been formulated following wide consultation.
Equity Sharing purchases will take place under the auspices of the House Sales Scheme. Therefore tenants buying under equity sharing must fulfil all of the criteria, and will be subject to the same rules set out in, the existing House Sales scheme. These include:
- Initial five year tenancy period
- Anti social behaviour exemptions
- Discount rules
- Restrictions on purchase of specific properties
- Historic cost ( not less then the costs incurred in the provision, improvement or acquisition the house)
- Dwelling Valuations
- Repayment of discount
- Joint Purchasers
- Option to purchase
Where these conditions are met, the tenant will be permitted to purchase the property. The tenant will be offered the option to buy the home, either in full or in part.
Tenants will be entitled to purchase a minimum initial equity of 25% and may then increase their equity in steps of as little as 5%.
Properties, and shares of properties, will continue to be sold at current market value. The market value will then be assessed by a suitably qualified professional valuer as at the date of the completed application to purchase or increase equity (i.e. date of receipt of all required information). Applicants' improvements will be disregarded in assessing market value.
The purchase price will be the market value at the date of receipt of the application less the eligible discount subject to the historic cost. The term historic cost refers to the cost incurred by the Housing Executive or Housing Association in the provision, improvement or acquisition of the house in the financial year in which the application to purchase is made and in the 10 previous financial years. If the market value before discount is below that amount no discount will be deducted from the price. Where the aggregate of the costs incurred in respect of improvement works is less than £5,000 throughout the period, those costs can be disregarded.
Eligible discount is the discount applicable at the date the first application for equity sharing is successfully completed and will take account of the period the applicant has been a secure tenant and the level of discount earned as described in paragraph 4.3 below.
Discounts will be applied to further equity purchased up to the maximum eligible discount for the house being bought. The maximum discount that any tenant can earn is £24,000 whether the dwelling is purchased outright or through equity sharing; this is known as the Discount Ceiling. The discount is calculated in relation to the length of tenancy at the date of application to purchase the initial equity. A secure tenant of a house with five years completed tenancy (or equivalent) will be allowed the following:
- An initial discount of 20%
- For each additional completed year's tenancy the discount will be increased of 2% per year up to a maximum of 60%, subject to the Historic Cost explained in paragraph 4.1 and the Discount Ceiling of £24,000. These discount levels also apply to the purchase of flats.
Under the equity sharing option, the maximum level of discount payable will be related to both the amount of equity purchased and subject to the eligible discount earned as well as the discount ceiling.
Discount will be payable each time equity is purchased. In order to help those with an aspiration to get onto the home ownership ladder, a more generous discount rate will apply to the first 50% of the property purchased. On the purchase of between one quarter and one half of the home, a person will be entitled to between 35% and 70% of the maximum available discount. On the purchase of more than half of the home, the remaining discount (totalling 30% of the original total) will be made available. An example is set out in paragraph 4.6 below. Details of the maximum available discount are set out in the table below.
Example. A person who is entitled to the maximum available discount (£24,000) purchases 25% of their home will be allowed 35% of the total discount, which will total £8,400. They subsequently decide to increase their total share to 55%. They will therefore be entitled to have received 73% of the total discount (£17,520). However, as they have already received 35%, they will receive the remaining 38% discount (£9,120).
Introductory tenants cannot apply. The time from an introductory to secure tenancy will count towards eligibility and discount.. Following the sale of the property on the basis of equity sharing the rent payable on the portion of the property which has not been bought by the tenant will not count towards increasing the amount of discount and historic cost.
Once a tenant buys their home, they will pay rent on potion of the property which the social landlord still holds. This rent shall not count towards any future discount awarded.
Equity sharers remain eligible to apply for Housing Benefit on the rental element.
Dwellings sold under equity sharing will be given a long leasehold, in line with the current equity sharing practice. In the event that it is necessary to seek recovery of the costs secured on the house, the mortgage lender will have the first claim to recover any outstanding mortgage loaned on the initial application for an equity share. This will be the first Charge. The former landlord (who shall become the Leaser) will have the second claim to recover any discount on a property sold under the equity sharing scheme. This will be the second Charge. The Leaser may not agree to dispense with its second Charge status in favour of any second mortgages subsequently taken out. However the Leaser will be expected to ensure that this is not used as a means of preventing the purchase of further equity.
At the time of purchase, tenants/purchasers will be responsible for building society fees and purchaser's legal fees.
Upon purchase, leaseholders will be liable for maintenance and other home ownership costs. These may include:
- Rates
- Service charges where appropriate
- Insurance charges
- Legal and building society valuation fees in the purchase of additional equity.
- The payment of the Valuer at a rate set by the Landlord in the purchase of second and subsequent equity buy out.
- The payment of Land and Property Services Agency fees for redeterminations of valuations in the purchase of additional equity.
The current disposal rules of the House Sales Scheme shall apply to equity sharing leaseholders. Where the leaseholder wants to sell the dwelling, they must give the Housing Executive or a Registered Housing Association which initially sold the property the option to repurchase. Where the Leaser confirms that the property is not required for social or affordable housing purposes then the leaseholder can sell the dwelling on the open market. The Leaser will recover equitable proceeds based on the level of equity they have at the time of sale.
The Landlord will pay for the initial valuation in determining the market value of the dwelling. All other costs will be the responsibility of the tenant.
