ITEM 9 MILTON KEYNES COUNCIL HOUSING FORUM 24 JUNE 2004 DRAFT POLICY ASSIGNMENT & SUBLETTING OF SHARED OWNERSHIP PROPERTIES. Author: Mike Ekoja, Home Ownership Manager (MK 253061) 1 Purpose 1.1 To brief delegates on the draft shared ownership housing policy on assignment (selling or transferring ownership) and sub-letting (see Appendix 1). 1.2 Once the view of the Forum is taken, the draft policy will be further developed and presented to Cabinet for decision. 2 Recommendation 2.1 To make comments/observations that may be included in draft policy. 3 Background 3.1 Shared ownership housing was introduced to help people who cannot afford to buy a home outright. Through shared ownership people are allowed to buy a share of the property and pay a rent on the remaining share they do not own. It allows people to get a foot on the property owning ladder. Gradually, they may buy further shares and eventually own their home outright. (the Shared Ownership Principle). 3.2 A few individuals and organisations have more than one shared ownership property, which they use for letting business. This defeats the purpose for which shared ownership housing was intended. The purpose of the draft policy is to prevent multiple ownership and therefore stop profiteering and to preserve the principle of shared ownership housing. 3.3 The shared ownership principle first came into general use in the early 1980s. At that time and subsequently the Milton Keynes
Development Corporation (MKDC) and the Council sold a number of homes on shared ownership terms with that aim. All of the MKDC homes have now passed to the council. 3.4 Milton Keynes Council now possesses approximately 1780 homes leased to home owners under shared ownership leases. They provide that the home owner owns the lease of part of the property and the council owns the freehold. 3.5 Under the provisions of the lease the home owner has the right to sell his share in the property by assigning the lease to someone else. However he must obtain the consent of the council to the assignment. 4 Proposed Changes 4.1 The proposed changes will allow the Council to refuse consent for a shared ownership property to be transferred (sold) or sublet to individual or an organisation where they already own a shared ownership property. The policy will help in preserving the shared ownership principle. 4.2 Currently the Council has no policy in refusing the sale of shared ownership properties to either individuals or organisations who already own a shared ownership property. 27 individuals currently own 91 properties, out of which 1 company owns 11 properties. 5 Legal implications 5.1 The policy is likely to be challenged not by individuals in housing need but by those wishing to use the scheme for business purposes. Preliminary legal advice indicates that the Council will have a good case to withhold consent where the shared ownership principle is being contravened or abused. 6 Policy Implementation/Financial Implications A detailed procedure will be drawn up for implementing the policy on approval. All the costs, other than possible litigation costs, will be borne out of existing resources. 7 Conclusion 7.1 The shared ownership housing scheme does not exist to make profit for individuals or businesses but to satisfy genuine housing needs. Although, the Council is not introducing new scheme, it should ensure that the existing properties are used for affordable housing and therefore meeting it s local housing needs.
Note: This draft policy has not addressed the issue of premiums. The construction of the Council s standard shared ownership lease does not prohibit payment of premiums. Appendix 1 Draft Shared Ownership Assignment Policy 1. Definition: The Shared Ownership Principle: Shared ownership was introduced to help people who cannot afford to buy a home outright. Through shared ownership scheme people are allowed to buy a share of the property and pay a rent on the remaining share they do not own. Gradually, they may buy further shares and eventually own their home outright. Whether the subsequent sale is a percentage part or a 100% leasehold interest it shall continue to be affordable within the meaning of the Council's policies of affordable housing (the Shared Ownership Principle). The definition of shared owner housing scheme was set out by the Housing Corporation. 2. Introduction The shared ownership principle first came into general use in the early 1980s. At that time and subsequently the Milton Keynes Development Corporation (MKDC) and the Council sold a number of homes on shared ownership terms with that aim. All of the MKDC homes have now passed to the council. Milton Keynes Council now possesses approximately 1780 homes leased to homeowners under shared ownership leases. They provide that the home owner owns the lease of part of the property and the council owns the freehold. Under the provisions of the lease the home owner has the right to sell his share in the property by assigning the lease to someone else. However he must obtain the consent of the council to the assignment.
3. Legal background The usual form of shared ownership lease provides that the home owner must seek consent to an assignment or underletting, such consent not to be unreasonably withheld in the case of an assignment or underletting to a respectable and responsible person. Under the provisions of the Landlord and Tenant Act 1927and the Landlord and Tenant Act 1988 the council owes a duty to the home owner to grant consent within a reasonable time unless it is entitled to withhold consent. The Council believes that it is reasonable to withhold consent where the Shared Ownership Principle will be breached by the incoming Assignee or Undertenant. 4. Purpose The purpose of the policy is to set out the circumstances in which the council will give consent to the assignment or underletting and the conditions on which such consent will be given. In particular consent will not be given where there is evidence that the purchaser or tenant of the home will be in breach of the Shared Ownership Principle. 5. Breach of the Shared Ownership Principle The Council will regard a home owner to be in breach of the Shared Ownership Principle in the following circumstances: 5.1.1. The assignee or undertenant of the shared ownership lease is a Company other than a Trust Company within the meaning of the Trustee Act 1925 or related legislation. A company cannot occupy a property as its home 5.1.2. The assignee or undertenant is a partnership firm or individual in the business on his own account of letting property for profit. 5.1.3. The assignee or undertenant is not going to use the property as their sole or principle residence. 5.1.4. There is clear and substantial evidence that the assignee or undertenant has means sufficient to be able to buy a property of similar size and with similar facilities on the open market and/or does not intend to occupy the property as a home for himself or
someone for whom he has a caring responsibility, or otherwise would be in breach of the Shared Ownership Principle 6 Policy 6.1 Milton Keynes Council will exercise its powers under shared ownership leases to ensure that wherever possible consent to sell or otherwise assign or underlet shared ownership properties is not given where the Shared Ownership Principle is likely to be breached. Accordingly the following specific polices will apply; 6.2 Consent will not be given where the assignee or undertenant is a Company 6.3 Consent will not be given where the assignee or undertenant is a firm, individual or other legal entity in the business of letting property for profit. 6.4 Consent will not be given where there is evidence that the assignee or undertenant has means sufficient to be able to buy a property of similar size and with similar facilities on the open market. 6.5 Consent will not be given where the Assignee does not at the time consent to assign is sought undertake to occupy the property as his home except in the following circumstances; 6.5.1 The Assignee has a caring responsibility for a person intending to occupy the property as his home without payment to the Assignee. 6.5.2 There is some other reason approved by the Director of Housing of Milton Keynes Council why consent should be given. 6.6 Consent will not be given where there is evidence that the Assignee or undertenant is not a respectable and responsible person. 6.7 It will be a condition of consent to assignment or underletting that: 6.7.1 All rent, service charge, insurance premiums and others sums due under the lease have been paid up to the date of assignment or underletting
6.7.2 The home owner has substantially complied with his obligations to keep the property in repair. 6.7.3 Any costs fees and charges due to the council in respect of granting consent to the assignment or underletting and registering the change of ownership have been paid. 6.7.4 There is no substantial breach of any other covenant term or condition of the Shared Ownership Lease. 6.8 At all times the Council will comply with the terms of the Shared Ownership Lease, the provisions of section 19 of the Landlord and Tenant Act 1927, the Landlord and Tenant Act 1988 relating to the grant of consent to assignment and all other statutes, regulations and rules of law relating to the grant or refusal of consent to assignment or underletting of a lease. In any case where the council's lawyers advise that there is a conflict between those rules and this policy, those rules will prevail. 7 Procedure 7.1 The Council will be responsible for processing applications for consent to assignment and underletting. They will at all times have regard to the Shared Ownership Principle in carrying out such work. 7.2 Applications for consent will only be entertained from persons registered with the council as being owners of Shared Ownership Leases. Persons intending to purchase Shared Ownership Property will be informed that the application must be made by the existing home owner and provided with a copy of this policy 7.3 On receipt of an application for Assignment the home owner will be sent a form of application. That form will seek the following information and give the following undertakings. It will be signed by both the home owner and the assignee 7.3.1 The full name of the Home Owner 7.3.2 The address of the Property 7.3.3 The full names of all proposed Assignees or Undertenant
7.3.4 The names of any legal representatives acting for the parties 7.3.5 A statement of the occupation of the Assignee or Undertenant 7.3.6 An undertaking that the Assignee will occupy the property as a home 7.3.7 Such other information as the Director of Housing of the Council considers necessary 7.4 The Assignee or Undertenant will also be required to produce a bank reference, an employer's reference and a character reference 7.5 The Property Department of the Council will send the application form, details of any other requirements and a copy of this policy to the applicant within 5 working days of receipt of the application 7.6 On receipt of a properly completed application the Property Department will consider whether consent should be granted. In making the decision it will have regard to the provisions of this policy and procedure. In any case of doubt it will refer the matter to the Home Ownership Manager or his deputy who may seek legal advice in relation to the application. Within 10 working days it will inform the applicant whether or not consent will be granted. At the same time the applicant will be informed of any conditions that must be complied with before the assignment takes place 7.7 If consent is given it will be subject to a condition that the assignment or underletting is completed within a period of 3 calendar months and that the Home Owner and the Assignee or Undertenant enter into a formal licence to assign or licence to underlet of which the council will also be a party 7.8 The grant of consent to assignment or underletting the legal department of the Council will be instructed to draw up the licence to assign or licence to underlet and complete the matter
7.9 At all times the Estate Division and the Legal Department will keep the Home Ownership Unit informed of progress of the application in accordance with standard protocols and procedures. Background papers: MK shared ownership lease The Housing Corporation fact sheets Housing legislation