After-sale shared equity procedures: guidance

Introduction

This Guidance is designed to cover after sale procedures in relation to Scottish Government's various shared equity schemes -€“ Help to Buy (Scotland), Help to Buy (Scotland) Affordable Home Ownership (both of which are referred to in these procedures as " HtB(S)"), Open Market Shared Equity (" OMSE") and New Supply Shared Equity and New Supply Shared Equity for Developers (both of which are referred to in these procedures as " NSSE") as well as the original Homestake scheme. The most common after sale matters are:

• Exercise of Golden Share
• Change of Owner
• Change of Lender
• Additional Secured Loan -€“ same lender/different lender
• Increase stake to less than 100%
• Increase stake to 100%
• Sales
• Subsequent Securities
• Grant of Tenancy
• Expiry of 19 years/Application of the 20 Year Security Rule
• Corresponding with Owners
• Valuations and Letters of Reliance
• Enforcement of Primary Lender security / Appointment of Trustee
• Alterations to the Property
• Death of Owner

Registered Social Landlords -€“ Reasonable Administrative Costs

In these procedures, references to a "registered social landlord" or " RSL" are to the registered social landlord which entered into the relevant shared equity transaction with a purchaser, or which acted as the administering agent on behalf of Scottish Ministers in relation to HtB(S) transactions. For transactions which completed prior to 6 April 2008 the shared equity documentation will have been entered into in the name of the RSL whereas documentation entered into after that date will run in the name of Scottish Ministers, care of the RSL. This guidance and the template correspondence set out in the various Annexes seek to cover both scenarios.

Each RSL which acts as the agent for Scottish Government in connection with the administration of any shared equity transactions should draw up a set of charges which should reflect the reasonable administrative costs for work that that RSL will undertake on post-sale HtB(S), OMSE and NSSE transactions.

RSLs should make clear that:

(a) these reasonable costs should be paid by a shared equity owner in advance and they are non-refundable -€“ as mentioned below these may be by cheque but it may be simpler and quicker to do so by credit card - see Section 11 -€“ Corresponding with Owners.

(b) every transaction will involve a range of further legal costs as well as, for example, search and registration fees and where appropriate Primary Lender arrangement and other fees and costs.

(c) the Owner should discuss all of these fully with their legal and/or financial adviser at the start of the process and before entering into any commitments.

(d) where the consent or approval of the Primary Lender is required the Owner should satisfy themselves in consultation with their advisers that such consent will be forthcoming before entering into any financial commitments.

These points are set out in the relevant correspondence which we have provided in the Annexes.

Consent of Developers

RSLs should bear in mind that, in relation to post-sale transactions which involve a purchaser who has purchased their home under the NSSE with Developers scheme, on occasion it may be necessary for the consent of the relevant Developer to be obtained in addition to that of Scottish Ministers, since the shared equity documentation which the Developer will have entered into with the purchaser, while separate from Scottish Government's documentation, should have been prepared in similar terms.

Indeed this may mean that the Developer's consent or agreement is required as a condition of Scottish Ministers giving their consent (for example, where the owner wishes to remortgage or to change their lender, it will be important to ensure that the equity stakes of the Developer and Scottish Ministers do not differ from each other). Such situations tend to arise fairly infrequently, and so not all of the templates contained in these procedures have been drafted so as to specifically cater for NSSE with Developers scenarios, but reminders have been inserted where appropriate to highlight the main situations where the Developer may have to be consulted. In any situation, if a RSL is unclear as to whether they require to contact the Developer, the RSL should contact either Scottish Government or Harper Macleod to discuss further.

Accuracy of Calculations and Information

A number of after sale matters will require the RSL to calculate the levels of equity stakes and amounts due to be repaid to the RSL or to Scottish Ministers. RSLs should appreciate that where they are acting as the administrative agent on behalf of Scottish Ministers, the RSL is responsible to Scottish Ministers for ensuring that all such calculations are accurate and that the correct information or moneys are passed on to Scottish Ministers or to Scottish Ministers' solicitors or to shared equity owners, as the case may be. RSLs should therefore ensure that they have appropriate systems and checks in place, and that staff are appropriately trained, for this purpose.