Redemption and realisation of equity
The affordable dwelling equity is:
- redeemed by the homeowner by making redemption payments or
- repaid out of the proceeds of a sale by the homeowner, or
- realised by the housing authority.
These are the different means by which an affordable dwelling purchase arrangement is brought to an end.
The homeowner may, at any time after the making of the affordable dwelling purchase arrangement and prior to a sale make payment(s) which redeem the affordable dwelling equity in whole or in part. This is subject to any minimum payment the Minister may prescribe This is intended to be €7,500-€10,000 as a minimum payment.
When the homeowner wishes to make a repayment he/she will give notice to the housing authority (in such form as may be prescribed) whereupon the ‘valuation mechanism’ is triggered. The housing authority will give its estimate of market value of the dwelling, including the value of any improvements made by the homeowner, which the homeowner may refer to an independent value.
Following the fixing of the market value, the homeowner has three months to make a payment. When the payment is made, the affordable dwelling equity is reduced accordingly, and this is notified to the homeowner. The amount the affordable dwelling equity is reduced by is the percentage that the redemption payment comprises of current market value. For example, where the affordable dwelling equity was 20%, the current market value is €320,000 and the redemption payment made is €10,000, i.e., 3.125% of €320,000, the new affordable dwelling equity is (20 – 3.125) %, i.e. 16.875%.
Sale prior to redemption
There are provisions for the sale of the affordable dwelling by the homeowner (either before or after the long stop date). This requires the consent of the housing authority, which may not be unreasonably withheld. The homeowner must request consent to sell, stating the minimum price for which he/she will sell, and the housing authority will give consent to sell subject to a stated minimum, or refuse consent.
Prior to the completion of any sale, the current market value is fixed in accordance with the valuation mechanism. It is agreed between the housing authority and the homeowner (i.e. the agreed sale price subject to any adjustments in respect of increases/ decreases in value attributable to the homeowner), and the monetary value of the affordable dwelling equity is calculated (the relevant percentage of the market value as fixed).
The housing authority will only discharge/ cancel the affordable dwelling purchase arrangement as a burden on the dwelling after the homeowner has paid to the housing authority, from the proceeds of the sale, the amount representing the monetary value of the affordable dwelling equity.
If the dwelling is being sold by a mortgagee having rights in priority to the rights of the housing authority, the housing authority is the person to receive the residue of the proceeds of sale after discharge of the mortgage. In such a case the housing authority will apply the residue towards the discharge of the affordable dwelling equity and the remainder is held by the housing authority ‘upon the trusts provided for in the Conveyancing Act and distributed accordingly’. Where the amount received by the housing authority in this situation is insufficient to discharge the affordable dwelling equity, the housing authority is entitled to recover the balance from the homeowner as a simple contract debt.
Realisation event and notice
There are situations in which the housing authority is entitled to end the affordable dwelling purchase arrangement and realise its equity share. The housing authority is entitled to demand the redemption of the affordable dwelling equity by the homeowner by serving a ‘realisation notice’. It is entitled to do so on the occurrence of ‘a realisation event’ as specified in the affordable dwelling purchase arrangement.
The Minister prescribes the form of the affordable dwelling purchase arrangement and on specific events which include:
- the homeowner fails to redeem the affordable dwelling equity by the long stop date;
- the original owner (or where there was more than one original owner, all of them) has died or become bankrupt;
- the affordable dwelling becomes subject to an order or process for compulsory purchase;
- the homeowner is in material breach of a covenant in the affordable dwelling purchase arrangement;
- the housing authority is satisfied that the homeowner willfully misled it in respect of any material fact having regard to their eligibility or priority for an affordable dwelling purchase arrangement.
The realisation notice will inform the homeowner that after a specified period (which must be at least three months) the housing authority is entitled to realise the affordable dwelling equity, unless the homeowner has first redeemed the affordable dwelling equity in full.
The housing authority has power to realise the affordable dwelling equity following the expiration of a realisation notice, d where the affordable dwelling equity has not been redeemed by the homeowner. The housing authority has the power to sell the dwelling in order to realise its equity and all powers reasonably necessary to effect such sale.
The housing authority may demand and take possession of the dwelling, giving not less than one month’s notice, peaceably enter and take possession of the affordable dwelling, or apply to the Circuit Court for an order for possession of the dwelling. Where it takes possession of the dwelling, the housing authority is required to sell it within a reasonable period at the best price reasonably obtainable. This does not prejudice the rights of any mortgagee of the dwelling.
Following the completion of the sale, the monetary value of the affordable dwelling is calculated in accordance with the valuation mechanism and the proceeds of sale is applied in the following order:
- in discharge of prior encumbrances, if any, to which the sale was not made subject;
- in payment of all charges, costs and expenses properly incurred by the housing authority as incident to the sale or any attempted sale or otherwise;
- in discharge of the affordable housing equity and any costs and expenses properly incurred by the housing authority in any proceedings necessary to recover possession of the affordable
- Any residue of the money received by the housing authority is held by the housing authority upon the trusts provided in the Conveyancing Act (order of priority and entitlement under property law) and distributed accordingly.
If the proceeds held are insufficient to discharge the amount due to the housing authority the balance is recoverable by the housing authority from the homeowner as a simple contract debt.
The homeowner has the right to redeem the affordable dwelling equity up to the actual point of sale of the dwelling by the housing authority (i.e. even after the expiration of the period specified in the realisation notice).In a case where the housing authority has already incurred reasonable costs in attempting to sell the dwelling, the homeowner must, as a precondition to the discharge of the affordable dwelling equity, be responsible for the discharge of those reasonable costs
Moneys received by the housing authority in discharge of the affordable dwelling equity must be accounted for by the housing authority in a separate account and used to provide affordable dwellings under this Part or cost rental dwellings under Part 3.There are special provisions for cases where the housing authority would insure the affordable dwelling in relation to the receipt of proceeds.