Tenant Purchase II

2014 Act

The Housing (Miscellaneous Provisions) Act 2014 extended  a scheme of tenant purchase for existing local authority houses  along the lines of the incremental purchase scheme applicable to new local authority houses and existing local authority apartments under the Housing (Miscellaneous Provisions) Act 2009.

Part 3 of the 2014 Act provides for a scheme of tenant purchase of existing local authority houses.  The tenant pays the housing authority a discounted price, which is related to his income, to purchase the freehold interest in the house.  The authority places an incremental purchase charge on the house for the proportion of the value.

The charge reduces in annual proportions over the charge period provided the tenant complies with the terms and conditions of sale.  In particular, it is a condition that the house is used as the household’s normal residence.

If this condition is breached, the annual release of the charge is suspended, and a payment must be made to clear the charge at the end of the charge period.  The purchaser may pay one or more annual releases of the purchase charge during the period.

If the purchaser wants to sell the house during the period, the housing authority has the first option of buying it at the current market value, less the outstanding incremental purchase charge.  Where it does not buy, the tenant must, on sale, pay the authority the value of the outstanding charge, provided there must not be a net loss on resale.

The terms and conditions of incremental purchase arrangements are to be set out in regulations.

Houses Covered

The scheme covers houses other than new builds or newly acquired houses, which are covered by a similar scheme under 2009 legislation.  A house that was provided as affordable housing but is no longer required for that purpose and has been allocated as social housing support, may be sold.

Excluded are local authority dwellings in buildings that contain one or more dwellings which require arrangements for regular upkeep and management of common area structure, services and works, other than by the owner.  The Minister may prescribe other classes of houses that do not qualify for the scheme.

A housing authority may not sell to a tenant where, in the three years prior to purchase, he or she or a household member was in arrears of rent, rent contributions, charges, fees or other monies owed to the housing authority or an approved housing body for a period of more than 12 weeks in respect of a dwelling or site provided as social housing support.

This does not apply where the tenant or household enters into a rescheduling arrangement to pay off the debts and complies with the obligations. A house may not be sold under the scheme to a tenant who previously purchased a dwelling from a housing authority.

Income

The reckonable income of the tenant, spouse, civil partners and cohabitants are taken into account in calculating the income of a tenant who has applied to purchase a house.  The Minister may issue directions to housing authorities on the determination of reckonable income.

The directions may specify the level, type, sources of household income that are deductible, reckonable deductions permitted and information that a tenant must supply.

Sale

A house may be sold in its existing state of repair and condition.  The sale is by way of a transfer order.

It is subject to conditions that apply during the charge period. Conditions may include conditions regarding the occupation of the house as a normal place of residence of the purchaser’s household member, changes in the status of the house, authority consent on key changes and prohibitions on antisocial behaviour.

The sale of the house does not imply a warranty as to its state of repair or its fitness for human habitation.

Charge

The housing authority must make a charging order in the required form which places a percentage incremental purchase charge on the house. This provides a charge in favour of the housing authority, equivalent to the percentage discount granted to the purchaser.  The charge applies for the e charge period specified.  The duration is set by regulations made by the Minister.

The charge reduces annually in equal proportions on the anniversary of the initial date.  This is provided the purchaser complies with the terms and conditions of the transfer order.  A reduction of the charge for the first five years does not apply until that period has expired.

A housing authority is to discharge the purchase charge when the charge is fully paid off, when it expires or when the house is resold.  A charging order is deemed a legal mortgage under the Land and Conveyancing Law Reform Act.  It is registered on the property.  Sums due under it may be recovered as a simple contract debt.

Charge Issues

Housing authority may enter an agreement with a lending institution giving the lending institution’s mortgage priority.  This may be done in order to facilitate obtaining purchase finance or refinancing existing advances or a further advance for any purpose.

The annual incremental release may be suspended where the purchaser breaches the terms or conditions of the transfer order.  When the charge period expires, the tenant has two months to repay the amount of the outstanding charge based on the authority’s current market valuation of the house.

The purchaser may, on the fifth and any subsequent anniversary and with the consent of the authority, pay the full outstanding incremental purchase charge, including suspended incremental releases or the value of one or more incremental releases based on the authority’s current market valuation of the house.  Where part is paid, the charge period is reduced by the number of years equating to the number of incremental releases which the payments represent.

Resale

In the case of a resale during the period of the charge, the purchaser must first offer the house to the housing authority at the current market valuation, less the incremental purchase charge.  If the housing authority elects not to purchase the house, it may be sold, and the authority must pay the outstanding incremental purchase charge amount.  There must not be a net loss on sale.

The resale is subject to the consent of the housing authority.  This may be refused for certain reasons including antisocial behaviour, good estate management grounds or where the sale would leave the seller or other person who might be expected to reside with him without adequate housing.

In the case of dispute in relation to current market value, it is to be determined by an independent valuer nominated by the purchaser from a panel of valuers drawn up by the authority.  The purchaser pays the cost of valuation.

Incremental Purchase Scheme

The Minister may make regulations in relation to the Incremental Purchase Scheme.  Methods that the housing authority uses to determine purchase price may be prescribed, including taking into account the cost of replacement in the authority’s stock of social housing.  The method of determining the discount may be set out in regulations and may have regard to the annual income of the tenant.

Social Housing Support

The minimum period in which the tenant is required to be in receipt of social housing support in order to qualify for purchase, and the minimum annual income in order to be able to purchase may be specified by regulations.  The authority may refuse to sell on the grounds of anti-social behaviour or good estate management.

There are provisions that may make a household ineligible for social housing. These include where, in the three years prior to carrying out the social housing assessment, the household was in arrears of rent, rent contributions, charges or fees for more than 12 weeks in relation to a house provided as a social housing support. This is not applicable where the household or household member enters a rescheduling agreement and complies with it.