Housing Associations Act 1985

Section 11.

SCHEDULE 2 Further Provisions as to Certain Disposals of Houses

Repayment of discount on early disposal

1 (1) This paragraph applies where, on a disposal of a house under section 8, in accordance with a consent given by the Housing Corporation under section 9, a discount has been given to the purchaser by the housing association ; but this paragraph does not apply in any such case if the consent so provides.

(2) On the disposal the conveyance, grant or assignment shall contain a covenant binding on the purchaser and his successors in tide to pay to the housing association on demand, if within a period of five years there is a relevant disposal which is not an exempted disposal (but if there is more than one such disposal then only on the first of them), an amount equal to the discount reduced by 20 per cent. for each complete year which has elapsed after the conveyance, grant or assignment, and before the further disposal.

Liability to repay is a charge on the premises

2 (1) The liability that may arise under the covenant required by paragraph 1 is a charge on the house, taking effect as if it had been created by deed expressed to be by way of legal mortgage.

(2) The charge has priority immediately after any legal charge securing an amount—

(a) left outstanding by the purchaser, or

(b) advanced to him by an approved lending institution for the purpose of enabling him to acquire the interest disposed of on the first disposal, or

(c) further advanced to him by that institution ;

but the housing association may at any time by written notice served on an approved lending institution postpone the charge taking effect by virtue of this paragraph to a legal charge securing an amount advanced or further advanced to the purchaser by that institution.

(3) A charge taking effect by virtue of this section is a land charge for the purposes of section 59 of the [1925 c. 21.] Land Registration Act 1925 notwithstanding subsection (5) of that section (exclusion of mortgages), and subsection (2) of that section applies accordingly with respect to its protection and realisation.

(4) The approved lending institutions for the purposes of this paragraph are—

• a building society,

• a bank,

• a trustee savings bank,

• an insurance company,

• a friendly society,

• the Housing Corporation

and any body specified, or of a class or description specified, in an order made under section 156 of the [1985 c. 68.] Housing Act 1985 (which makes provision in relation to disposals in pursuance of the right to buy corresponding to that made by this paragraph).

Restriction on disposal of houses in National Parks, etc.

3 (1) Where a conveyance, grant or assignment executed under section 8 is of a house situated in—

(a) a National Park,

(b) an area designated under section 87 of the [1949 c. 97.] National Parks and Access to the Countryside Act 1949 as an area of outstanding natural beauty, or

(c) an area designated as a rural area by order under section 157 of the Housing Act 1985 (which makes provision in relation to disposals in pursuance of the right to buy corresponding to that made by this paragraph),

the conveyance, grant or assignment may (unless it contains a condition of a kind mentioned in section 33(2)(b) or (c) of the [1985 c. 68.] Housing Act 1985 (right of pre-emption or restriction on assignment)) contain a covenant limiting the freedom of the purchaser (including any successor in title of his and any person deriving title under him or such a successor) to dispose of the house in the manner specified below.

(2) The limitation is that until such time (if any) as may be notified in writing by the housing association to the purchaser or a successor in title of his, there will be no relevant disposal which is not an exempted disposal without the written consent of the housing association; but that consent shall not be withheld if the disposal is to a person satisfying the condition stated in sub-paragraph (3).

(3) The condition is that the person to whom the disposal is made (or, if it is made to more than one person, at least one of them) has, throughout the period of three years immediately preceding the application for consent—

(a) had his place of work in a region designated by order under section 157(3) of the Housing Act 1985 which, or part of which, is comprised in the National Park or area, or

(b) had his only or principal home in such a region ;

or has had the one in part or parts of that period and the other in the remainder; but the region need not have been the same throughout the period.

(4) A disposal in breach of such a covenant as is mentioned in sub-paragraph (1) is void.

(5) The limitation imposed by such a covenant is a local land charge and, if the land is registered under the [1925 c. 21.] Land Registration Act 1925, the Chief Land Registrar shall enter the appropriate restriction on the register of title as if application therefor had been made under section 58 of that Act.

(6) In this paragraph " purchaser " means the person acquiring the interest disposed of by the first disposal.

Relevant disposals

4 (1) A disposal, whether of the whole or part of the house, is a relevant disposal for the purposes of this Schedule if it is—

(a) a conveyance of the freehold or an assignment of the lease, or

(b) the grant of a lease or sub-lease (other than a mortgage term) for a term of more than 21 years otherwise than at a rack rent.

(2) For the purposes of sub-paragraph (1)(b) it shall be assumed—

(a) that any option to renew or extend a lease or sub-lease, whether or not forming part of a series of options, is exercised, and

(b) that any option to terminate a lease or sub-lease is not exercised.

Exempted disposals

5 (1) A disposal is an exempted disposal for the purposes of this Schedule if—

(a) it is a disposal of the whole of the house and a conveyance of the freehold or an assignment of the lease and the person or each of the persons to whom it is made is a qualifying person (as defined in sub-paragraph (2));

(b) it is a vesting of the whole of the house in a person taking under a will or on an intestacy;

(c) it is a disposal of the whole of the house in pursuance of an order made under section 24 of the [1973 c. 18.] Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings) or section 2 of the [1975 c. 63.] Inheritance (Provision for Family and Dependants) Act 1975 (orders as to financial provision to be made from estate);

(d) it is a compulsory disposal; or

(e) the property disposed of is property included with the house by virtue of paragraph (b) of the definition of " house " in section 106(1) (yard, garden, outhouses, &c).

(2) For the purposes of sub-paragraph (1)(a), a person is a qualifying person in relation to a disposal if—

(a) he is the person or one of the persons by whom the disposal is made,

(b) he is the spouse or a former spouse of that person or one of those persons, or

(c) he is a member of the family of that person or one of those persons and has resided with him throughout the period of twelve months ending with the disposal.

Meaning of " compulsory disposal"

6 In this Schedule a " compulsory disposal" means a disposal of property which is acquired compulsorily, or is acquired by a person who has made or would have made, or for whom another person has made or would have made, a compulsory purchase order authorising its compulsory purchase for the purposes for which it is acquired.

Exempted disposals which end liability under covenants

7 Where there is a relevant disposal which is an exempted disposal by virtue of paragraph 5(1)(d) or (e) (compulsory disposal or disposal of yard, garden etc.)—

(a) the covenant required by paragraph 1 (repayment of discount on early disposal) is not binding on the person to whom the disposal is made or any successor in title of his, and that covenant and the charge taking effect by virtue of paragraph 2 cease to apply in relation to the property disposed of, and

(b) any such covenant as is mentioned in paragraph 3 (restriction on disposal of houses in National Parks, etc.) ceases to apply in relation to the property disposed of.

Treatment of option

8 (1) For the purposes of this Schedule the grant of an option enabling a person to call for a relevant disposal which is not an exempted disposal shall be treated as such a disposal made to him.

(2) For the purposes of paragraph 3(2) (requirement of consent to disposal of house in National Park, etc.) a consent to such a grant shall be treated as a consent to a disposal made in pursuance of the option.