Section 70 - Low cost home ownership
131.This section defines low cost home ownership accommodation.
132.Subsection (1) defines low cost home ownership accommodation as that which meets two conditions.
133.Condition 1 is that accommodation is made available on the basis of a shared ownership arrangement, an equity percentage arrangement or shared ownership trust.
134.Condition 2 is that the accommodation is aimed at people whose needs may not be adequately served by the commercial market. This could, for example, be for reasons of affordability, specialised/adapted housing, security of tenure or vulnerability.
135.Subsection (4) defines “shared ownership arrangements” as arrangements under a lease which:
is granted on the purchase of an initial share, the price of which is calculated by reference to a percentage of the value of the accommodation or the cost of providing it; and
provides that the tenant (i.e. the purchaser), or the tenant’s personal representative, is entitled to a sum calculated by reference to the value of the accommodation. This means that when the property is sold, the purchaser is entitled to a sum in proportion to the share he or she has purchased.
136.This description is intended to capture traditional shared ownership schemes, such as the current New Build HomeBuy scheme, also described as “part-buy, part-rent”, where the purchaser buys a share in a property, and pays rent to the freeholder on the unowned share.
137.Subsection (5) defines “equity percentage arrangements”. These work on similar principles to traditional shared ownership but do not involve a shared ownership lease. The key features are that the owner of the property sells it (conveys it) to the purchaser in exchange for:
an initial sum equivalent to a percentage of the value of the property at the time of sale, and
an agreement to pay further sums also calculated by reference to a percentage of the value of the property, and
the liability to make any payments under this arrangement is secured by a mortgage.
138.Subsection (6) defines “shared ownership trusts” as having the same meaning as in Schedule 9 to the Finance Act 2003.
139.Subsection (7) allows the Secretary of State to make regulations amending the definition of low cost home ownership accommodation, or any of the sub-categories specified in that definition. This is to ensure that innovative low cost home ownership schemes, not anticipated here, can be brought within the scope of regulation.