Every day has been a school day but recently I have been more incredulous than usual.
A client approached me recently, who is eligible to buy a new ‘affordable home’ under an initiative involving his local council and a local developer.
The property has various covenants or restrictions, which are covered by a 20-page document entitled ‘Planning Obligation by Unilateral Undertaking Made Pursuant to Section 106 of the Town and Country Planning Act 1990’.
I have been having untold difficulties in trying to get anyone to lend on the property. The mortgage lenders feel that the conditions do not offer them sufficient security to be able to proceed.
On the one hand, we have central and local government creating affordable housing schemes, which is obviously a very good and positive thing. But it seems apparent that the government staff responsible for the schemes are sitting in their ivory towers without consulting other interested parties, the lenders, which, certainly, is a very bad thing and therefore will make it very hard for the scheme to make any inroads into the problem of the severe shortage of affordable housing.
After speaking to the council, I was initially told that it appreciates that there is a problem with the document, but that the developer would have to submit more paperwork to apply for a ‘revised Section 106’ for this particular property and that it can take up to eight weeks. This is a problem brought about by the council, why should others be held responsible for sorting out its mess?
Councils owe it to the developers and to potential buyers to get this right. I have wasted so much time on this particular case that I am working at substantial loss and due to my experience with this case, I will give any future clients who wish to buy an affordable home a wide berth. I don’t charge fees to my clients, but if a client insists that I help, then I will have to charge them a fee to cover my own back. Unfortunately these are the clients who would least be able to afford it, and who would suffer most in the long run..
In addition to the issue of costs, the client also runs the risk of losing their potential home as if anyone comes up with the cash, who could blame the developer for selling the property to recoup his costs as soon as humanly possible?
How hard is it for the council/government to talk to just one mortgage lender, say the UK’s number one about the potential for such a scheme, and work out terms from there? The chances are that if it is happy, most other lenders will be too. It is about time that the council involved employs some joined-up thinking here. I do hope that not all councils are like this, otherwise the government can forget its affordable housing initiatives as far as I’m concerned and be it on their own heads.
Alan Frendo
Albion Financial Solutions
