Voluntary Right to Buy: the shot in the arm social housing needed?
Louise Drew, head of real estate at law firm Shakespeare Martineau, gives her insight into Voluntary Right to Buy…
The Voluntary Right to Buy (VRtB) pilot has now launched across the Midlands, giving social housing tenants the opportunity to purchase their homes at a discounted price, while enabling registered providers (RPs) to renew their stock. The scheme is widely seen as a positive step, providing welcome rejuvenation for the social housing sector, which has been suffering from a dramatic lack of supply. However, there will likely be a learning curve for RPs, so how should they prepare themselves in order to make the most out of the scheme?
Through VRtB, housing association tenants enter a lottery for a unique reference number (URN). Once a URN is received, the housing association will then decide whether to proceed, and if they do agree to sell, then the tenant can purchase the property at a discounted rate. Central government will then pay back the housing association the discount deducted from the full open market price of the property, on the condition that they replace the sold property with new stock.
While this is a positive development, there are some concerns across the sector. The scheme could lead to a great increase in workload for RPs, particularly for those allocated a significant number of URNs. The pilot scheme’s guidance highlights not only stringent requirements for extensive checks, which will likely require hours of dedicated work to complete, but also definitive timescales that must be kept to.
It is therefore important that RPs are prepared and have processes in place to handle the additional work as soon as it comes in. Of course, this won’t be possible overnight; while RPs nationwide can watch and learn, those in the Midlands will have to adapt over the course of the two-year pilot. This may mean recruiting or reorganising staff, acquiring additional resources and checking unit stock levels to make sure they will be sufficient.
To be able to do this, it is important that RPs have accurate records and documents in place and on hand for all of their properties. If these highlight a lack of appropriate stock to service all the tenants with URNs, then they may need to establish a Memorandum of Understanding with other RPs and housing associations and work together to address the issue. By establishing a framework of co-operation, interested parties can develop effective practices to better deliver the objectives of the pilot.
The planning application process will need similar attention. Section 106 agreements can make affordable housing developments acceptable even where they may be otherwise unacceptable in planning terms, so it is essential that the planning conditions allow for sale at an undervalue and the release of properties previously allocated as rented stock. Assessment of the conditions must take place ahead of time, to prevent delay in the sale process for eligible applicants.
To make the sale of each property go as smoothly as possible, it is important to ensure that the buyer is informed of the conveyancing process from the outset. A Land Registry-compliant plan should be given to them at the beginning, showing an accurate representation of the property’s boundaries. A common delay with the Right to Buy scheme is when RPs do not own all of the land they are purporting to sell.
It is also vital that all parties are aware of exactly what documentation they need to provide, to proceed. A robust information sheet should be issued to the buyer’s solicitor to outline the full process, including the timescales and the requirements for various undertakings. The buyer must also consider how they will fund the purchase, especially when borrowing from high street lenders.
The pilot scheme will be a learning curve for everyone. At this stage it is hard to tell exactly how it will work, and whether RPs will have sufficient resources and space to handle the building of new properties quickly enough to cover the sales and avoid creating an even greater supply shortfall. However, with thorough preparation ahead of time and clear communication amongst all parties, RPs can make sure that they’re in the best position possible to make the most of the scheme.
About Shakespeare Martineau
Working with organisations of all sizes, the firm delivers a broad range of specialist legal services and has particular expertise across areas including but not limited to: energy, education, banking & finance, healthcare, investment funds, manufacturing, agriculture, family business, Islamic finance, later living, social housing and real estate. Shakespeare Martineau believes that legal counsel is only one piece of the jigsaw and bespoke business solutions are designed firmly around clients’ needs.
With over 800 people, Shakespeare Martineau has offices in Birmingham, London, Leicester, Nottingham, Milton Keynes, Solihull, Sheffield and Stratford-upon-Avon.