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Publication - Advice and Guidance

Home Owners' Support Fund: guidance for trustees

Published: 6 May 2016

Guidance note intended to assist trustees acting on behalf of applicants to the Home Owners' Support Fund (HOSF).

Content

1. Home Owners Support Fund definitions
2. Role of Trustee
3. Establishing Trustee involvement
4. Consent to sale
5. Discharge fees
6. Equity
7. Funding shortfalls
8. Funding excess repairs
9. Funding council tax arrears
10. Funding factor fees
11. Distribution of funds
12. Conveyancing
13. Change of Trustee
14. Interest discharged
15. Equity within three years
16. Further information

1. Home Owners Support Fund definitions

There are two schemes within the Scottish Government's Home Owner Support Fund. These are:

  • Mortgage to Rent – which enables debtors to remain in their home by selling their property at the open market value to a local social landlord (housing association/local authority). The landlord will then provide a Scottish Secure Tenancy to the applicant.

  • Mortgage to Shared Equity – allows debtors to retain ownership of their home by selling a part share (up to 30% of the property value) to the Scottish Ministers, whereby reducing their secured debt to a manageable level.

If a Trustee has been appointed, applications will only be considered under the Home Owners Support Fund Mortgage to Rent scheme.

2. Role of Trustee

As Trustees, insolvency practitioners are responsible for managing the financial affairs of their clients under the Bankruptcy (Scotland) Act 1985, and in relation to Home Owners' Support Fund applications are responsible for:

  • consenting to an application being submitted by the applicant to HOSF for consideration
  • consenting to the sale of the property in lieu of the maximum funds available on the open market
  • if the property is to be purchased by a local authority, consenting to fund any arrears (such as council tax)
  • if the property is to be purchased by a registered social landlord consenting to the payment of any factoring fee arrears to the purchasing landlord
  • notifying us of any changes to the Trustee responsible for the applicant(s)
  • notifying us of any association discharge or other fees associated with removing your interest

3. Establishing Trustee involvement

On receipt of an application to HOSF, we will:

  • instruct our scheme solicitors, Morton Fraser LLP, to conduct a property and personal search against the applicant(s), to check if an owner has a Trustee appointed to manage their estate

  • seek evidence that the Trustee is looking to force the sale of the property

Trustees appointed to manage an applicant's estate will be asked to provide written confirmation that they agree to the application being considered through the Mortgage to Rent scheme.

5. Discharge fees

In a case where there is no equity in the property and the Trustee has agreed to the sale of the property through Mortgage to Rent, we will require to know if there is any discharge fee that needs to be taken into consideration as part of the sale of the property.

6. Equity

Whether or not a Trustee is involved, all households benefit from the same equity limits of the scheme.

All monies from the sale of the property must first be used to repay all secured loans and, where applicable, discharge any inhibitions. If there is equity remaining, the maximum amount that will be returned to the Trustee is £11,360 for those aged 16 to 59, and £17,040 for those aged 60 and over.

Please note: if there is more than one owner, the Trustee will only receive the appropriate share of the equity for those parties whom they represent.

7. Shortfalls

If the initial assessment of an application shows that there is a shortfall, the Scottish Government will write to the owner asking them to contact the secured lender(s), inhibitor or any other priority creditors who will incur the shortfall (the applicant may wish to contact their adviser for assistance with this).

The Scottish Government will require written confirmation from the secured lender(s), inhibitor or Trustee, that they will agree to release the security or inhibition on the property, which will allow the Scottish Government to continue to process the application. Before agreeing to the shortfall, the secured lender(s), inhibitor, or other priority debtors must be made aware that the shortfall is likely to increase due to interest and any other charges on the account accruing before settlement, should the application proceed to a successful conclusion.

8. Excess repairs

The maximum funding the Scottish Government will make available for Scottish Housing Quality Standard (SHQS) repairs to a property for applications is £8,500.

This includes the cost of repairs required to bring the property up to SHQS standards as detailed in the single survey and identified as a result of the gas and electrical safety checks carried out by the social landlord. We will accept the social landlord's costs for any work arising as a result of these safety checks.

Repairs in excess of £8,500 will need to be funded from one of the following sources:

  • equity to be returned to the homeowner following the sale of the property
  • equity to be returned to the Trustee
  • the social landlord purchasing the property
  • a shortfall agreement with a homeowner's lender
  • a third party, such as a family member of the applicant

In exceptional circumstances, in cases where HOSF will receive equity from the sale of the property, we may allow this to be used to pay for additional allowable repairs costs but only after all other avenues have been explored and ruled out, and where our budget allows.

9. Council tax arrears

If the property is being sold to the local authority and there are council tax arrears, these will need to be funded as part of the sale of the property and will be added to the list of debts to be recovered from the sale. This may take priority over other secured loans, as the purchasing landlord may insist that the recovery of this debt is a condition of the sale.

10. Factor fees

If the property is being sold to a registered social landlord and there are factoring fees arrears attached to the property, these may need to be taken into consideration as part of the sale of the property and will be added to the list of debts to be recovered from the sale. This will take priority over other secured loans as the purchasing landlord may insist that recovery of this debt may be a condition of the sale.

11. Distribution of funds

The scheme solicitors will distribute the funds from the sale of the property to the lenders in the ranking order that they appear on the standard mortgage report against the subjects. The funds will generally be distributed in the following order:

  1. Council tax arrears/factor fees arrears and excess repairs
  2. Any lender in ranking order
  3. Inhibitions
  4. Any other debts secured against the property

12. Conveyancing

In the event that a social landlord is found, you will need to consent to the sale of the property, including the distribution of funds from the sale of the property. An offer letter will be issued to the appointed Trustee. The Trustee will be required to sign and return this within 14 days.

The conveyancing process will be carried out by out the scheme solicitors. As a guide, this should take approximately six to eight weeks. Once the case has reached this stage, any further enquiries should be directed to:

Anderson Strathern
1 Rutland Court
Edinburgh
EH3 8EY

Tel: 0131 270 7811

Email: HOSF@andersonstrathern.co.uk

13. Change of Trustee

If there is a change of Trustee at any point during the progression of an application, the caseworker should be notified as soon as possible in order to avoid any delays in information reaching the correct person. It is imperative that offer letters are correctly titled and addressed in order that they can be signed by the appropriate person.

14. Interest discharged

It is imperative that a Trustee informs HOSF if an inhibition has been discharged in order that the discharged debt is not taken into consideration as part of the sale of the property.

15. Equity within three years

When there is a possibility of equity being returned to either the applicant or the Scottish Government once the secured debts are settled, we will request completion of an income and expenditure statement from the applicant to consider if there is a risk of insolvency from unsecured debts.

Where a potential risk is identified, the case will be suspended until such time that the debtor(s) can satisfy us that they have taken appropriate stops to manage the risk.

16. Further information

Should you require any further information on this guidance note, please refer to the HOSF website.

Alternatively, you may contact us in writing or by telephone, as detailed below:

The Programme Manager
Home Owners Support Fund
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU

Email: hosf@gov.scot

Telephone: 0300 244 1093
Fax: 0141 242 5770

Contact

Email: hosf@gov.scot

Telephone: 0300 244 1093

Post:
The Programme Manager
Home Owners Support Fund
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU

Published:
6 May 2016
Home Owners' Support Fund: guidance for trustees