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Publication - Guidance

New Supply Shared Equity administrative procedures

Published: 12 Aug 2016
Part of:
Housing
ISBN:
9781786523877

Guidance for registered social landlords and grant providers on New Supply Shared Equity (NSSE) administrative procedures.

165 page PDF

1.4MB

165 page PDF

1.4MB

Contents
New Supply Shared Equity administrative procedures
Section Five: Owners wishing to increase their equity stake

165 page PDF

1.4MB

Section Five: Owners wishing to increase their equity stake

5.1 In the majority of cases, an owner will have the option of increasing their equity stake after the initial purchase to 100 per cent. In certain circumstances however, such as in areas where there is a constrained supply of affordable housing and limited scope for this supply to be increased, the Scottish Ministers may be allowed to retain a 20 per cent equity stake in the property, known as a 'golden share'. The golden share will generally be used in areas where there are fewest opportunities for supply to be increased - in particular some rural areas.

5.2 The Scottish Government will agree any areas for operation of the golden share with each local authority. The retention of a golden share is secured through the Shared Equity Agreement as provided for in Annexe A. Please note that Scottish Government regards it as sufficient for the golden share right of pre-emption to be documented contractually in the shared equity agreement which is entered into between Scottish Government and individual purchasers. There is no need for a right of pre-emption to be included as a title burden, such as a rural housing burden, in the sale conveyancing.

5.3 At any time after an owner has moved into a property, an owner can increase their equity stake in that property up to 100 per cent (or up to 80 per cent if there is a golden share). Each equity increase must be for a minimum 5 per cent equity stake. The table below illustrates how this could work in practice. It uses two examples: one where the Scottish Ministers retain a golden share; the other where there is no golden share.

Example 1
The Scottish Ministers retain a 'golden share'
Example 2
The Scottish Ministers have no 'golden share'
Initial equity stake taken by an owner. 65% 65%
Permitted (at least 5 per cent) equity stake increase (to no more than 80 per cent where there is a 'golden share') and allowable at any time after the owner has moved into the property 75% 85%
Further permitted (at least 5 per cent) equity stake increase (to no more than 80 per cent where there is a 'golden share') at any time after the first equity stake increase 80% 95%
Further permitted (at least 5 per cent) equity stake increase (to no more than 80 per cent where there is a 'golden share') at any time after the second equity stake increase Not applicable 100%

5.4 An owner can increase their equity stake regardless of whether the open market value of their property has increased or decreased. The open market value of the property will be determined by the District Valuer or such other professionally qualified valuer as agreed between the Scottish Ministers and an owner. The valuation will reflect any improvements carried out to the property by an owner but will disregard matters such as lack of vacant possession, any breach of an owner's obligations, any security or other encumbrance, and any reduction in value caused by adaptations carried out to meet the needs of a disabled person.

5.5 There will be no means testing of owners following the initial purchase. Local Authorities and Registered Social Landlords must therefore recommend to owners that they take independent financial advice before increasing their stake in a property.

5.6 An owner will be responsible for meeting all costs (including those incurred by the Local Authority or Registered Social Landlord) when increasing their equity stake.

5.7 Annexe H illustrates how a financial reconciliation would work when an owner increases their equity stake from an initial 65 per cent to 85 per cent and then from 85 per cent to 95 per cent and then from 95 per cent to 100 per cent. Although this example uses a property in a Type 1 project, the principles set out therein would apply equally to other types of project.

5.8 Full details of how this increase may be effected together with relevant correspondence are more fully set out in the ASSEP Procedures at http://www.gov.scot/Topics/Built-Environment/Housing/BuyingSelling/lift/ASSEPdocument


Contact

Email: John Mcrorie, john.mcrorie@gov.scot