Middlesbrough Council Financial Assistance Policy

APPENDIX THREE

MIDDLESBROUGH COUNCIL FINANCIAL ASSISTANCE POLICY

EMPTY HOMES ASSISTANCE

OCTOBER2010

PURPOSE OF THE POLICY

The purpose of this policy is to provide financial assistance in order to undertake medium to large scale work that will contribute towards bringing properties up to the Decent Homes Standard as prescribed in the CLG guidance document “A decent Home: Definition and guidance for implementation – June 2006” andbring properties which have been empty for more than six months back into use.

Properties which fall into the category of non decent are those which have one or more category one hazards as prescribed under the Housing Health and Safety Rating System (HHSRS), have building or other components that are old and because of their condition need replacement or repair, have old and inadequate facilities and/or do not have a reasonable degree of thermal comfort.

The Regulatory Reform (Housing) (England and Wales) Order 2002 gave local authorities the autonomy to move away from providing grants. It also recognised, however, that while the responsibility for housing repairs and maintenance ultimately lies with the owner, there are those who are vulnerable within our community who require extra assistance with the repair and maintenance of their home.

ELIGIBILITY CRITERIA

Applications for assistance can only be made for properties that have been empty for more than six months.

The applicant must be aged 18 years or over on the date of application.

Assistance will not be available for properties which are included in the Council’s clearance programme.

Assistance will be available to landlords intending to let the property to tenants or those wishing to live in the property as their principal residence.

TERMS OF ASSISTANCE

The maximum assistance available will be £35,000 and this will be available as an equity share loan, secured capital and interest repayment loan, grant (where a Council loan is not appropriate) or a combination of these where this is identified as being the most appropriate option.

Applicants will be referred to Helping Hands, the regional financial assistance programme and officers will carry out assessments as to the most appropriate financial assistance option. An affordability test will be carried out and will consider income, such as salary or benefits that are received, and outgoings, such as an existing mortgage, and any loan repayments as well as living costs. Living costs may include the cost of household bills or running a car. This information will enable the provider to assess whether the applicant might be able to access a loan from a bank or building society and whether the applicant would be able to make repayments on any loan that the Council would be able to provide.

Capital and Interest Repayment Loan

This is a loan for applicants who are able to make monthly repayments. The interest rate will be fixed at 2% above the Bank of England Base Rate, so that the monthly repayment will always be the same, and the amount of interest that will be charged to the applicant will be known at the beginning of the loan. The monthly repayment will consist of an interest payment and a reduction in the amount of capital owed.

Applicants can borrow between £500 and £15,000, over a term of 1-15 years.

The repayment period will depend on the individual circumstances of the applicant and the amount borrowed. An affordability test will be carried out to make sure that the monthly repayments will be affordable. Repayments will be no more than one third of the applicant’s monthly disposable income and help and support will be provided should the applicant experience difficulty in making their repayments.

Loans of more than £3,000 will be secured as a legal charge against the home. Loans of less than £3,000 will not be secured with a legal charge but will be secured by a notice offering no less protection than a Unilateral notice with HM Land Registry, which will be used to notify the council should the applicant initiate the sale of the property.

There will be no penalties should the applicant be able to overpay, or repay the loan early in full. This means that repaying the loan early will reduce the amount of interest paid, and so the total amount paid back.

Equity Loan

This product will meet the needs of applicants who do not have sufficient income to be able to make monthly repayments on a loan but who have sufficient equity in their property. No monthly repayments are required.

The applicant can access up to 80% of the available equity in their home and can borrow between £500 and £35,000.

The amount of the loan will be calculated as a percentage of the property value at the time that the loan is approved. The percentage will be used to calculate the amount to be repaid at the time that the property is sold. This will require the property to be valued at the beginning and end of the loan period.

The following rules apply in relation to calculating the amount to be repaid but would be subject to a review at the time that the loan is repaid should they cause the client to be placed in unreasonable hardship:

the minimum amount repayable will be the amount borrowed. This may cause difficulty should the property decrease in value; and
there will be no cap on the amount to be repaid. Should the property value increase significantly, so will the amount to be repaid. Any appreciation in the value of the property will be shared with the Council in accordance with the original loan as a percentage of the property value at the point that the loan is repaid.

Repayment will be required on sale, disposal of the property, or upon the death of the applicant. Should the applicant wish to repay the loan (or part of the loan) at any time before the property is sold, the amount to be repaid will be calculated using the value of the home at the time. There will be no early redemption charges.

Empty Homes Grant

The maximum grant available is £35,000 although in certain circumstances, particularly where a property is in poor condition a larger grant than the maximum of £35,000 may be available at the discretion of the Council.

The grant is available to applicants who are unable to access a loan from a commercial lender on reasonable terms and for whom a loan from the Council is also unsuitable. The applicant may be required to provide evidence that the works would not be financially viable without assistance from the Council.

Only one grant will be available per property in any five year period. The grant will be repaid to the Council when the property is sold.

FEES AND ANCILLARY CHARGES

Any fees incurred in the set up of the financial assistance, such as property valuation costs or Building Control notices will be added to the amount of assistance awarded.

The Council’s Home Improvement Agency, Staying Put will charge a fee of 12% plus VAT of the cost of eligible improvement works to the Council’s Housing Capital Budget for acting as the client’s agent.

CONDITIONS OF ASSISTANCE

The Council will determine an application within 6 months of the receipt of a valid application. The applicant will be informed in writing of the approval or refusal of an application.

A Technical Officer will inspect the property to determine whether it is failing the Decent Homes Standard and to estimate the scale and cost of works required.

A property valuation may be undertaken in order to assess the potential for releasing the value of any equity.

The applicant will be provided with a list of builders who have achieved the Government’s Trustmark. The applicant can select 3 builders from this list to provide estimates, from which the lowest will be selected. Should the applicant wish to seek estimates from builders not on the list they may do so, but the builders must have Trustmark accreditation. The contractor who will carry out the works must be agreed with the Council before works commence.

If any client contribution is payable towards the cost of works required the applicant will be required to sign an agreement that they will pay this contribution to the builder within 30 days of the completion of the works.

Payment will be made direct to the builder for works that have been carried out to the satisfaction of the Council in accordance with any specification imposed.

Should works that are unforeseen at the time of approval of the financial assistance be identified whilst the works are being undertaken, financial assistance towards any additional cost will be considered. This means that the applicants will be required to pay for such works themselves unless they are able to demonstrate that they do not have the resources available. Should additional financial assistance be appropriate, a loans first, grants second principle will be applied. Should the additional financial assistance required cause the maximum amount of financial assistance available to be exceeded, the Council may use discretion through normal decision making processes to approve the increased amount.

The eligible works should be completed within 6 months of the date of approval of the application. The Council may extend this period if this is deemed necessary, upon written request from the applicant.

Where the work has begun but has not been completed within the time allowed in accordance with the terms of the approval of assistance, and the Council has incurred costs including any interim payments or additional costs, the Council may recover these from the applicant. Where the applicant fails to fully reimburse the Council, the Council will place a land charge on the property for that outstanding amount plus any interest accrued from that date.

The Council will seek, in full, repayment of financial assistance provided under this scheme at any time if it is proven that the applicant has provided false or incorrect information to the Council that has helped them to obtain financial assistance to which they were not entitled.

It is a condition of the assistance that the property must be insured and properly maintained. If this condition has not been met during the period until the assistance is repaid it will be a breach of the conditions of assistance. A copy of the buildings insurance certificate may be requested annually by the Council.

It is the responsibility of the applicant to demonstrate that the conditions of financial assistance are being adhered to. If the Council requests any information relating to the conditions in writing and the applicant fails to provide that information, then the Council may deem this a breach of financial assistance conditions.

Where the applicant intends to occupy the property, it must remain their only or main residence until such point as the property is sold or transferred and the financial assistance repaid. The property must not be left empty for any appreciable length of time until the assistance is repaid. An extended period of vacancy may be construed as a breach of conditions and the Council may seek to recover the financial assistance from the applicant. The applicant should notify the Council in writing of any extended period of vacancy of over 6 weeks in duration.

Where the property is let to a tenant, the landlord must ensure that following improvement works, he/she undertakes any works that are required to ensure that the property remains decent. The landlord must also become a member of any local Landlord Accreditation Scheme.

If the property is to be let it must be let as a residence (not a holiday let) on a tenancy that is not a long tenancy, by the owner of the property to a person who is not connected to the landlord (generally speaking, this means not a member of the landlord’s family).

The Council may by written notice require the landlord to provide within 21 days a statement showing how the property is occupied. Should this information not be provided the Council may consider this a breach of conditions and require that any financial assistance be repaid.

It will be a requirement for the Landlord to maintain the property to a decent standard and for the landlord to become a member of any local Landlord Accreditation Scheme. Failure to do so may be construed as a breach of the conditions of financial assistance.

Once an application for financial assistance is approved, the assistance will be registered as a legal charge, or a local land charge before any assistance is paid. This charge will remain on the property until the financial assistance is repaid.

In relation to the Capital and Interest Repayment Loan, should the applicant wish to make a relevant disposal of the property before the repayment of the loan is complete, this will be a breach of conditions and the loan amount outstanding must be repaid to the Council on disposal of the property.

Reducing the priority of the charge or removing the charge from the property will only be undertaken in exceptional circumstances.

Where a condition is broken the Council has all the usual remedies in law to secure repayment including enforcement of the charge.

In relation to Equity Loans, repayment will be received when the property is sold, disposed of, assigned, transferred or otherwise, including transfer to family members, or is no longer occupied by the applicant as his/her principle residence. Family members include both immediate and extended family. Should family members or other persons be living in the property at the time of death of the applicant there will be no automatic right of succession. Should repayment of the loan require the property to be sold, in these circumstances the Council can exercise discretion by taking the case to an exceptions panel if appropriate.

Where any of the conditions is breached the Council may decide not to make any demand for whole or part repayment. Each case will be considered on its own merits. A decision will be primarily based on the financial hardship that will be experienced by the applicant as a result of the repayment of assistance. Should financial hardship be experienced in conjunction with any of the following, the Council may decide not to make a demand for full or part repayment;

Owner Occupiers

Provision of care – where the Council is satisfied that the owner is elderly or infirm and is disposing of the property with the intention of being cared for by relatives or going to live in sheltered housing or a residential care home, or where the owner is moving to care for an elderly or infirm family member;
Repossession – where a mortgagee exercises power of sale;
Employment – where an applicant is making a disposal further to the need to move following acceptance of employment where they would otherwise become unemployed;
Health and wellbeing – where the disposal is connected with the physical or mental health or wellbeing of a relevant person;
Disposal to the Local Authority or Registered Social Landlord; or
Sale to a disabled person on the Council’s Disabled Facilities Grant waiting list – where the Council would otherwise have to assist the buyer to adapt their current home.

Landlords

Disposal to the Local Authority or Registered Social Landlord; or
Inability to let the premises – where the landlord has not been able to let the property and can provide evidence to support this.