Guarantee 1
If you, as a council homeowner, wish to continue to live on your new estate, you will be given the opportunity to do so. You will be offered a range of options depending on your personal financial circumstances. If none of these options are adequate to enable you to continue living on your estate, the council will explore other options with you. (This Guarantee does not apply to non-resident homeowners.)
Existing residents living on estate regeneration estates have priority for the newly built homes.
The newly built homes will have a higher market value than existing homes. The council has identified various ways in which you can obtain full or partial ownership of one of these new homes and thereby remain living on your estate.
So long as one of the co-owners in a property is resident on the estate, then the property will be treated as being that of a resident homeowner with eligibility for Key Guarantee 1.
You have the following options.
- Leasehold – buying a new home outright
- Zero Rent Shared Ownership* - buying a shared ownership new home – where your existing mortgage can continue, or a new mortgage can be obtained
- With Rent Shared Ownership* - buying a shared ownership new home – where your existing mortgage cannot continue nor can a sufficient new mortgage be obtained
- Other options - where home ownership is no longer a feasible option the council will explore other options with you, including a rented home on the rebuilt estate
For all these options, Guarantee 3 applies.
*The shared equity option was removed and the reason for the switch from shared equity to shared ownership was explained during the consultation process. The council considers that the shared ownership offer provides an equivalent opportunity for homeowners wishing to remain living on an estate to do so.
A) Leasehold – buying a new home outright.
You would be able to swap the value of your existing home together with your home loss payment into a newly built home and then make an additional lump sum payment so that you can own the new home outright (100%).
- You would have to put the full value of your existing property together with your home loss payment into the new property
- You would have to make up the difference to the value of the new property with a lump sum contribution
- You would have to make your own mortgage arrangements
- You would have a lease of 125 years
- You would have to pay 100% of service charges
- If you wish to downsize to a smaller home and the value of your existing home plus home loss payment turns out to be of higher value than your new home, then the council will pay you the difference in value
- If available, you could potentially acquire a larger home than your current home
The main difference between freeholders and leaseholders is that freeholders own the freehold of their property. This freehold has a value, and this value would be included in the market valuation of the property. In addition, some freeholders do not currently pay any service charges (whereas others do). The compensation to freeholders would consequently be different (a higher value for their property). But the offers of a new property remain the same as for leaseholders.
B) Zero Rent Shared Ownership. Buying a shared ownership new home – where your existing mortgage can continue, or a new mortgage can be obtained.
You would be able to swap the value of your existing home, together with your home loss payment, into a newly built home with the same number of bedrooms or fewer –i.e. 110% of your existing property’s value. You would obtain an equivalent value share in the new home and be able to live in it without making any additional lump sum payment. The remaining share in the property would be retained by Homes for Lambeth; you would not have to pay any rent for the share owned by Homes for Lambeth.
- You would have to put the full value of your existing property together with your home loss payment into the new property
- Your share of the home would be a percentage of the total value of the home
- You would have a shared ownership lease with zero rent
- You would have a shared ownership lease of 125 years
- You would have to make your own mortgage arrangements to secure a mortgage of at least the size of your current mortgage
- You would have the ability to “staircase” – to buy additional percentage shares of your new home up to 100%
- You would have to pay 100% of service charges
The zero-rent shared ownership offer to resident homeowners is made to compensate you for the disturbance caused by having to move home to make way for regeneration of your estate. Therefore, you would be able to live for the rest of your life in a home of considerably higher value without having to pay anything for this benefit. The council cannot justify offering to extend that benefit to people who have no prior connection to the location, nor have experienced any disturbance from relocation.
Under option B you must be able to put the full market value of your existing property (regardless of whether you have any mortgage or not) plus your home loss payment into the new home.
C) With Rent Shared Ownership. Buying a shared ownership new home – where your existing mortgage cannot continue nor can a sufficient new mortgage be obtained.
You would be able to swap the value of your existing home (minus your current outstanding mortgage obligations) together with your home loss payment, into a newly built home with the same number of bedrooms or fewer. You would obtain an equivalent value share of the new home and be able to live in it without making any additional lump sum payment. The remaining share of the property would be retained by Homes for Lambeth. You would have to pay rent for the share owned by Homes for Lambeth to cover the cost to Homes for Lambeth for acting as a lender of last resort.
Criteria:
- You would need to notify the Housing Regeneration team that you are unlikely to be able to obtain a new mortgage
- You would be put in touch with an independent financial adviser, who specialises in the affordable housing market, who would explore your options to identify whether there are any other mortgage providers who may be able to assist If you are unable to secure a mortgage:
- You would need to notify the Housing Regeneration team that you are unable to obtain a new mortgage
- You would have to put the full value of your existing property minus your current remaining mortgage together with your home loss payment into the new property
- Your share of the home would be a percentage of the total value of the home
- You would have to pay a rent for the share retained by Homes For Lambeth, where that rent would be determined on the basis of the cost to Homes For Lambeth for repaying your current existing mortgage and acting as lender of last resort; the rent would be converted into a percentage of the value of the share of the property owned by Homes For Lambeth, up to 2.75%; this would be calculated on the basis of the interest only cost to Homes For Lambeth
- We would expect that the share of the property that you retain would probably be more than 25%
- You would have the ability to “staircase” – to buy additional percentage shares of your new home up to 100%
- You would have to pay 100% of service charges
- You would have a shared ownership lease of 125 years
Under option C you must be able to put the full market value of your existing property minus your current mortgage plus your home loss payment into the new home and will pay rent to the council.
Under Key Guarantee 1 (Option C), you would effectively experience a switch from paying a mortgage to paying a rent, where that rent is likely to be like your existing mortgage. If you were unable to renew your existing mortgage, then Homes for Lambeth would step in and pay off your existing mortgage. Consequently, you would not be putting the full market value of your property into your new home and Homes for Lambeth will have had to borrow money to pay off your mortgage. Homes for Lambeth would therefore seek to recoup the cost of stepping in to pay off your mortgage by charging a rent on your property. The commitment in the Key Guarantees is that the rent that you would be charged would be calculated based on the cost of paying off your mortgage.
D) Other options. Where none of options A-C are feasible, then the council will explore with you the best option available to enable you to move into a newly built home on your estate.
The following process will be applied:
- You would need to notify the Housing Regeneration team that you are unlikely to be able to obtain a new mortgage
- You would be put in touch with an independent financial adviser, who specialises in the affordable housing market, who would explore your options to identify whether there are any other mortgage providers who may be able to assist
- If no mortgages are available and you are unable to pay the rent proposed by Homes For Lambeth, then we will work with you to identify what choices you could afford with a view to enabling you to remain living on your estate; this could include renting a new home at a level set according to what you can afford