The Social Homebuy Scheme (SHB) was introduced in April 2006 and allows Registered Social Landlords (RSLs) and Local Authorities to dispose of their rented housing at a discount on shared ownership terms i.e. part buy/part rent and outright, to its secure and assured tenants who occupy properties eligible for the scheme.

The SHB scheme gives the RSL the opportunity to:

• sell its permanent rented housing stock to secure or assured tenants at a discount
• offer home ownership to tenants who do not have or cannot afford the Right to Buy/Acquire
• provide replacement affordable housing by using the recycled receipts from sales together with private finance
• develop mixed, balanced and sustainable communities

For tenants it gives the opportunity to:

• purchase their current home which may have previously been excluded from the Right To Buy or Right To Aquire
• purchase their current home on shared ownership terms that makes the purchase affordable and sustainable
• benefit from a pro-rata purchase discount regardless of whether they buy outright or on shared ownership terms

Funding arrangements

Funding for Social HomeBuy is subject to cash limits and where demand for the scheme exceeds supply a waiting list may operate.

Eligibility requirements

Currently only our self-contained properties for rent in York are included. However, properties which are exempt from the Right to Acquire scheme are also exempt from Social Homebuy. This includes homes suitable for occupation by older people, homes due to be demolished, and homes suitable for sheltered housing.

Summary of the social homebuy programme

You are allowed to buy an equity share based on a percentage of the full market value of the property you occupy. The range of the initial equity share can be any amount between 25% and 100%.

All Social Homebuy leases allow the purchaser to buy further shares and staircase to 100%. You can if you wish buy the property outright at the outset.

You are entitled to a discount on the initial share purchased and this is determined by the share purchased. The discount limits are the same as those applying to properties that could be bought on Right to Acquire terms and are pro-rata to the size of the share purchased.

For example if a 50% share of a property is purchased then 50% of the applicable RTA discount will be payable to assist the purchase. This discount is only payable on the initial shares purchased and not on future shares (staircasing).

Rents / service charges

A rent will be payable on any remaining equity not purchased in the property. This is limited to 2.75% of the value on the remaining equity.

A service charge may also be payable depending on your properties location. This can include gardening and repairs on communal areas and the cleaning of communal areas. The level of the service charge is determined by the costs incurred in providing these services and so is variable.

Annual rent increases are limited to RPI plus 0.5%, using the September RPI figure published annually.

Eligibility criteria for applicants

To qualify for the scheme tenants must:

• be a secure or assured tenant (excluding shorthold assured tenants and long leaseholders) of JRHT and occupy self contained accommodation (tenants may jointly purchase with up to 3 members of their family who currently live with them in the RSL property)
• have been a public sector tenant for a minimum of 2 years (5 years for tenancies granted after 18 January 2005). Previous public sector tenancies can count towards the qualifying period and need not be continuous. The one exception is where the RSL acquired the property under a mortgage rescue arrangement and the previous owner is now the tenant. In these cases the tenant must have been a tenant of their current home for two complete years (or 5 years as set out above)
• occupy an eligible property.

The following categories are not eligible for the scheme:

• tenants occupying property on an assured shorthold tenancy, licence or a long lease
• an undischarged bankrupt or who has a bankruptcy petition pending against him/her or has an arrangement with creditors, the terms of which remain to be fulfilled
• a tenant who is obliged to give up possession of the tenanted property in pursuance of an order of the court or will be obliged to at a date notified in the order
• is the subject of a 'suspension order' or 'suspension status'.
• tenants meeting the eligibility criteria at application stage must continue to do so up to the exchange of contracts.

List of public sector landlords

Please contact us if you have any queries regarding whether a previous tenancy was with a 'public sector' landlord.

Refusal of an application due to anti-social behaviour

The same principles as introduced by the Housing Act 2004 to Right To Buy/Acquire applications will apply to Social HomeBuy applications. This means that if action has been taken against you for anti-social behaviour, then a 'suspension status' may apply and would prevent your application from proceeding.

The application of a 'suspension status' may be considered only if we are satisfied that the tenant or a person living in the property, or visiting the property, has engaged or threatened to engage in antisocial behaviour (which includes using the premises for unlawful purposes), and that it is reasonable for a 'suspension status' to be applied.

Once applied, 'suspension status' will have the effect of suspending an existing Social HomeBuy application and preventing new applications and claims being made during the period the 'suspension status' covers.

Eligible properties

The grant currently only applies to our secure and assured tenants occupying self contained accommodation for rent in York. Assured shorthold tenancies and those who hold long leases or tenants of shared accommodation will not be eligible for the scheme.

Excluded properties

Properties to be excluded from Social HomeBuy include:

• properties where the landlord has insufficient legal interest i.e. where the property is a house, a lease with a term less than 21 years and for a flat, a lease with a term less than 50 years
• properties situated in a rural area designated by order of the Secretary of State under Section 17(1)(b) (Right to Acquire: Supplementary Provisions) of the Housing Act 1996
• properties let in connection with employment
• properties designed with special features for letting to people with physical disabilities. To gain exemption the property should be one of a group of properties normally let to people with physical disabilities and a social service or special facility is provided close by wholly or partly to assist the tenants
• properties with special facilities let to tenants who are suffering or have suffered from a mental disorder. As above the property must be one of a group of properties and a social service or special facility must be provided close by wholly or partly to assist the tenants;
• properties which are one of a group of properties where it is the practice of the landlord to keep for occupation by persons who have special needs and require intensive housing assistance and such intensive housing assistance is provided either directly or indirectly by the landlord
• properties let to persons of pensionable age. Such properties must be one of a group of properties let to the elderly and have special facilities consisting of or including a resident warden, a non-resident warden with a calling facility and a common room close by.

We have complete discretion over which properties we include in the scheme in each local authority area.

Valuing the property

Social Homebuy sales are based on a full open market valuation of the property carried out by a qualified independent valuer. Sales on shared ownership terms are based on a percentage of the full market value of the property. Valuations are required at the initial Social Homebuy stage and on staircasing. The cost of the valuation for an initial sale is met by us. The cost of valuation for staircasing sales is met by the purchaser under the terms of the staircasing provisions in the lease.

The valuation will be valid for 3 months.

What happens next

You should first make a formal written application to purchase your property - contact us for an application form.

The application must be completed by the tenant(s) and returned to us.

On receipt of the application we will determine your eligibility by checking:

• the application form has been correctly completed and signed and dated
• you are either a secure or assured tenant
• the property is not in an exempt category
• you have been a public sector tenant for the appropriate two or five year qualifying period
• where the property is charged to a private lender, the lender is willing to release their charge
• whether there is an effective possession order
• whether you are subject of a suspension order
• you have certified in the application that you are not an
  undischarged bankrupt
• whether you have previously received a discount to purchase a property from a public sector landlord e.g. a cash incentive through the Tenants Incentive Scheme or Cash Incentive Scheme by a local authority, a discount under the Right to Buy/ Preserved Right to Buy, Right to Acquire or Voluntary Purchase Grant.

Where you have previously received a discount to purchase a property from a public sector landlord, the amount of discount due is reduced by the amount previously received. This is not applicable to cases where you repaid the whole of the discount on disposal within a repayment period.

On completion of the checks we will respond to you either confirming or denying eligibility stating reasons. This letter will be sent to you within 4 weeks of receipt of your application.

Following confirmation that you are eligible, you have 4 weeks to confirm you wish to proceed to stage 2 of the purchase process.

Following confirmation of your intention to proceed we will provide the following:

• formal open market valuation of the property to be sold
• The total rent payable on the property
• an estimate of the annual service charges /sinking fund contributions
• details of any known structural defects
• the provisions which, in our opinion should be contained in the conveyance or lease
• a suitable identification plan showing the boundaries of the property including the land to be sold
• details of any discounts received by the tenants in respect of previous purchase.

You will then need to provide us with a copy of your mortgage offer or other evidence of the means to purchase. We will then instruct the solicitors to deal with the sale.

You have 3 months from the date of the formal valuation to exchange contracts and a further month in which to complete the purchase. Where you fail to exchange contracts on the property within the period the application may be deemed to be withdrawn.

The discount

The discount is based on the RTA discount applicable in York which is currently £11,000. If you buy a 50% share of the property the discount you receive is therefore 50% of this.

An example purchase is set out below:

Property Value £160,000
Share purchased £80,000 (50%)
Mortgage/deposit £74,500
Discount £5,500 (ie 50% of the RTA discount)

Repayment of the discount

The Lease or conveyancing documentation will contain a repayment of discount clause, as the discount is repayable in certain circumstances.

The discount is repayable if the property is sold or the share is assigned within 5 years from the date of initial purchase. The amount due to be repaid is calculated as a percentage of the resale value equivalent to the percentage of the discount when compared to the purchase price and reduced by a fifth each year as follows;

Sale within year 1, repay an amount equal to the % that the discount bore to the purchase price
Sale within year 2, repay 80% of the amount calculated as in 1) above
Sale within year 3, repay 60% of the amount calculated as in 1) above
Sale within year 4, repay 40% of the amount calculated as in 1) above
Sale within year 5, repay 20% of the amount calculated as in 1) above

No repayment is required after year 5.

Where property values fall the same calculation method is followed.

Further information

For further information contact us on Tel 0800 633 56 70 or homebuy@jrf.org.uk

Download an application form