With shared equity schemes, including Homestake and LiFT, now becoming increasingly popular some Registered Social Landlords (RSLs) and their subsidiaries who are Rural Housing Bodies, have applied a Rural Housing Burden (RHB) on their shared equity developments. How does shared equity and rural housing burdens work?
What is a Rural Housing Burden?
The official definition is: -
A perpetual personal right of pre-emption contained within the title deeds of a property in favour of a rural housing body which allows the rural housing body the right to repurchase the property in the event of it coming up for sale, and as a consequence, the ability to control future sales.
Why were they Introduced?
It was hoped that they would allow Registered Social Landlords the ability to retain some element of control on resale by the owners by retaining properties as affordable housing with the aim of securing another local purchaser.
How is this Burden Affecting Sellers?
Shared equity owners seeking to sell their properties which are burdened with a RHB have recently faced the prospect that their properties will be valued by the District Valuer at 5% less than market value due to the RHB depressing the value.
The Way Forward.
The Scottish Government indicated that their preference for Shared Equity schemes, is the use of a 'Golden Share', which is contained in a Minute of Agreement between the shared equity owners and the Scottish Ministers.
So, what is the difference between Golden Share and Rural Housing Burden?
RHB and 'Golden Share' provide some assurance against properties being lost in the open market to the second home or holiday market. The main differences are: -
- The RHB mechanism was essentially for community benefit rather than the personal benefit of any subsequent owner,
- The RHB was perpetual, an RSL need not acquire on the first sale, and
- The 'Golden Share' is purely contractual and can only work if the Scottish Ministers always exercised their right to acquire the property. If the Scottish Ministers did not acquire, then the property would be lost as affordable housing.
With the economy being in such a flux at present, has the future role of the RHB been sold to short-termism?
If you would like any advice or information on shared equity and rural housing burdens, contact our team.