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Appendix H Cont’d: Further Guidance on the Delivery of Affordable
Housing
6.4 Fife Council’s preferred approach to securing affordability in perpetuity is for a
formula to be incorporated into the Section 75 Agreement which states that
the initial sale price of the individual houses and future resales will be a resale
price covenant scheme. This relates the resale price of the unit to its full
market value, at the same ratio as at the initial sale. This approach aligns with
the CML’s requirement that where restrictions relate to price, it is essential for
this to relate to open market value as opposed to any other index.
For further details of one lender’s approach to resale price covenant, see the
Nationwide guidelines. 15
Details are also provided of the CML’s guidelines in England, where the model
S 106 Agreement (the equivalent of a S75 agreement) is currently under
revision. 16
6.5 The Agreement will also provide that both initial and future sales are offered
first to purchasers who meet the specific requirements referred to in Appendix
I. This will mean that the sale of the house will require to be notified to Fife
Council’s Housing and Neighbourhood Services, so that it can be offered first
to tenants and first time buyers whose income is below the maximum
indicated in Appendix G.
It should also be advertised simultaneously on the open market, described as
subject to the eligibility criteria outlined above. If, after the 6 month period
described in the cascade approach in Appendix I, no eligible buyer can be
found, the property can be offered on the open market.
On resale, the same procedure is followed again. If no such purchaser is
found within a six month period, the property will then be offered on the open
market, at full market value, and the margin between the discounted value and
full market value would be transferred to Fife Council’s Affordable Housing
Fund, and used to support the supply of affordable housing. Alternatively, the
Council or a housing association could buy all the equity in the property so
that it could be used as rented housing.
6.6 The CML generally find this type of approach acceptable so long as there is a
clear process for the mechanism within agreed timescales. The timescales
allowed for the cascade will differ between lenders but typically they can be
between 3 and 6 months.
15 http://www.nationwide.co.uk/NR/rdonlyres/1FA15E68-8443-44DF-B02F-C6169B096734/0/M438.pdf
16 http://www.cml.org.uk/cml/filegrab/1Section106briefingnoteCMLMay2009.pdfref=6546
http://www.cml.org.uk/cml/filegrab/keeping-it-simple-toolkit-.pdfref=7722
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