Housing Associations Act 1985

Section 11.

SCHEDULE 2E+W+S Further Provisions as to Certain Disposals of Houses

Repayment of discount on early disposalE+W+S

1(1)This paragraph applies where, on a disposal of a house under section 8, in accordance with a consent given by the Housing Corporation under section 9, a discount has been given to the purchaser by the housing association; but this paragraph does not apply in any such case if the consent so provides.

(2)On the disposal the conveyance, grant or assignment shall contain a covenant binding on the purchaser and his successors in title to pay to the housing association on demand, if within a period of [F1three years] there is a relevant disposal which is not an exempted disposal (but if there is more than one such disposal then only on the first of them), an amount equal to the discount reduced by [F1one-third] for each complete year which has elapsed after the conveyance, grant or assignment, and before the further disposal.

Liability to repay is a charge on the premisesE+W+S

2(1)The liability that may arise under the covenant required by paragraph 1 is a charge on the house, taking effect as if it had been created by deed expressed to be by way of legal mortgage.

[F2(2)Subject to sub-paragraphs (2A) and (2B), the charge has priority immediately after any legal charge securing an amount—

(a)left outstanding by the purchaser, or

(b)advanced to him by an approved lending institution for the purpose of enabling him to acquire the interest disposed of on the first disposal.

(2A)The following, namely—

(a)any advance which is made otherwise than for the purpose mentioned in sub-paragraph (2)(b) and is secured by a legal charge having priority to the charge taking effect by virtue of this paragraph, and

(b)any further advance which is so secured,

shall rank in priority to that charge if, and only if, the housing association by written notice served on the institution concerned gives its consent; and the housing association shall so give its consent if the purpose of the advance or further advance is an approved purpose.

(2B)The housing association may at any time by written notice served on an approved lending institution postpone the charge taking effect by virtue of this paragraph to any advance or further advance which—

(a)is made to the purchaser by that institution, and

(b)is secured by a legal charge not having priority to that charge;

and the housing association shall serve such a notice if the purpose of the advance or further advance is an approved purpose.]

(3)A charge taking effect by virtue of this section is a land charge for the purposes of section 59 of the M1Land Registration Act 1925 notwithstanding subsection (5) of that section (exclusion of mortgages), and subsection (2) of that section applies accordingly with respect to its protection and realisation.

[F3(3A)The covenant required by paragraph 1 (covenant for repayment of discount) does not, by virtue of its binding successors in title of the purchaser, bind a person exercising rights under a charge having priority over the charge taking effect by virtue of this paragraph, or a person deriving title under him; and a provision of the conveyance, grant or assignment, or of a collateral agreement, is void in so far as it purports to authorise a forfeiture, or to impose a penalty or disability, in the event of any such person failing to comply with that covenant.]

(4)The approved lending institutions for the purposes of this paragraph are—

• a building society,

• a bank,

• a trustee savings bank,

• an insurance company,

• a friendly society,

• the Housing Corporation

and any body specified, or of a class or description specified, in an order made under section 156 of the M2Housing Act 1985 (which makes provision in relation to disposals in pursuance of the right to buy corresponding to that made by this paragraph).

[F4(5)The approved purposes for the purposes of this paragraph are—

(a)to enable the purchaser to defray, or to defray on his behalf, any of the following—

(i)the cost of any works to the house,

(ii)any service charge payable in respect of the house for works, whether or not to the house, and

(iii)any service charge or other amount payable in respect of the house for insurance, whether or not of the house, and

(b)to enable the purchaser to discharge, or to discharge on his behalf, any of the following—

(i)so much as is still outstanding of any advance or further advance which ranks in priority to the charge taking effect by virtue of this paragraph,

(ii)any arrears of interest on such an advance or further advance, and

(iii)any costs and expenses incurred in enforcing payment of any such interest, or repayment (in whole or in part) of any such advance or further advance;

and in this sub-paragraph “service charge” has the meaning given by section 621A of the M3Housing Act 1985.

(6)Where different parts of an advance or further advance are made for different purposes, each of those parts shall be regarded as a separate advance or further advance for the purposes of this paragraph.]

Restriction on disposal of houses in National Parks, etc.E+W+S

3(1)Where a conveyance, grant or assignment executed under section 8 is of a house situated in—

(a)a National Park,

(b)an area designated under section 87 of the National Parks and Access to the M4Countryside Act 1949 as an area of outstanding natural beauty, or

(c)an area designated as a rural area by order under section 157 of the Housing Act 1985 (which makes provision in relation to disposals in pursuance of the right to buy corresponding to that made by this paragraph),

the conveyance, grant or assignment may (unless it contains a condition of a kind mentioned in section 33(2)(b) or (c) of the M5Housing Act 1985 (right of pre-emption or restriction on assignment)) contain a covenant limiting the freedom of the purchaser (including any successor in title of his and any person deriving title under him or such a successor) to dispose of the house in the manner specified below.

(2)The limitation is that until such time (if any) as may be notified in writing by the housing association to the purchaser or a successor in title of his, there will be no relevant disposal which is not an exempted disposal without the written consent of the housing association; but that consent shall not be withheld if the disposal is to a person satisfying the condition stated in sub-paragraph (3).

(3)The condition is that the person to whom the disposal is made (or, if it is made to more than one person, at least one of them) has, throughout the period of three years immediately preceding the application for consent—

(a)had his place of work in a region designated by order under section 157(3) of the Housing Act 1985 which, or part of which, is comprised in the National Park or area, or

(b)had his only or principal home in such a region;

or has had the one in part or parts of that period and the other in the remainder; but the region need not have been the same throughout the period.

(4)A disposal in breach of such a covenant as is mentioned in sub-paragraph (1) is void.

(5)The limitation imposed by such a covenant is a local land charge and, if the land is registered under the M6Land Registration Act 1925, the Chief Land Registrar shall enter the appropriate restriction on the register of title as if application therefor had been made under section 58 of that Act.

(6)In this paragraph “purchaser” means the person acquiring the interest disposed of by the first disposal.

Relevant disposalsE+W+S

4(1)A disposal, whether of the whole or part of the house, is a relevant disposal for the purposes of this Schedule if it is—

(a)a conveyance of the freehold or an assignment of the lease, or

(b)the grant of a lease or sub-lease (other than a mortgage term) for a term of more than 21 years otherwise than at a rack rent.

(2)For the purposes of sub-paragraph (1)(b) it shall be assumed—

(a)that any option to renew or extend a lease or sub-lease, whether or not forming part of a series of options, is exercised, and

(b)that any option to terminate a lease or sub-lease is not exercised.

Exempted disposalsE+W+S

5(1)A disposal is an exempted disposal for the purposes of this Schedule if—

(a)it is a disposal of the whole of the house and a conveyance of the freehold or an assignment of the lease and the person or each of the persons to whom it is made is a qualifying person (as defined in sub-paragraph (2));

(b)it is a vesting of the whole of the house in a person taking under a will or on an intestacy;

(c)it is a disposal of the whole of the house in pursuance of an order made under section 24 of the M7Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings) or section 2 of the M8Inheritance (Provisions for Family and Dependants) Act 1975 (orders as to financial provision to be made from estate);

(d)it is a compulsory disposal; or

(e)the property disposed of is property included with the house by virtue of paragraph (b) of the definition of “house” in section 106(1) (yard, garden, outhouses, &c.).

(2)For the purposes of sub-paragraph (1)(a), a person is a qualifying person in relation to a disposal if—

(a)he is the person or one of the persons by whom the disposal is made,

(b)he is the spouse or a former spouse of that person or one of those persons, or

(c)he is a member of the family of that person or one of those persons and has resided with him throughout the period of twelve months ending with the disposal.

Meaning of “compulsory disposal”E+W+S

6In this Schedule a “compulsory disposal” means a disposal of property which is acquired compulsorily, or is acquired by a person who has made or would have made, or for whom another person has made or would have made, a compulsory purchase order authorising its compulsory purchase for the purposes for which it is acquired.

Exempted disposals which end liability under covenantsE+W+S

7Where there is a relevant disposal which is an exempted disposal by virtue of paragraph 5(1)(d) or (e) (compulsory disposal or disposal of yard, garden etc.)—

(a)the covenant required by paragraph 1 (repayment of discount on early disposal) is not binding on the person to whom the disposal is made or any successor in title of his, and that covenant and the charge taking effect by virtue of paragraph 2 cease to apply in relation to the property disposed of, and

(b)any such covenant as is mentioned in paragraph 3 (restriction on disposal of houses in National Parks, etc.) ceases to apply in relation to the property disposed of.

Treatment of optionsE+W+S

8(1)For the purposes of this Schedule the grant of an option enabling a person to call for a relevant disposal which is not an exempted disposal shall be treated as such a disposal made to him.

(2)For the purposes of paragraph 3(2) (requirement of consent to disposal of house in National Park, etc.) a consent to such a grant shall be treated as a consent to a disposal made in pursuance of the option.