Housing Associations Act 1985

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.

[F1(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.

[F2(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).

[F3(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.]