Part of Fairhive's Leasehold and Freehold Property Framework - Level 2 Policy approval.
1. Introduction
1.1. This policy relates only to shared ownership leases issued by Aylesbury Vale District Council (AVDC) now known as Buckinghamshire Council before the 2006 stock transfer, of which Fairhive is now the landlord. As issued, these leases do not contain a Mortgagee Protection Clause (MPC).
1.2. This policy does not relate to shared ownership leases issued since stock transfer, which already include a MPC as per Homes England (HE) guidelines.
1.3. The purpose of this document is to present the general policy on requests for MPC’s to be added to ex-AVDC / Buckinghamshire Council shared ownership leases, and the granting of the necessary accompanying Consent to Mortgage. The policy sets out the aims, principles and values that will be followed by Fairhive Homes Ltd. (Fairhive) in its dealings with these shared ownership leaseholders, who purchased their lease from AVDC / Buckinghamshire Council.
2. Statement of Intent
2.1. Fairhive is bound by the terms of its leases and by legislation, as are its leaseholders (in this case, stock-transferred shared owners).
2.2. Fairhive, as landlord, has a legal duty to maintain the integrity of its stock and to protect against anything which might prejudice Fairhive, the stock or residents, now or in the future.
2.3. Fairhive aims to minimise risk now and in the future, whilst at the same time fulfilling its responsibilities as a Registered Provider by affording a reasonable level of assistance to shared owners.
2.4. MPC’s present a potential risk to Fairhive. In the event of a lender repossessing the lease, Fairhive could be liable for any negative equity.
2.5. However Fairhive recognises that it is now the norm for lenders to require an MPC and that leases are therefore difficult to sell without one.
2.6. In order to balance the requirement of Fairhive to manage its risk and the need of the shared owner to be able to sell, this policy sets out the circumstances in which the addition of an MPC to the lease will be allowed and the circumstances in which Consent to Mortgage will be granted.
3. Resales
3.1. A Mortgagee Protection Clause will normally be requested when an AVDC / Buckinghamshire Council-issued shared ownership lease is to be resold.
4. Mortgagee Protection Clauses
4.1. As long as the proposed borrowing is for the purpose of purchasing the lease, Fairhive will allow an MPC to be added to an ex-AVDC / Buckinghamshire Council shared ownership lease. The MPC will be added via a Deed of Variation and the shared owner is liable to pay the legal costs incurred by Fairhive.
4.2. The MPC will be drafted so that it will only be enforceable by the lender if Fairhive has given its prior written consent to the Mortgage/Charge to be granted. Upon requesting the addition of an MPC to the lease, the leaseholder (or their representative) will be advised of this. They will also be advised of Fairhive’s policy on any subsequent consent to mortgage (see Section 5).
4.3. Consent to the inclusion of a MPC will not be consent to any Mortgage/Charge.
5. Consent to Mortgage
5.1. If no MPC has been added to the lease then Fairhive is not at risk from negative equity. Subject to the leaseholder satisfying Fairhive of their ability to meet the financial and other commitments under the lease, consent to mortgage in these circumstances will not ordinarily be denied on grounds of financial risk.
5.2. If an MPC has been added to the lease it will only be enforceable by the lender if the mortgage has landlord consent. Fairhive, as landlord, will only consent to the proposed mortgage (thus validating the MPC) once it is satisfied as to the financial risk presented by the leaseholder/ buyer of the lease.
5.3. Fairhive will satisfy itself as to the risk presented by the buyer with its own financial assessment, for which a fee will be charged (see document “Home Ownership Fees and Charges”). Fairhive will consider, amongst other factors, the likelihood of the MPC being enforced, the value of the property in comparison to the loan/mortgage, the financial standing of the applicant’s ability to satisfy the financial and other commitments under the lease and any other relevant factors.
5.4. If Fairhive (in its absolute own discretion) considers the applicant to present an undue risk to Fairhive, consent to mortgage will be denied.
5.5. If the mortgage is for any purpose other than the purchase of the lease, consent to mortgage will be at Fairhive’s absolute own discretion irrespective of whether an MPC exists or not.
6. Review
6.1. The Leasehold Manager will review this policy after three years or before if required by legislation or by best practice.
7. Impacts
Resident/Staff Implications -
All relevant staff will be fully trained and be aware of all updates and changes to legislation and regulation.
Residents will be kept up to date with any changes made to this policy via the Resident Forum and a copy of this policy will be available on request.
Equality, Diversity & Inclusion -
This policy will conform to all Equality and Diversity legislation and requirements set out by the Group’s Equality and Diversity Policy.
Value for Money -
This policy protects Fairhive against risk but also affords reasonable assistance to ex-AVDC shared ownership leaseholders.
Data Protection -
All due care is taken to protect data held by us and in particular, we ensure we keep all resident data secure and meet with data protection requirements.
Accountability -
The Leasehold Team is responsible for ensuring the implementation and operation of this policy.
MPC’s and consents to mortgage are a legal issue and there is no relevant performance measure.
Quality -
We look to ensure that our residents are safe in their homes by supporting the provision of well-maintained homes which are in line with legislative and regulatory requirements.
When things go wrong -
Residents can communicate concerns through our formal channels.
8. Legislation and other Documents
Commonhold and Leasehold Reform Act 2002
Landlord and Tenant Act 1985
Leasehold Reform Act 1967
| Author | David Goss |
| Job title | Leasehold & Service Charge Team Manager |
| Date approved | October 2023 |
| Review due date | October 2026 |
