Further Instructions to Solicitors
Shared Equity (Re-mortgage)
These instructions relate to shared equity lending where the borrower(s) is/are re-mortgaging only and are in addition to the Society’s edition of the BSA Mortgage Instructions. For additional instructions relating to shared ownership lending, please see the Society’s ‘Further Instructions to Solicitors – Shared Ownership’.
Where the Society is prepared to lend under the Government’s Help to Buy: Equity Loan Scheme, the arrangement for the equity loan must be through either a Registered Housing Association, Registered Social Landlord or through a Government or Local Authority approved and funded scheme.
Where an existing Shared Equity Loan is to be used in respect of a re-mortgage of a property in conjunction with a West Bromwich Building Society mortgage, the Society’s additional requirements are:
- The borrower must pay or has paid a percentage of the full open market value (e.g. 75%) but must acquire ownership of 100% of the property on completion.
- The remaining balance (e.g. 25%) must be made up by means of an equity loan from an equity sharing lender which is secured by a second charge ranking subsequent to a secured first charge in favour of the Society. The cumulative borrowing must not exceed 100% of the value of the property.
- The existing charge in favour of an equity sharing lender must be postponed to the new mortgage in favour of the Society.
- Any future change in the value of the equity in the property (excluding any increase the direct result of home improvements carried out by the borrower), on a disposal or sale, will be shared between the borrower and the equity sharing lender in the relative percentages, the equity sharing lenders rights being secured by the terms of the second charge.
- No rent, fee or other payment is paid by the borrower in respect of the equity sharing lender’s percentage.
- The repayment term of the borrower’s agreement with the equity sharing lender must be at least the term of the mortgage.
- On disposal of the property, or earlier on expiry of the term of the borrower’s agreement with the equity sharing lender, the equity sharing lender’s percentage must be repaid.
- Any ‘buy out’ of the equity lender’s percentage permitted under the equity sharing scheme in favour of the borrower prior to the expiry of the term of the borrower’s agreement must be at current open market value.
- The Society will only lend on a shared equity basis where a shared equity product has been selected. In the event that a shared equity product is not specified in the offer of loan then this should be reported to the lender.
- The Society must have the ability, as mortgagee in possession, to sell the property on the open market and at full open market value, with access to 100% of the equity of the property in satisfaction of its charge, and free of any restrictions in this regard.
- The Landlord must be either a Registered Housing Association, a Local Authority or other Social Landlord.
- The lease must be based upon the appropriate and current standard form of lease issued by Homes England (known as the ‘Model Lease’) without material variation.
- The initial share to be purchased by the borrower must be at least 25% based on the open market value of the property and there must be the right (but not the obligation) to buy further shares in the property permitting staircasing up to 100% of its total value. If the lease does not enable the borrower to acquire the full 100% of the property then the Society will not lend in these circumstances.
- If the percentage of the property to be purchased is different to that set out in our mortgage offer then you must inform us and await further instructions.
- Before exchange of contracts, you must ensure that the Landlord is shown a copy of the mortgage offer and other terms of the mortgage to be taken out by the borrower and the Landlord must provide written consent to the mortgage and (if appropriate) written consent to the assignment of the lease. Evidence of consent must be sent to us following completion.
- The lease must have at least 85 years to run at the start of the mortgage.
- The lease must be granted to the borrower(s) alone and the borrower(s) must not hold his/her/their share in the property in trust with the Landlord.
- The lease must provide for notice of forfeiture proceedings to be served on a mortgagee and you must obtain a written undertaking from the Landlord in the form set out at Appendix A to provide us with not less than 28 days’ written notice of intention to forfeit the lease or commence proceedings.
- If the lease makes provision for the sale of a share back to the Landlord (Downward or Reverse Staircasing) there must be a provision requiring the Society’s and the Landlords mortgagee’s consent and that the proceeds are paid directly to the Society.
- If the lease provides that, upon disposal of the property, the borrower must assign his share to a person nominated by the Landlord, then the lease must also provide that any such person must be nominated and contracts exchanged within 6 months from the date of the leaseholder notice of an intention to sell. Failing this the borrower must be able to dispose of the property on the open market.
- If the lease contains pre-emption rights in favour of the Landlord then reasonable time limits should also be included and the Landlord should pay the full market value of the shares it is acquiring.
- There must not be any requirement to make payment on assignment/surrender other than a reasonable amount (maximum 2% of sale price) in respect of valuation, legal and administrative costs. In addition no payment on surrender or assignment to a sinking fund is permitted.
- If the property is to be valued on assignment/surrender there should be no onerous restrictions in respect of market value. The value of any improvements should be taken into account. After surrender, the Landlord should be allowed to deduct any sums due under the lease.
- If the property is to be valued for the borrower to acquire an additional share or to purchase the superior interest, this must be open market value disregarding improvements to the property or deterioration attributable to the borrower for the purposes of valuation.
- In any circumstance requiring a valuation, the lease should provide for a valuation by an independent expert in the event of any disagreement between the Landlord and the borrower (or lender).
- The lease must contain a Mortgagee Protection Clause which shall protect the Society against losses that it may sustain should it have to take the property into possession. These clauses must follow the guidance set out in the Shared Ownership Joint Guidance issued by the Home and Communities Agency (HCA) and must provide that if a mortgagee in possession wishes to sell the property it has the choice of either (a) assigning the lease to the buyer as it is; or (b) staircasing to 100% and then assigning. The amount payable for staircasing shall be as set out in the lease for staircasing by the borrower.
- The Society will accept rent review provisions that are in accordance with the Joint Guidance issued by the Home and Communities Agency.
- The lease must not contain any limit upon the person or class of person to whom it may be assigned, and any term of the lease purporting to do so must be reported to the Society for consideration.
- In respect of shared ownership leases granted after 6 April 2010, clauses relating to Alienation, Mortgagee Protection, Rent Review and Staircasing are fundamental clauses of the model lease and must be in the same form as those contained in the current model shared ownership leases for flats or houses (as the case may be) issued by Homes England.
- Insurance proceeds must be apportioned between the Landlord and the borrower if repair, rebuilding or reinstatement of the property is not possible. The borrower’s share of the proceeds must be paid to the Society.
- There must be no obligation in the lease for the Society to release its security upon payment of anything less than the full amount of the outstanding mortgage plus any fees, costs and expenses associated with the mortgage.
These instructions relate to shared ownership lending only and are in addition to the Society’s edition of the BSA Mortgage Instructions. For additional instructions relating to shared equity lending, please see the Society’s ‘Further Instructions to Solicitors – Shared Equity’.
IT IS THE RESPONSIBILITY OF THE ACTING SOLICITOR/LICENCSED CONVEYANCER TO ADVISE ON THE MODEL LEASE AND ENSURE THAT ANY PROPERTIES PURCHASED PURSUANT TO THESE INSTRUCTIONS MEETS ALL REQUREMENTS. WEST BROMWICH BUILDING SOCIETY WILL NOT REVIEW ANY LEASES OR PROVIDE ANY ADVICE AS TO WHETHER A PROPERTY MEETS THESE REQUIRMENTS. IF THE INSTRUCTING SOLICITOR/LICENCSED CONVEYANCER IDENTIFIES THAT A PROPERTY DOES NOT MEET THESE REQUIREMENTS, THEY MUST INFORM US IMMEDIATELEY IN WRITING.
Where a Shared Ownership mortgage is being sought by the borrower from West Bromwich Building Society, the Society’s additional requirements are:
Name of Landlord
Address of Landlord
Re: [Insert applicant name and security address]
Mortgage Account Number:
In consideration of the Lender granting the Borrower a mortgage on the Property, the Landlord undertakes not to commence any proceedings to obtain possession of the Property under any of the grounds in Schedule 2 of the Housing Act 1988 without:-
(a) Giving the Lender not less than 28 days’ notice in writing of their intention to commence proceedings; and
(b) If within such a period of 28 days’ (or within such other period specified in the notice period, if longer), the Lender indicates in writing to the Landlord that it wishes to remedy such breach, or is going to take such action as may be necessary to resolve the problem complained of by the Landlord, giving the Lender such time as may be reasonable (in view of the nature and extent of the breach/problem) to take such action.
You should retain the attached copy of this undertaking as it details below the address where any notice should be sent:
West Bromwich Building Society
2 Providence Place