The price is right

In its main policy document the coalition government pledges that it ‘will create new trusts that will make it simpler for communities to provide homes for local people’. This is a reference to community land trusts.

The government has provided £100,000 for the launch of the National Community Land Trust Network, which will promote and provide advice to CLTs. Housing minster Grant Shapps is due to outline the government’s vision on the initiative this week.

There are continuing issues for CLTs in balancing the disposal of affordable housing so that it remains permanently affordable with the requirements of lenders and complying with the terms of planning agreements. The Council of Mortgage Lenders has been sceptical about the place of CLTs in the provision of low-cost housing.

An appropriate method of disposal needs to reconcile these conflicting interests. CLTs are prepared to sell dwellings while retaining an equity stake of a percentage of the open market value, secured by a charge over the property. Pre-emption arrangements are also used, giving the CLT first refusal to reacquire the home when sold and resale covenants where the owner must resell at the percentage of the value at which it was acquired.

A model increasingly used by CLTs, which may ultimately be the favoured option, is the grant of a lease of a dwelling by the CLT jointly to the owner and the CLT itself. That is combined with a declaration of trust recording the equity shares in the dwelling, as well as dealing with issues such as maintenance responsibilities and the ability of the owner to buy more shares up to an agreed maximum figure.

Tim Davies is a partner at Penningtons Solicitors
tim.davies@penningtons.co.uk

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