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High Court orders leaseholders to sell affordable housing back to council
A judge has authorised a London council to buy back 27 units of affordable housing sold under alleged “sham transactions”, in the culmination of a long legal battle.
Southwark Council will pay leaseholders an affordable housing valuation for each of the properties, which were built as affordable housing under planning agreements but were then sold outright.
Under the settlement, leaseholders of 11 of the homes in the Signal Building in Southwark will be bought for £200,000, unless they can find a registered provider of social housing that offers a higher price.
When Judge Hodge QC endorsed the settlement in the High Court today, it was the culmination of two years of legal battles between Southwark Council and various defendants, including leaseholders, banks and London District Housing Association (LDHA).
Southwark’s claim was that homes in the 22-storey Signal Building in Elephant and Castle and other buildings in the borough – intended for shared ownership under Section 106 agreements – are not being used as affordable housing.
The council said these homes were the subject of “sham transactions” whereby buyers were found who would ‘staircase’ their share of the home up to 100% in a matter of days.
As part of the settlement, the leaseholders will be forced to undertake “a declaration that these flats are bound by the planning obligations requiring them to be used as affordable housing”.
Three of the leaseholders, who cannot afford to pay off the mortgages they took out to buy the flats, will be given a one-year grace period so that they can sue the solicitors who told them the homes were ordinary market sale properties.
The council also reached an earlier settlement with LDHA, in which it was agreed that the association would pay what damages it could afford and stay afloat.
In LDHA’s accounts, posted in March of last year, it stated: “Should the council prevail, the association would, in the opinion of the committee, be unable to continue to function as a going concern, and would be required to enter into insolvency.”
The accounts said Southwark’s original claim for damages was “in excess of £12m”. The accounts said the association had been “unable to expand as planned” due to the ongoing litigation.
At the end of the 2015/16 financial year, the organisation had three units of low-cost rented housing and “various” retained interests in shared equity schemes.
It turned over £157,266 in 2015/16, reporting a deficit of £161,683, before making £327,349 on the disposal of assets.
Southwark Council and London District Housing Association have been contacted for comment.
