Update to Shared Ownership Lease

As you will be aware the HCA has issued a new precedent Shared Ownership Lease for both houses and flats which must be used after 6 April 2010.

It has produced further guidance on its requirements which provides that the lease cannot be used prior to 6 April 2010 but it must be used after this date. This will mean any scheme which has properties which have not exchanged on the current lease by this date will have to have two different style leases as the new lease becomes compulsory. Housing associations may be allowed to issue older style leases after the deadline but an application must be made to the HCA for dispensation and it is not guaranteed.

The precedent lease for protected areas and Social Homebuy is still to be drafted and will be issued shortly. However, it will be in a similar format to the New Build Leases.

There is also a key information sheet which explains to the shared owners the key clauses in the lease.

Further details can be found on the HCA website.

To find out more, please contact Graham Phillips

ASB law can have real teeth

We recently acted for a major social landlord in obtaining a without notice injunction against a tenant to oust him from his home for serious anti social behaviour against his neighbour that involved damage to property and serious threats of harm against a mother and her young son. Within days of being instructed, an injunction with a Power of Arrest had been obtained and the tenant was removed from the property with the help of the police. A week later the injunction was extended for a further four months during which time possession proceedings will be commenced.

This goes to show that with the right representation and evidence - not to mention a remarkable effort from the Housing Officer involved - you can take swift and effective action to deal with problem tenants.

To find out more, please contact Colin Hammond

VAT: new guidance on deposits paid to RSLs

HM Revenue and Customs has recently issued a business brief clarifying its view on the treatment of deposits for a plot of land.  This will be of particular significance to RSLs who receive deposits from developers.

It is commonplace for a deposit to be paid at exchange of contracts when construction has not commenced and the land is bare land.  If the deposit is held as stakeholder, it will not create a tax point for VAT, (and therefore a liability to account for VAT), until it is released to the RSL.  Completion normally occurs when the construction of new dwellings has started and progressed beyond foundation level.  This is the so-called 'Golden Brick' planning and means that the supply of the land should be zero rated for VAT.

However, increasingly the deposit is made available to the RSL at exchange when the land is bare land.  The question is whether the deposit can be treated as part payment for the future zero rated supply.

HMRC states that its view is where the deposit is released to the RSL and it is clear from the contract that what will be supplied at completion will be partly completed dwellings, the deposit is part payment for that supply.  Therefore, the VAT liability of the deposit will follow the VAT liability of the supply and can be zero rated.  However, for this to happen, there must be clear evidence that the RSL will have commenced construction of the dwellings by that time and acquired 'person constructing' status.

One point to watch is if the state of the land at completion differs from that which was anticipated at exchange, when the deposit was paid.  If this is the case, HMRC advises that it will be necessary to revisit the VAT treatment of the deposit and that each case will depend upon its own facts.

The structuring of property transactions usually throws up complex VAT and other property tax issues, and it is advisable to seek property tax advice at the outset in order to ensure that the parties' tax objectives are fully met.

To find out more, please contact Sarah Cardew

Landlords ignore the service charge consultation requirements at their peril

In Daejan Investments Ltd v Benson and others [2009] UKUT 233 (LC), the landlord owned a block of shops and flats. It gave notice to the long leaseholders of the flats that it intended to carry out major works amounting to £270,000. However, it failed fully to comply with the statutory consultation requirements and the Leasehold Valuation Tribunal (LVT) refused to grant a dispensation from compliance. This meant that the liability of the five tenants was restricted to £250 each.

On appeal, the Lands Chamber of the Upper Tribunal agreed with the LVT that it could not take into account the disproportionate financial consequences for the landlord when deciding whether or not to make an order for dispensation: the statutory consequences of the failure to comply were an intrinsic part of the legislative scheme.

This decision is a clear warning to landlords to make sure that they comply fully with the detailed service charge consultation requirements. This is particularly important where the works are major, as non-compliance can result in a drastic reduction in the amount that the landlord can recover from the tenants.

To find out more, please contact Colin Hammond

CIH South East & South West housing conferences

Penningtons' Linda Storey and Tim Davies and other members of our social housing team will be attending the Chartered Institute of Housing's South East and South West conferences during March and April. We look forward to seeing many of you there.

For more details on either of the conferences, please visit the Chartered Institute of Housing website using the links below:

CIH South East Region Conference & Exhibition
2-4 March 2010, Brighton

CIH South West 2010 Housing Conference
14-16 April, Torquay