The Help to Buy (HTB) scheme assists those who need it the most, helping a variety of people make their first step on the property ladder. Many housebuilders participate in this scheme, offering HTB as an option to buyers.
However, housebuilders have had to adjust to the increasingly stringent conditions of the HTB scheme as Homes England continue to press for quality and consistency in building standards. This article focuses on clarifying the latest changes surrounding planning conditions as part of the new HTB requirements.
In order to access HTB, housebuilders are required to follow the Consumer Code, the New Homes Ombudsman and the Building Safety Charter as well as fulfilling planning permission and Building Regulations conditions. Condition 2.1.3 (d) of the new HTB Funding Administration Agreement (FAA) requires a developer to provide ‘Confirmation … that all applicable pre-commencement and pre-occupation planning conditions with any and all Planning Permissions and/or Planning Agreements relating to an Eligible Dwelling have been satisfied’. It, therefore, implies that assurance from the developer to Homes England will be enough for this requirement to be met.
In contrast, the Participation Guidance goes further and states in paragraph 2.11 that: ‘developers must ensure that the evidence of discharge is supplied to the eligible purchaser’s conveyancers prior to legal completion’.
Homes England affords buyer protection
Homes England have indicated their guidance affords buyers protection from previous developer failures including failure to comply with planning conditions, leaving the buyer without remedy if that developer were to go insolvent or be wound up. They have indicated that this requirement is in the interest of the borrower and non-compliance by the developer is not to be reasonably accepted by Homes England.
Yet planning continues to be the biggest concern when it comes to the delivery of plots for developers. Delays around securing planning permission and subsequent discharge of planning conditions by local authorities is the toughest challenge they face in ensuring ‘housing deliveries’ over the next year. Housebuilders are concerned their business is now heavily impacted due to planning delays alongside COVID-19. Many believe the main cause of this could be due to lack of resource across planning departments within the local authorities.
Providing a practical solution
The latest guidance issued by Homes England does provide a solution to this practical problem. This confirms that Homes England appreciates the considerable time it can take for a local planning authority to provide written confirmation that any pre-commencement and pre-occupation planning conditions have been satisfied by a developer and the consequential delay this can cause to housing delivery. It has also confirmed that it understands that, in some instances, local planning authorities may not provide explicit and express written confirmation that pre-commencement and pre-occupation planning conditions have been complied with.
As a result, where the developer has not obtained discharge of the pre-commencement and pre-occupation planning conditions from the local planning authority, Homes England has confirmed that a Help to Buy transaction may proceed provided that:
- the developer has applied to the local planning authority for confirmation that the relevant pre-commencement and pre-occupation planning conditions have been satisfied (where such conditions require the consent or approval of the local planning authority);
- the developer is in the process of putting in place any infrastructure agreement required by any pre-commencement and pre-occupation planning conditions, having received the associated technical approvals;
- the pre-commencement and pre-occupation planning conditions have been satisfied (or that they will be, when any consents or approvals awaited from a local planning authority are received and any required infrastructure agreement is entered into); and
- the developer has entered into a prescribed form of Deed of Indemnity with the eligible purchaser, upon legal completion, in order to indemnify plot purchasers, their mortgagees and future purchasers against any costs incurred in relation to any outstanding obligation, breach, or non-compliance by the developer.
It will therefore be more important than ever that developers prioritise satisfaction of such planning conditions and keep track of any consents or approvals expected from a local planning authority. It will also be necessary to provide confirmation to their conveyancers, on a plot by plot basis, that they have submitted all information and documentation (and made any payments necessary) in order to satisfy any such conditions that are relevant to that plot, as and when HTB reservations are taken. If this cannot be confirmed, then the agreed work-around of providing a deed of indemnity will not be available and HTB cannot be used.