Spotlight on Management Companies and HTB2

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Housebuilders need to be aware of the management company requirements of Homes England in The Equity Mortgage Lender’s Handbook for Conveyancers and the UK Finance Lenders’ Handbook for Conveyancers, both when drafting transfers, leases and estate rent charge instruments and when negotiating wider estate management deeds.

Help to Buy Equity Loan

The Help to Buy: Equity Loan 2021 – 2023 Programme (HTB2) was launched on 1 April 2021 exclusively for first time buyers. 

There are strict requirements upon developers where selling units with the benefit of Help to Buy. On top of guidance contained in the UK Finance Lenders’ Handbook for Conveyancers, the Equity Mortgage Lender’s Handbook for Conveyancers (Handbook) also contains comprehensive instructions for conveyancers acting on behalf of Homes England in HTB2 conveyancing transactions.  

Help to Buy key requirements

One of the key requirements that housebuilders should be aware of arises where there is a management company on the development site overseeing the maintenance and management of common parts. In these circumstances, the Handbook states at 5.15 that the transfer or lease:

"must contain a provision requiring the Seller to either:

  • step in and perform the obligations of the management company; or
  • work with the residents of the estate to appoint a successor/alternative management company to maintain the common parts.

In the event that the management company becomes insolvent or fails to comply with their maintenance obligations.”

This means that, should the management company become insolvent or default in the performance of any of its maintenance obligations, the housebuilder is expected to step in to perform the function of the management company or assist the plot owners on the development to appoint a new management company.

Management arrangements by types of site

On straightforward sites where the developer owns the whole development scheme and incorporates a new management company for the benefit of the plots being constructed, this can be readily addressed in the plot sales documentation at the point of site setup. We are able to include straight forward provisions in plot disposal documentation that satisfies these requirements.  

However, housebuilders should also be mindful of this requirement when acquiring sites that are part of more complicated schemes. Most commonly, this arises when entering into a consortium deal with other developers. In such circumstances, management arrangements that impact the wider development site are often agreed and documented well in advance of each housebuilder setting up their own apportioned parcel. In these circumstances, failing to give proper consideration to the requirements of the Handbook could have significant implications on plot sales further down the line. 

Although the current HTB2 scheme is set to run until March 2023, it is likely that any future government housing schemes will have similar requirements.

It is important that housebuilders seek specialist advice to ensure that their transfers and leases documents comply with the Handbook and UK Finance Lenders’ Handbook for Conveyancers. Please speak to your usual Gateley contact for further guidance, or alternatively, get in touch with one of our experts whose details are below.  

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