How to maximise Value and the S133 Issue

Carol Matthews

Partner, Wright Hassall

How to get maximum value from stock?

Need to elevate from an EUV valuation to MV-STT by:

• No affordable housing restrictions on title;• No personal planning permissions;• S106 Agreements with acceptable mortgagee exemption

provisions which are that affordable housing provisions should • Not bind a mortgagee, chargee or a receiver and their

successors;• Any obligations to try to sell back to LAs or other RP must be

within a period of three months or less.

Get your ducks in a row

Work with the NHF which is pioneering new initiatives to streamline the charging process;

Do a tidy of your rent roll – HCA out to consultation on “living wills” so you have to do it;

Allow twice the time you think you need to sort your property lists for in charging exercises – esp Bonds and PPs;

Vary your old S106 Agreements to elevate your valuation;

Work with the Valuers as a team so you all use the same list;

Support the initiative about the S133 restriction if you have LSVT stock!!

The current scenario – the S133 Issue

2 different categories of RPS

• Traditional RPs• LSVT RPs

BUT they do not have a ‘level playing field’ in asset valuation

Why is this?

All RPs have a restriction on disposal under s172 Housing and Regeneration Act 2008

Consent to disposal needed from HCA

This falls away from title on disposal including sales by mortgagees in possession

The S133 Restriction

Feature of the LSVT regime;

Local Authorities had certainty that stock would be protected as affordable housing.

“ RESTRICTION: No disposition by the proprietor of the registered estate or in exercise of the power of sale or leasing in any registered charge (except an exempt disposal as defined by section 81(8) of the Housing Act 1988) is to be registered without the consent of the Secretary of State to that disposition under the provisions of section 133 of that Act”

What is different about an LSVT RP?

All properties transferring by virtue of an LSVT have the additional restriction on the title under s133 of the Housing Act 1988

RPs need consent to disposal under this restriction from the Secretary of State

BUT under s133(2) the restriction does not fall away on sale by mortgagee in possession

What does this mean in valuation terms?

RP stock is valued under the RICS ‘red book’ as either:

Market value subject to tenancy (MV-STT)

stock valued subject to a tenancy but not limited to social housing;

Existing use value (EUV)

assumes properties will be re-let as social housing

Valuers always value stock with an s133 restriction as EUV.

What can be done?

Move afoot to change the impact of s133(2) restriction

• Supported by NHF and CIH• Treasury interested in proposal• Consultation promises to tenants on LSVT will not be affected

Can be done by:

• Legislation• General consent provisions

The on-going debate

May not elevate LSVT stock to MV-STT

• Loan agreements may prohibit this valuation

• Funders/valuers may take the view still EUV due to size and density – could be EUV “basis 2” – 45% of MV

• Local authorities may object