A SCHEME designed to help first-time buyers has come in for criticism after it was revealed that Carmarthenshire County Council had lost crucial documentation relating to at least one of the properties concerned.
It has also been claimed that the advice given to buyers looking to sell shared equity properties has been at best contradictory.
Because the issues raised in this story could affect others who have not contacted The Herald, we have taken the decision not to identify either the person affected or the area in which this took place.
Our main source for this story was happy to be named, but as his issues with Carmarthenshire County Council have been largely resolved, we decided that identifying him, and the location, could cause problems for others who may face an impact from this. For the purpose of this article we have called him ‘Jon’.
WHAT HAPPENED
Jon’s partner had entered into an affordable housing deal with Carmarthenshire County Council (CCC) for a property in the Machynys area of Llanelli in 2010. She took out a mortgage for 70% of the property’s value, with CCC holding the other 30%.
However, as a result of changes in their circumstances, the two bedroom property was no longer sufficient for their needs, and the couple, who have two children, decided to sell.
‘MIXED MESSAGES’
Jon told The Herald that the couple were told that they could sell the property on the open market, and in June 2014 put the house up for sale with an estate agent. After several people viewed the property, a prospective purchaser from England offered to pay £112,000 cash for the property.
The couple informed the council that they had a buyer, and went to a solicitor to sort out the necessary documentation, at an estimated cost of £1,300.
However, at this point, Jon said that the council’s legal department ‘put a block’ on the sale, saying that it didn’t meet the terms of the unilateral agreement drawn up by the council.
“We were £1,300 out of pocket, and we still couldn’t move,” Jon told us. At this point the sale fell through.
Questions were also raised about the property’s valuation. Carmarthenshire County Council put the value at £135,000 following the advice of its property valuation team. However, three independent valuations which Jon instigated claimed the property was worth £112-114,000 – something he says was borne out by comparable house prices in the area at the time.
More worryingly, he said, the council apparently had ‘no procedure in place’ for the sale of shared equity housing: “We were told that the council had not allowed for people’s circumstances changing,” he added.
Following a subsequent meeting, and after local MP Nia Griffith got involved with the case, Carmarthenshire County Council hired a registered independent investigator.
PAPERWORK ‘LOST’
In August 2015, the advice given was that the couple had the paperwork in place to back his claim of 70% ownership. The council was unable to provide any evidence to the contrary.
This implies that Carmarthenshire County Council had failed to keep a record of a property transaction. It has been alleged that other homeowners in a shared equity mortgage agreement may be affected by this.
In terms of selling the property on, Jon was told that he would be given a list of people who qualified for the shared equity scheme, and that he and his partner would ‘have to get in touch’ with these to identify an interested party.
However, when Jon phoned the department on Monday, he was told that shared equity properties were only dealt with on one day a week.
In a subsequent meeting with a council legal advisor, Jon was asked the value of houses in the area of the same size.
“We didn’t want to make money out of this – we just needed a bigger house,” he told us.
STRESS
By this stage, the stress was beginning to tell on the couple, one of whom had been forced to sleep on the sofa every weekend for more than a year already. Jon told us that plans for their wedding had been affected by the uncertainty still surrounding the sale.
“They [Carmarthenshire County Council] didn’t care about the stress they were putting us through, or our children’s welfare,” he claimed.
At this stage, Carmarthenshire County Council was still claiming that owned 49% of the property rather than 30%. However, after ‘several ding-dongs’ it emerged that CCC was unable to locate ANY documents relating to the ownership of the house. “They didn’t have a leg to stand on,” Jon recalled.
At a meeting in October 2015 – more than a year after their initial sale had been blocked – the council accepted the couple’s valuation and 70% ownership claim, and asked how they wished to proceed.
“I told them; all we want is to be able to sell our home,” Jon said. “I said there needed to be a procedure in place to stop this happening to other people.”
Carmarthenshire County Council agreed to buy the couple’s share of the property back for cash. In addition, they agreed to cover legal fees up to this point, and ‘graciously’ offered £500 cash settlement for their trouble.
THE ‘AFFORDABLE HOUSING’ SCHEME
Carmarthenshire County Council describes the Affordable Homes Scheme as follows: “Affordable homes are aimed at people who can get a mortgage and earn an average income, but cannot afford to buy a suitable home at open market prices.
“They’re usually sold on a shared equity basis – this means that you would buy a percentage share of the home, and we – or a Housing Association – will own the remaining share of the home (up to the market value).
“To be eligible, you must live or work full time, in Carmarthenshire, or have a long standing local connection to Carmarthenshire, such as immediate family within the area. Your income before tax should be a minimum of £15,000 a year. This figure can include benefits other than Housing Benefit. Priority is given to council and housing association tenants.”
In a list of Frequently Asked Questions on the council’s website, it is explicitly stated that to purchase an affordable home ‘you must be registered on our affordable homes register.’ This would preclude any open market sale.
“If you are interested in a particular development”, The website adds, “we will ask for further financial details from you including a mortgage certificate. We will then prioritise households according to our affordable housing allocations policy. We will write to let you know if you have been successful and the next steps you will need to take.”
It is difficult to reconcile these arrangements with those suggested to Jon. It is implied that any buying or selling of affordable homes will be carried out through the council, rather than personally by the co- owner. At the least this raises questions over whether the resale of shared equity homes had been properly thought through.
As Nia Griffith pointed out: “You would never expect a tenant vacating a place to find the next tenant.”
Given that the couple were initially advised to advertise the property on the open market, this indicates a lack of communication between different departments.
The Herald has been told that an email to Jon from the council’s Chief Executive acknowledged failings, and suggested that a review of the council’s own processes was under way. Whether or not this is the case remains to be seen. SHARED EQUITY ISSUES
The Herald has seen the original mortgage documents relating to the sale of the property. These clearly indicate that the mortgage taken out was for a 70%/30% split between the purchaser and Carmarthenshire County Council. This equated to £67,480 of a total agreed property price of £96,400. The mortgage papers make clear reference to a 30% discount.
However, after Jon and his partner announced their intention to sell, a letter from the council informed them that they had purchased 51.9% of the property, for £67,480, and that the original open market price was £130,000.
It is then suggested that their share of the property could be sold for around £70,000, which equates to 51.9% of the market valuation of £135,000.
These figures have been heavily disputed by Jon, who paid for three separate valuations. These put the value of the house between £110,000 and £120,000. At £120,000, a 70% stake would equate to £84,000. 70% of the council’s valuation would equate to £94,500.
This would have meant that by either valuation, Jon and his partner would have lost between £10- 25,000. While the amount initially paid was agreed by both parties, the council’s claim appears to be based on what could charitably be described as an over-estimate.
Given that the council failed to provide paperwork to back up their case, it could be suggested that the valuation is an extrapolation based on the flawed premise of a 52-48% split, with an increase in value along the lines of inflation.
NIA GRIFFITH MP
The Herald spoke to Nia Griffith, who Jon said was instrumental in assisting him in his struggle with the council.
Ms Griffith said that the main issue was the way in which the scheme had been handled by Carmarthenshire County Council, and the lack of certain provisions.
“I really think that the issue here is about how Carmarthenshire County Council manages this type of scheme,” she told us.
“If you say ‘we are giving firsttime buyers a leg-up’ by offering a 70-30 split equity mortgage, you have to work out what to do when they need to move on.
“I think the situation of any young purchaser, their needs, will change – most first time buyers will need a larger property at some stage.
“So, regardless of that everyone would expect families’ circumstances could change, that wasn’t taken into account.
“The council didn’t seem to have a clear idea about what to do.”
Ms Griffith described the treatment of Jon and his family as ‘utterly appalling.’
“At one stage they had a cash purchaser ready to go ahead, and when they asked CCC for permission they were told they couldn’t sell it on the open market,” she pointed out. As has been mentioned, this led to delays of over a year in selling their property. “The council has been guilty of sending out ‘mixed messages.”
“Carmarthenshire County Council has set up a system where you could purchase but had no strategy for exiting,” she added.
“There has been a strategic failure in the sense that they have not thought out how the scheme should work, and a practical failure where they have lost the relevant paperwork.
“The reason Jon managed to prove that they owned 70% of the equity was because the mortgage company noted the detail.
“The disgraceful thing CCC had done was no paperwork to this effect, so the onus was on the first time buyer to prove this.
“To be fair the council accepted what it had to do when the investigation raised these issues – whatever happened had clearly been badly mismanaged, which was probably why the Head of Housing was prepared to bring in outside consultants.
“These are things that CCC has to get right: How to maintain a bank of affordable properties; how to enable the value of a property to grow, while at the same time keeping it as an affordable property; When devising the scheme, they have to make sure that staff are trained to avoid mixed messages.
“They need to find a way to make sure that no one should go through that agony when going to sell a property.
“Another question which remains unanswered is that if the property is sold on the open market what would happen to the affordable housing provision?
“Whilst it is laudable in its aims the details need to be watertight.
“You would never expect a tenant vacating a place to find the next tenant.”
The Herald asked Carmarthenshire County Council whether or not any review of shared equity mortgage policy had been initiated following the terms of their eventual agreement with Jon.
We also asked whether there were any outstanding issues pertaining to documentation with other shared equity properties, given reports that other residents had been given similarly misleading valuations.
Robin Staines from Head of Housing and Public Protection, told us: “As has been confirmed, the matter relating to this property is resolved. Unfortunately, documentation relating to a small number of shared equity agreements were destroyed in error during an office relocation. We have since contacted all affected owneroccupiers to apologise and review their individual agreements. The council has reviewed its shared equity mortgage policy due to recent changes in lender practices.”
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