Swapping the deeds for a rent book

Question 4 for the Property Compensation consultation is, “What are your views on the ‘sale and rent back’ scheme?” and the supporting information is in Section 4.4 and Section 4.5 of the consultation document. This scheme was the subject of Question 3 in the original consultation and, apart from some reordering and editing of the text describing the scheme, it is unchanged from the proposal consulted upon in autumn/winter 2012/3; so we can recycle any comments that we submitted to that consultation.

I devoted the first half of my blog Something of a minority interest (posted 15 Jan 2013) to this proposed scheme. Although I think that we can welcome the principle of renting back purchased properties to the former owners, I suggested four comments that respondents to that consultation could make on the scheme details:

  • That the scheme is very limited, in terms of the number of owners that could benefit.
  • That the limiting of the scheme to residential premises and the general exclusion of second-home owners and landlords is unfair and not justified by the reasons given by the Government.
  • That the Government should set out unambiguously any concessions that will apply to the satisfying the ownership criterion, rather than stating that it wishes to “reserve the right to make exceptions under certain circumstances” and apply “some flexibility on a case by case basis.
  • That the Government should do more to reduce the possibility of communities having empty properties threatening community cohesion.

Some further points were made in responses received to the original consultation, and an analysis of these can be found in Chapter 7 of the Dialogue by Design report. Additional points raised by respondents to that consultation include:

  • That the scheme should be extended to all properties that the Government may purchase under the compensation regime, not just those scheduled for demolition.
  • That take up of the scheme may be low, due to problems affording the rent and possible increasing property values during the tenancy making the purchase of a replacement property more expensive.
  • That there are some doubts about the effects that the proposed “value for money test” may have.
  • That the administrative proposals for the scheme appear to be complicated and onerous for the applicant.
  • That there is concern about the rent levels and how they will be determined.

To my great surprise – and I venture that I may not be the only one to react in this way – the Government appears to have taken notice of the point about extending eligibility for the scheme to cover all properties that will be purchased, not just those scheduled for demolition. Section 4.6 of the consultation document describes “alternative proposals” to do just this, and poses the consultation question:

“QUESTION 5: What are your views on our alternative proposals for renting properties to their previous owners?”

This alternative proposal is to extend the offer of the rental option to all previous owner-occupiers where the Government buys the property, irrespective of the scheme under which the property has been purchased. This will not affect the compensation to be paid by the Government at the time of purchase, which will be as appropriate to the scheme that applies.

Apart from the scope of the properties involved, the only discernable difference between the two alternatives covered by Question 4 and Question 5 is in the form of the leases that would be offered. In the scheme that is restricted to properties that are scheduled to be demolished the Government is prepared to give an assurance that it will serve notice on the tenant only in certain circumstances. The supposition is that the former owner will stay in the property until it is required to be demolished, it becomes certain that it will not be required to be demolished, or the rental becomes uneconomic. For the alternative scheme the Government is proposing to “use standard assured shorthold leases and commercial management practices”, so the security of the tenancy would be less assured. You may feel, as I do, that it is unreasonable to treat any former property owner in the same way as an “off the street” tenant, and that a more secure lease should be on offer.

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