First Homes Scheme
The First Homes Scheme is a government scheme intended to assist more people onto the property ladder.
The First Homes Scheme applies only to properties in England and provides for homes to be offered for sale at a discount of at least 30% of the market value, with local authorities able to offer discounts of 40% or 50%.
An individual may qualify for a First Home under the Scheme if:
- They are 18 years of age or over;
- They are a first time buyer;
- The property is to be their only or main residential property;
- The annual household income does not exceed £80,000 (or £90,000 in London) in the tax year immediately preceding the year of purchase;
- The price of the property is £250,000 or less (or £420,000 in London) after the discount has been applied;
- The purchaser has a mortgage to fund a minimum of 50% of the discounted purchase price of the property.
Local authorities can apply eligibility criteria in addition to the national criteria set out above which could include lower income caps, a local connection test or criteria based on employment status and this is at the discretion of the local authority.
At the planning stage, the developer should enter into a Section 106 Agreement which secures the delivery of First Homes and ensures that a legal restriction is registered onto a First Home’s title on its first sale. The purpose of the restriction is to ensure that any future sales of the property are to other First Home buyers which meet the eligibility criteria and with the same percentage discount to the market value applied.
Provisions should be included within the Section 106 Agreement which allows a developer or a First Home owner to sell a First Home on the open market and remove the title restriction (provided certain conditions are satisfied) in the event that a suitable buyer for a First Home cannot be found preventing sale for a long period i.e. at least 6 months. It will be interesting to see how this is policed and evidenced in practice.
If such a situation arose, notification should be made to the local authority so it has the opportunity to purchase the First Home. If the local authority do not wish to purchase the First Home, the owner would have the ability to sell the property on the open market at the open market price with the discounted portion of the sales receipts being returned to the local authority.
The detail of the scheme will not only be contained in the Section 106 Agreement but the transfer of any relevant First Home Plots and each owner of the First Home will be obliged to comply with the various requirements and conditions in perpetuity until such time as the title restriction is removed (if ever).
If you are a developer who requires advice with regards to a Section 106 Agreement containing First Homes obligations, or a buyer looking to purchase a First Home, please get in touch and our specialist property and planning and development teams would be delighted to assist.