Local authority's right of first refusal
Housing Bill
2:30 pm
'(1) After section 36 of the Housing Act 1985 (c.68) insert—
''36A Right of first refusal for local authority
(1) This section applies where, on a disposal of a house under section 32, a discount is given to the purchaser by the local authority in accordance with a consent given by the Secretary of State under subsection (2) of that section; but this section does not apply in any such case if the consent so provides.
(2) On the disposal the conveyance, grant or assignment shall contain the following covenant, which shall be binding on the purchaser and his successors in title.
(3) The covenant shall be to the effect that, until the end of the period of ten years beginning with the conveyance, grant or assignment, there will be no relevant disposal which is not an exempted disposal, unless the prescribed conditions have been satisfied in relation to that or a previous such disposal.
(4) In subsection (3) ''the prescribed conditions'' means such conditions as are prescribed by regulations under this section at the time when the conveyance, grant or assignment is made.
(5) The Secretary of State may by regulations prescribe such conditions as he considers appropriate for and in connection with conferring on—
(a) a local authority which have made a disposal as mentioned in subsection (1), or
(b) such other person as is determined in accordance with the regulations,
a right of first refusal to have a disposal within subsection (6) made to them or him for such consideration as is mentioned in section 36B.
(6) The disposals within this subsection are—
(a) a reconveyance or conveyance of the house; and
(b) a surrender or assignment of the lease.
(7) Regulations under this section may, in particular, make provision—
(a) for the purchaser to offer to make such a disposal to such person or persons as may be prescribed;
(b) for a prescribed recipient of such an offer to be able either to accept the offer or to nominate some other person as the person by whom the offer may be accepted;
(c) for the person who may be so nominated to be either a person of a prescribed description or a person whom the prescribed recipient considers, having regard to any prescribed matters, to be a more appropriate person to accept the offer;
(d) for a prescribed recipient making such a nomination to give a notification of the nomination to the person nominated, the purchaser and any other prescribed person;
(e) for authorising a nominated person to accept the offer and for determining which acceptance is to be effective where the offer is accepted by more than one person;
(f) for the period within which the offer may be accepted or within which any other prescribed step is to be, or may be, taken;
(g) for the circumstances in which the right of first refusal lapses (whether following the service of a notice to complete or otherwise) with the result that the purchaser is able to make a disposal on the open market;
(h) for the manner in which any offer, acceptance or notification is to be communicated.
(8) In subsection (7) any reference to the purchaser is a reference to the purchaser or his successor in title.
Nothing in that subsection affects the generality of subsection (5).
(9) Regulations under this section—
(a) may make different provision with respect to different cases or descriptions of case; and
(b) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(10) A disposal in breach of the covenant mentioned in subsection (3) shall be void.
36B Consideration payable for disposal under section 36A
(1) The consideration for a disposal made in respect of a right of first refusal as mentioned in section 36A(5) shall be such amount as may be agreed between the parties, or determined by the district valuer, as being the amount which is to be taken to be the value of the house at the time when the offer is made (as determined in accordance with regulations under that section).
(2) That value shall be taken to be the price which, at that time, the interest to be reconveyed, conveyed, surrendered or assigned would realise if sold on the open market by a willing vendor, on the assumption that any liability under the covenant required by section 35 (repayment of discount on early disposal) would be discharged by the vendor.
(3) If the offer is accepted in accordance with regulations under section 36A, no payment shall be required in pursuance of any such covenant as is mentioned in subsection (2), but the consideration shall be reduced, subject to subsection (4), by such amount (if any) as, on a disposal made at the time the offer was made, being a relevant disposal which is not an exempted disposal, would fall to be paid under that covenant.
(4) Where there is a charge on the house having priority over the charge to secure payment of the sum due under the covenant mentioned in subsection (2), the consideration shall not be reduced under subsection (3) below the amount necessary to discharge the outstanding sum secured by the first-mentioned charge at the date of the offer (as determined in accordance with regulations under section 36A).''
(2) In section 33(2) of the Housing Act 1985 (c.68) (covenants and conditions which may be imposed), after ''But'' insert '', subject to sections 36A and 37,''.
(3) In section 37(1) of that Act (restriction on disposal of dwelling-houses in National Parks etc.),after ''restriction on assignment)'' insert ''or a covenant as mentioned in section 36A(3) (right of first refusal for local authority)''.
(4) In section 41 of that Act (exempted disposals which end liability under covenants), after paragraph (a) insert—
''(aa) the covenant required by section 36A (right of first refusal for local authority) is not binding on the person to whom the disposal is made or any successor in title of his, and that covenant ceases to apply in relation to the property disposed of, and''.
(5) The amendments made by this section do not apply in relation to a disposal under section 32 of that Act if—
(a) the purchaser has accepted an offer for the disposal of the house from the authority, or
(b) the authority has accepted an offer for the disposal of the house from the purchaser,
before the day on which this section comes into force.'.—[Keith Hill.]
Brought up, and read the First time.
Mr Keith Hill (Minister of State (Housing and Planning), Office of the Deputy Prime Minister; Streatham, Labour)
I beg to move, That the clause be read a Second time.
Mr Peter Pike (Burnley, Labour)
With this it will be convenient to discuss the following:
Government new clause 31—Registered social landlord's right of first refusal.
Government new clause 32—Housing action trust's right of first refusal.
Mr Robert Syms (Poole, Conservative)
The new clauses give a right of first refusal to the local authority; essentially, that is achieved by putting a covenant in the deeds for 10 years. Presumably, if someone died or wanted to sell the property, their solicitor would have to tell the local authority. A house with a covenant in the deeds could not be sold, but what would be the situation if the house was left in a will to a son, daughter, sister or brother? What would trigger the
local authority's right of first refusal? Would such a right pre-empt any rights that family members had to the property? The sister who had inherited the property from the deceased person might have a greater need for the house than someone whom the RSL or local authority wanted to put into the property. I would like a little more detail about how the provision would work. If the property were simply put on the market—or, rather, if someone wanted to sell the property—one could understand the local authority having first refusal, but if the property were left to a relative, could the local authority or the registered social landlord insist on exercising its right of first refusal and buy that property at the market rate? I would be interested in the Minister's comments. If he cannot answer I would be happy for him to write to me with any details, although I am sure he has the facts at his fingertips.
Mr Keith Hill (Minister of State (Housing and Planning), Office of the Deputy Prime Minister; Streatham, Labour)
The facts have reached my fingertips and I am in a position to answer the hon. Gentleman's question. Under section 39 of the Housing Act 1985, section 15 of the Housing Act 1996 and paragraph 4 to schedule 11 of the Housing Act 1988, such disposals are deemed to be exempted disposals. In other words, inheritance by spouses and family members who have lived in the property for 12 months are not caught by the right of first refusal under the terms of the current Acts.
Question put and agreed to.
Clause read a Second time, and added to the Bill.