Where a scheme involves a discount off the market value in addition to the SHI subsidy, for example through developer subsidy, the grant recipient should ensure, through a lease or resale covenant, that this can be passed on to subsequent purchasers and does not result in a windfall gain for the first purchaser, subject to such terms being acceptable to mortgage lenders. Any amount recoverable from the purchaser as a condition of the assistance provided under the SHI, arising from the disposal of the property or other relevant event, is registered as a second charge on the property.
Where there is a contribution from another source, for example an employer or the grant recipient, this may rank as a second charge and the SHI contribution be registered Capital Gains Tax Valuations process as a third charge. In order to protect both the SHI and other contributions secured by a charge, the amount of the commercial mortgage, SHI and other contribution together must not exceed 100% of the valuation at the time of purchase. The grant recipient should only agree to further borrowing after the purchase of the property, where the total amount secured, including the further advance, does not exceed 100% of the then current value of the property.
If a property whose purchase was assisted under the SHI is repossessed by the lender with first charge on the property, the lender will have first call on the sales receipt to repay its outstanding loan plus interest. The lender will have first call on the sales receipt to repay its outstanding loan plus interest. The balance will then be used to repay any amounts recoverable under the SHI and other loans or grant secured against the property in accordance with the priority of charges specified. Interest free loans, including equity loans, to buy a property on the open market or a new build property being provided through the scheme manager.
These vary, but normally an affordable share e. g. 25% or 50% of the value of the property is purchased by the key worker and rent is paid on the share owned by the scheme manager. When further shares are bought the cost of purchasing these further shares will be on the basis of the value of the property at the time the additional shares are purchased.