A pathway to homeownership through market renting
We helped Frontier Development Capital to create a legal framework to create a pathway to homeownership through market renting.
With the cost of a new home ever-increasing, and rents rising, affordability has fallen to an all-time low. The biggest barrier to homeownership is the inability to save for a deposit. Frontier Development Capital (FDC), debt and funding advisers, created a financial model where tenants could rent a property over the long term and after 25 years of renting purchase the freehold for £1. FDC wanted to create a pathway to homeownership through market renting and called it ‘Help to Own’ (HTO). FDC instructed Anthony Collins Solicitors (ACS) to create a legal framework to bring HTO to fruition.
What Anthony Collins Solicitors did to help support our client
The model contains multiple facets:
- No rent deposit.
- Tenants build a Loyalty Premium linked to rental increase which can be taken as cashback/rebate when leaving the scheme or used to extend initial tenancy ultimately leading to being able to purchase their home for £1.
- Tenants can leave at any time on three months’ notice; if they do leave ‘early’ they take with them the accrued value of their Loyalty Premium.
- Tenants must maintain the home as their own.
The legal framework needed options and tenancy arrangements that reflected the financial model. HTO is a unique concept that sits between traditional tenancy and intermediate homeownership models. Working with FDC we identified the different obligations the parties had to each other and then worked through the legal challenges to make those obligations enforceable.
“ACS’ in-depth knowledge of housing law was truly invaluable to us. We recognised that like us the people at ACS recognised the impact HTO would have for people who are otherwise trapped in market renting; for them HTO is life changing and we are indebted to ACS for the advice we received.”Sam Miller, commercial director – new propositions, Frontier Development Capital
FDC formed HTO2 LLP, a joint venture between the pension funds of the West Midlands Combined Authority and Wolverhampton City Council, who purchased 100 brand new homes at The Marches, Wednesfield, Wolverhampton. The homes were a mix of 29 x 2 bed, 50 x 3 bed and 21 x 4 bed reflecting the needs of the community. A help to own website was created through which applicants could apply. Those applicants went through a strict process to ensure that only applicants who could not raise a deposit were able to apply. Over 2,000 people applied for the 100 tenancies available.
Social media reflected the excitement around this unique scheme:
“If you factor in that you require at least a 10% deposit and an excellent credit rating to get a mortgage…then you’ll understand how good this (HTO) scheme is. This is a good scheme and it’s none binding unlike a mortgage. Buying and owning a house isn’t cheap but this scheme is giving certain individuals a helping hand.”Facebook comment
Fund management business FDC launched NewCo My Generation Group Limited to support delivery of the scheme.
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