On Right to Build Day (30 October) NaCSBA published a letter calling for an end to the practice whereby local authorities place unfair financial tests that prevent people signing their local self build Register.
Importantly, the letter is supported by the mortgage sector, including the Association of Mortgage Intermediaries, the Building Societies Association and UK Finance.
NaCSBA is sharing the letter to bring an end to the minority of councils applying unnecessary and bureaucratic tests that must be passed before someone can join a self build register. Effectively these few councils are restricting people’s ambitions – and legal right – to sign their self build register.
The legislation does enable local authorities to set tests for people wanting to sign the register, which include local connection and financial tests. But the guidance for these states that these should only be applied where there is a “strong justification” for doing so.
However, some of the tests are completely unnecessary and unfair, such as the requirement to have a mortgage offer in place or to have written confirmation of funds from a qualified financial adviser.
In addition, some of these policies also refer to the Council of Mortgage Lenders, which ceased to exist in July 2017, with its activities now undertaken by UK Finance.
The letter recommends that:
It is not appropriate to ask for a mortgage offer to join a Register.
This can typically only be obtained when access to land with planning permission has been assured. Any person who is in this position has therefore no need to join a Register.
It is not appropriate to ask for an Approval in Principle.
Such a document has a specific place in the house purchase process, and the regulatory environment. The production of an Approval in Principle (AIP) involves time and cost for an applicant, the mortgage adviser and for the mortgage lender. An AIP typically includes a credit assessment of the customer. This process can result in credit footprints that can ultimately reduce access to credit including future mortgage lending. An AIP has a limited life (no more than 6 months) which is much shorter than the time in which the local authority has to act.
It is not appropriate to ask for other written evidence from a fully qualified financial adviser.
An adviser would typically charge a fee for such work, and as noted above any activity this far in advance of any mortgage application is of no wider underlying value to the customer.
Andrew Baddeley-Chappell CEO of the National Custom & Self Build Association stated: “A limited but growing number of local authorities are making it too difficult for potential self builders to benefit from the law. This is unfair and wasteful of the resources of individuals and the mortgage sector. We are hugely grateful to the mortgage sector for their support in enabling our sector to deliver more and better homes.”
Kevin McCloud (Presenter, Grand Designs) stated: “At a time when we need more sustainability and affordable homes, it is beyond belief that any council is making it impossible for such homes to be delivered.”
NaCSBA has also published a briefing note setting out the context around the Right to Build legislation and registers.
About the Right to Build
What has become known as the Right to Build legislation requires all local authorities to establish a Register of all those who wish to build or commission a home and to then ensure that sufficient plot ‘permissions’ come forward to meet that demand.
The financial solvency test is designed to assess the ability of an applicant to purchase the land and build a self build home. However, the examples above applied by some local authorities effectively make them too hard and / or too expensive for applicants to pass.
NaCSBA is urging anyone facing such tests to share the letter with the local authority and also let it know by emailing media@nacsba.org.uk
Examples of inappropriate policies:
Solihull Metropolitan Borough Council
There will also be an assessment of financial resources. The Council will require relevant evidence of sufficient resources as follows:
- An offer for a self-build mortgage from a verifiable lender (for example, a member of the Council of Mortgage Lenders). Any evidence provided must clearly show that the release of funds for the purchase of land – which is usually the first phase of funding released – covers any proxy land value used by the Council for the purposes of assessing this criterion; or
- Written confirmation and evidence from a qualified financial advisor with active membership of a verifiable and appropriate professional body. This evidence should clearly outline that the applicant has sufficient readily accessible funds/savings/investments/equity to purchase land; or
- Any other information which demonstrates, to the Council’s satisfaction, that the applicant has sufficient resources to purchase land for their own self-build and custom housebuilding. The Council welcomes evidence of Islamic mortgages and no interest mortgages such as Murabaha and Ijarah.
(Source: letter from Solihull Council to everyone already registered on its register)
Epping Forest District Council
The council will require relevant evidence of sufficient resources as follows:
- An offer for a self-build mortgage from a verifiable lender (for example, a member of the Council of Mortgage Lenders). Any evidence provided must clearly show that the release of funds for the purchase of land – which is usually the first phase of funding released – covers any proxy land value used by the council for the purposes of assessing this criterion
- Written confirmation and evidence from a qualified financial advisor with active membership of a verifiable and appropriate professional body. This evidence should clearly outline that the applicant has sufficient readily accessible funds / equity to purchase land
Any other information which demonstrates, to the council’s satisfaction, that the applicant has sufficient resources to purchase land for their own self-build and custom housebuilding - Where multiple funding sources are utilised, evidence may be required that funds will be readily accessible for the purchase of land phase of the project
(Source: Epping Council Self Build FAQs)
Runnymede Borough Council
Financial Solvency Test:
- The Council requires evidence from applicants which demonstrates that they have sufficient funds to purchase a plot of land for their self-build project at a value of £259,333.
- Details of savings equivalent or greater to the average price per plot (as defined in this document) that could definitely be used for purchase of land and to fund the construction of a self-build project or;
- In-principle bank loan agreement or an agreement in principal from a mortgage provide
(Source: Self-Build and Custom Housebuilding Register: Advisory Notes)
