Section 106 Planning Obligations
© S106
“Modify or Discharge S106 Agreements”

Planning News - S106

Planning Rules Creating “Mortgage

Prisoners”

http://www.ftadviser.com/2013/03/13/mortgages/mor tgage-products/planning-rules-creating-mortgage- prisoners-CDnbqfgLwHTfCuj2ngBoOO/article.html People who borrowed to build homes could become “mortgage prisoners” due to onerous planning restrictions placed on them by local authorities, Evan Owen has warned. The former adviser and founder of the IFA Defence Union, said there was a lack of providers offering finance for homes as they have section 106 planning conditions of the Town and Country Planning Act 1990 imposed on them. This means that consumers could lose money on mortgage arrangement fees, or they could be unable to secure a mortgage or remortgage on their property. Gwynedd-based Mr Owen said: “These conditions are common on new property developments in rural areas such as Wales, Cornwall, the Lake District and the Yorkshire Dales. “They mean that people building a new home often have to adhere to strict conditions to get planning consent, such as ensuring the occupants are local and that any future sale is at an affordable cost to the local community. “Houses in some cases have to be put on the market at 60 per cent of the market value. This can leave homeowners with negative equity and the reality is that most mortgage providers, and to that matter equity release providers, will not touch them, and if they do, they are seen as of a higher risk.” It means a borrower could have spent thousands of pounds on fees before finding out that they cannot get finance on the property. However, if they do, they could find themselves stuck with the same provider at vastly increased rates, or unable to remortgage as the provider deems them to be too risky. Background The Section 106 (local needs) clause of the Town and Country Planning Act 1990 states that local authorities can impose “any restriction or requirement” on a planning case to protect a community from overdevelopment. An example of this policy can be found in many rural regions in the UK, such as Cornwall, Cymru, Wales (Gwynedd in north Wales), Cumbria and, most national parks and AONBs.

Industry Comment

Council of Mortgage Lenders spokesman Bernard Clarke agreed that lenders were cautious when presented with a section 106 case in these circumstances, and that the CML had lobbied local authorities over the issue. He said: “Mortgages are secured on property. If there are barriers limiting the potential to sell the property, it is bound to be a concern for the lender. “The more restrictive the planning agreement, the more a lender sees it as a risk and, consequently, they will be less likely to lend on that case. Most lenders will consider each case on its individual merits, but these types of restrictions do limit the pool of lenders.

Adviser Comment

Glyn Jones, owner of north Denbighshire-based Vale Financial Services, said: “This is definitely a problem. I have experienced a few of these cases and they tend to prove very restrictive when seeking finance. It’s basically creating another type of mortgage prisoner as the lenders will just find it easier to stay away from properties of this type.” This was tied to another house as an “Annexe”, removed To add insult to injury these homes still have to pay the full amount of Council Tax.
This was tied to two acres and some sheds, removed.
S106.co.uk
© S106
“Modify or Discharge S106 Agreements”

Planning News - S106

Planning Rules Creating “Mortgage

Prisoners”

http://www.ftadviser.com/2013/03/13/mortgages/ mortgage-products/planning-rules-creating- mortgage-prisoners- CDnbqfgLwHTfCuj2ngBoOO/article.html People who borrowed to build homes could become “mortgage prisoners” due to onerous planning restrictions placed on them by local authorities, Evan Owen has warned. The former adviser and founder of the IFA Defence Union, said there was a lack of providers offering finance for homes as they have section 106 planning conditions of the Town and Country Planning Act 1990 imposed on them. This means that consumers could lose money on mortgage arrangement fees, or they could be unable to secure a mortgage or remortgage on their property. Gwynedd-based Mr Owen said: “These conditions are common on new property developments in rural areas such as Wales, Cornwall, the Lake District and the Yorkshire Dales. “They mean that people building a new home often have to adhere to strict conditions to get planning consent, such as ensuring the occupants are local and that any future sale is at an affordable cost to the local community. “Houses in some cases have to be put on the market at 60 per cent of the market value. This can leave homeowners with negative equity and the reality is that most mortgage providers, and to that matter equity release providers, will not touch them, and if they do, they are seen as of a higher risk.” It means a borrower could have spent thousands of pounds on fees before finding out that they cannot get finance on the property. However, if they do, they could find themselves stuck with the same provider at vastly increased rates, or unable to remortgage as the provider deems them to be too risky. Background The Section 106 (local needs) clause of the Town and Country Planning Act 1990 states that local authorities can impose “any restriction or requirement” on a planning case to protect a community from overdevelopment. An example of this policy can be found in many rural regions in the UK, such as Cornwall, Cymru, Wales (Gwynedd in north Wales), Cumbria and, most national parks and AONBs.

Industry Comment

Council of Mortgage Lenders spokesman Bernard Clarke agreed that lenders were cautious when presented with a section 106 case in these circumstances, and that the CML had lobbied local authorities over the issue. He said: “Mortgages are secured on property. If there are barriers limiting the potential to sell the property, it is bound to be a concern for the lender. “The more restrictive the planning agreement, the more a lender sees it as a risk and, consequently, they will be less likely to lend on that case. Most lenders will consider each case on its individual merits, but these types of restrictions do limit the pool of lenders.

Adviser Comment

Glyn Jones, owner of north Denbighshire-based Vale Financial Services, said: “This is definitely a problem. I have experienced a few of these cases and they tend to prove very restrictive when seeking finance. It’s basically creating another type of mortgage prisoner as the lenders will just find it easier to stay away from properties of this type.” This was tied to another house as an “Annexe”, removed To add insult to injury these homes still have to pay the full amount of Council Tax.