The Department for Communities and Local Government (DCLG) has launched the Rent To Buy Fund in England.

The Rent To Buy Fund will provide low cost loans to home providers to build homes. The homes must be let at below-market rent for a minimum of seven years to households who have never owned a home before. The tenants can use this fixed period of support to save for a deposit, in anticipation of buying the home.

£200 million of loan funding is available for homes in London and £200 million of loan funding is available for homes in the rest of England. Private providers that wish to apply must be registered with the Homes and Communities Agency (HCA). Loans will be offered at a low fixed interest rate. Completion should be achieved no later than 31 March 2017.

Homes built with the funding must be retained by the provider and let at no more than 80% of the market rent for at least seven years (even if the loan is repaid). After the initial seven year period, the below-market rent restriction will continue to apply until the loan is repaid. Loans will be repayable no later than 16 years after draw down of the funding.

After the end of the seven year period, the tenants can request to buy the property at open market value, which the provider should agree to unless there are business reasons for not selling at that stage (for example, if the open market value is less than the cost of provision of the home). Tenants will also have a right of first refusal to buy the property at open market value. If the home is sold, the home provider may use any return on its investment to build more affordable homes in the area. If the tenants do not buy the home the home provider may rent it at a below-market rent to another tenant who needs help to buy.

Fitzhugh Gates Solicitors Comment

The HCA will begin assessing bids from 12 November 2014 so that construction work can start in 2015.

Frances Hovey - Property Solicitor

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