Www.no-use-empty.org Partnership Working “What can be achieved” by Andrew Lavender (Project...

www.no-use-empty.org

Partnership Working“What can be achieved”

byAndrew Lavender

(Project Consultant)


What we set out to achieve

• To improve the physical environment in four coastal districts of Kent - Dover, Shepway, Swale and Thanet by bringing empty properties back into use. These Districts contain 19 out of 20 most deprived wards in Kent and represented over 3,000 long term empty properties.

• Agreed Performance Indicators (PSA Target – 3 Years)

• Return 372 private sector long term empty or poorly used properties, including HMO’s, in the four Districts into occupation as quality accommodation (100% increase on performance)

• Improve by 15% both residents’ perceptions of the physical environment and business confidence in the four Districts where empty properties have been brought back into use

• Scheme extended to all 12 Kent LA in 2009


Our Approach• KCC appointed a project manager for the initiative

• Undertook initial collection of evidence, including residents & business survey, survey of empty properties, mapping exercise (Empty Homes Agency)

• Appointed “Tamesis” - a PR & media relations company to raise and promote the profile of the initiative

• Appointed “Capital Project Consultancy Ltd (CPC)” – to provide professional and technical expertise

• Initiative three strands: £5 Million capital fund to support:(Revolving Fund) • Loan Scheme• Partnership Fund• KCC Direct Purchase


Loan Scheme

• Kent County Council – not a Housing Authority (Complications)

• Loans - £25,000 per unit, maximum of £175,000 per applicant.

• Properties must be sold (maximum of 2 years) or let on completion (maximum of 3 years)

• Properties expected to meet the decent homes standard on completion

• Do not offer loans where property will be occupied by applicant

(FSA – Local Housing Authority have their own mortgage guidance)


Loan Scheme• Secured as a financial charge against property (first or second only)

• Will accept another property for security

• Maximum LTV 90%, independent RICS valuation (charged to applicant)

• Many lenders withdrawn from the market• Lenders (large developments max 60% LTV, some will not allow second

charges i.e. Mortgage Works)• Buy to Lets (50-75% LTV), high interest rates, high fees and retainer for

works)• RICS Valuer (Very cautious in their valuations)

• 100% of the funding provided up front (staged, if maximum loan * £50K)

• Provides good working capital• £25,000 @ 3% / 5% = £750 / £1,250 a year (2/3 years)


Loan Scheme

• Initial discussion with owner & application supported by EPO• Project Manager / Consultant meet on site to discuss the viability of

scheme, available finance, ownership arrangements, vat and tax strategies

• Application submitted• 2 quotes for the cost of the works or RICS Surveyor costings• Rics valuation (current value)• Letter of consent from Mortgage Company (deed of priority)• Money Laundering Regulations ID and address

• Companies accounts : 3 years and financial check• Individual 3 months pay slips

• Evidence of adequate finance to make scheme viable (shortfall)• Risk assessment


Risk Assessment (Factors Considered)

• Panel of 3 Persons (assess whether scheme low to high risk)

• Credit Check: adequate / fail (does not proceed)

• Business Plan: Financial viability of project, do they have additional finance plus loan to make scheme viable

• Loan amount £25K-175K

• Loan to Property Value (LTV ↑ 50%, ↑ 51-85% , or ↑ 85%)

• Proposed Loan period up to 24 months or ↑ 24 months

• Provision of references from previous projects


Loan Scheme – Investment vs. Leverage

Loan Scheme

Thanet DC

Dover DC

Shepway BC

Dartford BC

Sevenoaks

Funding By No. of Units

% of Units

Value NUEI Loan

£

Leverage Total Investment

% of Loan

% of Leverage

% of Total

Project

Individuals (<3 units)

66 32% £1,507,700 £1,333,804 £2,841,504 38% 18% 25%

Developers (> 4 units)

140 68% £2,425,000 £6,213,981 £8,638,891 62% 82% 75%

Total 206 100% £3,932,700 £7,547,784 £11,480,484 100% 100% 100%

*Does not include Warren Court


Scheme Costs

• Average renovation cost per unit = £47,381 (often very worst properties) • KCC average investment per unit £18,508

• Actual cost to KCC = £619,691(loss of interest & on costs), if loans run to completion • Current rate of interest charged & on costs@ 3.13%) = £3,008 per unit • Includes 80% Project Managers, 10% Consultant time, 5% EPO• Legal costs & local searches • Registering charges with District Land Registry & Companies House

• Repayment to date £400,000 & £600,000 scheduled for 31st March 2011• 16% Loan to Sell (2 years) & 84 % Loan to Let (3 years)

• Only 26% of application forms returned , 76% of them approved (some in progress)


Loan to Sell

• Derelict Warehouse in Dover• NUE Loan £175,000• Developers Contribution £161,000• Total development £336,000

• 6 x 2 bed apartments • 2 x loft apartments• high spec - private courtyard,

allocated parking, security gates & video entry system


Loan to Let & Compulsory Purchase Orders

• 28 & 32 Bellevue Road• NUE Loan £125,000 • Developers contribution £100,000• Total development £225,000• 5 units of accommodation

• 34 Bellevue Road, Ramsgate• Unregistered Land – CPO• Sell the property to developer,

agreed to pay CPO costs• Compensation (6 year rule)


Loan Scheme

• To date only 1 default of loan and concern over 1 other project.• Practice of lenders requiring recipients to pay down their mortgage,

including taking funds from accounts without any warning• Assessment of financial standing of property development companies

(same as KCC supplier) (often equity rich but cash poor).• Special Purpose Vehicles (SPV – set up for a single development is not

uncommon and causes problems as often do not have 3 year accounts)• Strict interpretation of Money Laundering Regs (Nepal)• Company set up outside England and Wales (Malta/Isle of Man)


CPOESP

CPOESP

Works in Defaultor

Prosecution

Works in Defaultor

Prosecution

Enforcement (Notices Served on Owner)

Enforcement (Notices Served on Owner)

Threat of EnforcementThreat of Enforcement

Financial Assistance / Other Assistance(Loans, grants, home improvement agency, private

sector leasing)

Financial Assistance / Other Assistance(Loans, grants, home improvement agency, private

sector leasing)

Advice and Guidance(Development advice, tax and vat, reduced fees to sell via

auctioneer, guidance on extent of works, guidance on planning, raising finance)

Advice and Guidance(Development advice, tax and vat, reduced fees to sell via

auctioneer, guidance on extent of works, guidance on planning, raising finance)

Compulsory Purchase Orders, Enforced Sales Procedure or Empty Dwelling Management Order

Prosecution for non compliance of Notice or undertaking the works in default and using the County Court or Enforced Sales Procedure to recover costs

Statutory Notices under a range of legislation. Owner has right of appeal.

After exhausting of voluntary assistance, threat of appropriate enforcement action is raised with owner

Advice & Guidance59%

Grants 7% &

Interest Free Loans 13%

Threat of or Actual Enforcement 13%

CPO, EDMO & Enforced Sales (3%)

Other (Auctioneer, sale of LA

land, PSL) 8%

No Use Empty Initiative: Achievements by Approach


Achievements to date• Strong partnership arrangements between KCC and the 12 District Councils

• Increased output, knowledge, expertise of professional staff and development and sharing of good practice.

• Extended the Initiative to all Authorities in Kent and gained National Recognition

• 487 Properties brought back into use during scheme, target 372.

• Target 2011 to return 1,050

• Achieved a minimum of 1,627 (last quarter not reported)


Thank you for listening

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