Transcript The Kent Empty Property Initiative

Partnership Working
“What can be achieved”
by
Andrew Lavender
(Project Consultant)
www.no-use-empty.org
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
www.no-use-empty.org
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
www.no-use-empty.org
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)
www.no-use-empty.org
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• Many lenders withdrawn from the market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)
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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
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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
www.no-use-empty.org
Loan Scheme – Investment vs. Leverage
Funding By
Loan
Scheme
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%
Thanet DC
Dover DC
Shepway BC
Dartford BC
Sevenoaks
*Does not include Warren Court
www.no-use-empty.org
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)
www.no-use-empty.org
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
www.no-use-empty.org
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)
www.no-use-empty.org
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)
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No Use Empty Initiative: Achievements by Approach
Compulsory Purchase Orders, Enforced
Sales Procedure or Empty Dwelling
Management Order
CPO
ESP
Works in Default
or
Prosecution
Statutory Notices under a
range of legislation. Owner
has right of appeal.
Prosecution for non compliance of Notice
or undertaking the works in default and
using the County Court or Enforced Sales
Procedure to recover costs
CPO, EDMO & Enforced Sales (3%)
Enforcement
(Notices Served on Owner)
Threat of Enforcement
After exhausting of
voluntary assistance,
threat of appropriate
enforcement action is
raised with owner
Threat of or Actual Enforcement 13%
Grants 7%
&
Interest Free Loans 13%
Financial Assistance / Other Assistance
(Loans, grants, home improvement agency, private
sector leasing)
Other
(Auctioneer, sale of LA
land, PSL) 8%
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 & Guidance
59%
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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)
www.no-use-empty.org
Thank you for listening
www.no-use-empty.org