Analysis: Rob Aberdein, Partner, analyses Notice of Improvement and Repair grants.
Local Authorities in Scotland will from time to time choose to provide financial assistance to homeowners in order to assist with improvements or repairs to their residential property.
When this occurs the Local Authority will usually file a ‘Notice of Payment of Grant’ (NPG) with the Registers of Scotland. These NPGs are in a prescribed statutory form which is contained in the Housing Scotland Act 2006 and appear in the ‘Charges’ section of a property’s Title.
NPGs are usually for relatively small amounts of a few thousand pounds and are not repayable provided that the property; continues to be used as a dwellinghouse, continues to be the owner’s principal place of residence, and that the property is well maintained.
Only in the event that the property is sold and the owner had not adhered to the NPG conditions would the sums due under the NPG need to be repaid from the sale proceeds.
The CML’s view
It is common practice to alert a lender to a NPG. Scottish solicitors are currently bound to adhere to the terms stipulated in Clause 6.13 of the CML Handbook which states that:
“6.13.1 Where the property is subject to an improvement or repair grant which will not be discharged or waived on settlement, check part 2 to see whether or not you must report the matter to us.“
This usually leads to an NPG being reported to a lender. Some lenders will also actually request that a solicitor enter into a Ranking Agreement with the Local Authority, which tends to be a long and drawn out process.
What the Law Society of Scotland have said
The Law Society of Scotland (LSS) has recently issued Guidance on the matter after consultation with the Scottish Government and the Council of Mortgage Lenders.
The LSS have confirmed that they do not see NPGs as an obstacle to lenders taking a first ranking security (charge) over a property.
A copy of the LSS’ guidance can be found here.
Lenders should review their current practices accordingly. In cases where there is Notice of Repair or Improvement Grant lenders will therefore continue to be notified for their records.
Rob Aberdein, Partner