What if my Section 106 legal agreement needs to be changed?

If you have an old s106 agreement relating to your home you may need to get this updated to make your property mortgageable.  Normally your existing s106 agreement will be replaced with a new agreement containing the latest lender friendly terms.

Lender friendly terms

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Your new agreement will be based on a Section 106 template agreement which includes terms which are acceptable to those lenders who we are aware are currently providing mortgage finance on discounted sale homes.  These terms are:

  1. Reference to sale at a percentage of open market value and removal of any reference to a restricted price based on local earnings.  The resale percentage is written into the document at paragraph 3.1.2 of the second schedule
  2. A local connection cascade which allows the owner to sell the property to any purchaser regardless of housing need or local connection (but still at the discounted price) after 90 days of advertising.  See paragraph 3.5 of the second schedule.  Please note that the Council will require evidence of extensive advertising in line with an agreed advertising scheme before this provision can be applied
  3. A robust mortgagee protection clause.  Should your lender need to take possession of the property following a breach of the mortgage terms this clause allows your lender to sell the property on the open market if the Council is unable to secure its sale to a new affordable housing purchaser within a certain time.  See paragraph 5 of the second schedule.

A few older ‘Local Needs’ homes will not be subject to a price restriction on resale.  If this is the case with your home the resale percentage will not be applicable.

You will need to meet the Council’s legal costs in drawing up the document.  This is currently £350 plus disbursements based on using the Section 106 template agreement.  Disbursements are the costs of obtaining title documents and registering with Land Charges and are normally a maximum of £24. Our Legal Services will seek an undertaking of costs from your solicitor before they start any work, or if you are not instructing your own solicitor, our Legal Services will require payment of the Council’s legal fees and anticipated disbursements on account before they are able to commence work. 

You may wish to take your own independent legal advice.  If you currently have a mortgage or are seeking to mortgage your property, it is likely that the mortgage company will require you to instruct your own solicitor. Your own solicitor will also charge you a fee for advising you about the s.106 agreement.  In some cases your lender or freeholder (or any other party to the agreement) may also charge for checking and signing the new agreement.

Once our Legal Services have received an undertaking for the Council’s costs from your solicitor, our Legal Services will do a land registry title search and then draft the new agreement.  The draft agreement will be sent to your solicitor for approval.  Once you and your solicitor have approved the draft the Council’s legal services will prepare the new agreement ready for signature (normally referred to as ‘engrossing’).  All persons/organisations with a legal interest in the title of your property will need to be party to the agreement and sign it.  Other parties are normally your lender(s) and any freeholder (eg if the property is a flat).  You or your solicitor will be responsible for arranging for the new agreement to be signed.  The Council’s Legal services prepare the final documents and send to your solicitor to sign and circulate to other parties.  There is normally one original document for each party.  Once all the signed documents have been returned to the Council’s Legal services they seal and date them.  A signed original is sent to each party. Your solicitor will need to register the document at the Land Registry.  The Council’s legal services register the document with the Local Land Charges team.

As a rule of thumb the process takes a minimum of 4 – 8 weeks from the date you request a new agreement.  It could take longer depending on how long it takes to arrange signature by all relevant parties. It is therefore important to start the process early to avoid delays in exchanging contracts on the sale of your home or your remortgage. 

If you wish to proceed you need to email the Affordable Home ownership team at affordablehomeownership@cornwall.gov.uk requesting a new agreement and confirming:

  1. Name and address of all owner(s)
  2. Full address of your property including postcode
  3. Name and contact details (including email address and phone/mobile number) of your solicitor
  4. Your own contact details (including email address and phone/mobile number) for the purpose of forwarding to our legal services