Graduated Ownership : Rules of GO schemes
Eight Key Rules of the Graduated Ownership Scheme
Rule One – Increment
No Increment is applied where average House Price Inflation for the relevant period is less than 1% per annum.
Rule Two – Sales During The Restricted Resale Period
If the Owner wishes to sell the property during the Restricted Resale Period, he must first offer it to the Provider. The price payable by the Provider is the Owner’s Value (C) at the time of service of notice of intention to sell. Owner’s Value (C) is a specified percentage of Open Market Value, as determined by independent valuation.
If the Provider does not purchase for any reason (or nominate a purchaser who proceeds with the purchase) within eight weeks of notice of intention to sell, then Owner may sell on the open market at OMV. The Owner is entitled to retain a percentage of the sale price equivalent to the percentage of the Owner’s Value as at the date of service of notice of intention to sell.
Rule Three – Sales After Expiry Of Restricted Resale Period
After the Restricted Resale Period expires, the Owner is allowed to sell the home at market value and to any interested buyer. However, the Owner’s Value will remain at the same percentage of the sale price as it was in the last year of the Restricted Resale Period. (Thus 36.3% of the sale price in the case of a 30% scheme, or 77.25% in the case of a 75% scheme.) The difference between the actual net sales price and the Owner’s Value is returned to the Provider.
Rule Four – Buying Out Of The Scheme
There is an automatic right for the Owner to buy out of the scheme during the Restricted Resale Period by paying the Residual Value to the Provider, based on current Open Market Value and the percentages applying in the current year of the Restricted Resale Period.
Upgrades may be negotiated with the Provider. Normally the Owner will upgrade by paying to the Provider the difference between (a) Owner’s Value for the current level of GO scheme and (b) Owner’s Value for the level he or she is upgrading to. In the case of all upgrades an independent valuation will be needed to fix the Owner’s Values by reference to the Open Market Value.
There is no right of pre-emption in favour of the Provider where the Owner has bought out of the scheme, or where the Restricted Resale Period has expired.
Rule Five – Fees
The Owner must pay reasonable management fees (as determined by the Provider) in connection with any applications he makes. A fee is also payable in connection with the filing of the annual declaration under Rule Seven. The costs of any independent valuations required in connection with a proposed sale or other transaction are to be paid by the Owner.
Rule Six – Improvements
The Owner’s Value may be increased if significant home improvements are made, but never to more than 77.25% of Open Market Value. There are limitations regarding what types of improvements that can result in an increase to future resale prices. The Owner will be advised to contact the Provider prior to making any improvements to determine if they will impact the Owner’s Value. The Provider must preapprove any proposed improvements if the Owner wishes them to be taken into account in assessing future values.
Rule Seven – Sublettings
Homes must be owner-occupied. The Owner must file a declaration each year that he and his family occupy the house or flat as their principal residence. In default, the Increment will be forfeited and the Provider may take enforcement action againt the Owner
The Owner is not allowed to sublet the property, except allowing one room to be used by a lodger. In specific hardship cases, the Provider may approve subletting of a home for short periods of time (typically one year). These are usually reasons such as family illness, short term employment transfers, etc.
Rule Eight – Sale By Mortgagee
If the Owner defaults on his mortgage and the First Mortgagee sells the home, the Increment is forfeited. The amount payable to the Provider is the Residual Value that would have been payable if the Owner himself had sold the Property at Open Market Value, or at the sale price achieved by the First Mortgagee, whichever is the greater. The Provider is also entitled to be paid reasonable administration fees. The balance of proceeds of sale, if any, is due to the Owner.