TREASURY AND RESOURCES DEPARTMENT
JERSEY PROPERTY HOLDINGS
Property Transaction for Ministerial Decision –
Minister for Treasury and Resources
Proposed Sale of - 18 Grasett Park
Purpose
To seek approval from the Assistant Minister for Treasury and Resources for the Public to sell 18 Grasett Park, St Saviour in accordance with the proposals of P 6/2007.
Background
On 17 July 2007 the States approved P.6/2007, the Social Housing Property Plan 2007 – 2016. Section 3.7.4 empowered the Housing Department to sell certain properties as detailed in Appendix D2 of P6.2007.
As noted in MD-PH-2007-0087, advice has previously been obtained from both the Comptroller and Auditor General and the Solicitor General on the principles underlying these disposals. They have confirmed that on the basis of the information provided to them on the specific sale in question, that the transaction was in accordance with the policy approved by the States Assembly under P.6/2007.
The disposals detailed in this report follow the same principles as the disposal documented in MD-PH-2007-0087, and it is therefore considered that the advice received continues to be applicable to these circumstances. MD-PH-2007-0087 incorporates extracts of P6/2007, including section 3.7.1 and Appendix D for ease of reference. It is therefore not considered necessary to reproduce those extracts in this report.
Jersey Property Holdings does not undertake due diligence in relation to individual properties in order P6/2007, this is conducted by the Housing Department. It is noted that purchasers have been offered varying levels of discount as detailed below. It should also be noted that the Minister for Housing can offer different discounts (anywhere between 0% and 25%) on any property sold under P.6/2007 which also states that “a buyer who could afford to pay the full price would be encouraged to do so…” Procedures are being put in place to ensure that all prospective purchasers maximise initial payments. Accordingly these individual transactions do not set a precedent for any future transactions.
On 24 August 2007 the Minister for Housing adopted MD-H-207-0057 “Valuation Policy for sale of homes in accordance with the Property Plan”. All valuations, to be provided by a suitably qualified independent Chartered Surveyor and will be valid for a maximum of 6 months up to the passing of the sale contract through the Royal Court. If contracts are not passed the property will be re-valued and the purchaser will be given the opportunity to purchase at the new value.
The properties are all sold with first time buyer conditions attached in perpetuity and have been valued in accordance with the Housing Ministers’ Valuation Policy as detailed in MD-H-2007-0057. It is also agreed that a condition of sale is that the property shall only be used as a single residential dwelling (or other such appropriate wording agreed with the Law Officers Department).
Property Holdings acknowledge that for sales on mixed tenure Estates, there will be a requirement to identify all communal areas with associated maintenance liabilities and costs and, accordingly, contractual provisions will be included in the sale contract. It will be necessary for a Property Owners Residents Association to be established and registered in the Royal Court, prior to any individual sales completing. Once registered, all communal areas will be transferred to the Association, such transfer to take place prior to the sale of any individual properties.
The Association Constitution will cover in detail the mechanism for re-charging property owners for all costs associated with the communal areas, insurance requirements and administration costs of the Association.
Current Situation
The Minister for Housing seeks the acceptance of the Minister for Treasury and Resources to the terms and conditions which have been agreed between the Housing Department on behalf of the Public for the transactions set out in Appendix 1.
Upon the disposal the vendor will pay back to the Public either (as a minimum) the sum identified in the relevant table in Appendix 1 as the “deferred payment amount” even if the market value reduces or 25% of the market value at the time of sale, whichever is the higher.
As an example if a property was subsequently sold for a value of £400,000 the capital receipt to the Public would be £100,000.
Conclusion
The financial risk to the States of not receiving the maximum initial payment are considered minimal, as if house values fall in the future the full amount of the deferred sum must still be repaid upon resale. Any loss is therefore limited to the opportunity value of the deferred sum.
The Housing Department has also confirmed that procedures have been put in place to ensure that banks providing funds to prospective purchasers are not permitted to take a first charge against a property which is greater than the actual purchase price.
The disposal and valuation are in accordance with the Social Housing Property Plan 2007 - 2016 P.6/2007 approved 17 July 2007 and MD-H-2007-0057 dated 27 August 2007 “Valuation Policy for sale of homes in accordance with the Property Plan” and the capital receipt is to be spent in accordance with Article 15(3) of the Public Finance (Jersey) Law 2005, and as set out in the annual States Business Plan.
Recommendation
Ordinarily the Property Holdings would/could not recommend such a transaction as the disposal is at less than best consideration (i.e. best financial value). However, it is accepted that the Minister for Housing is trading financial value for social benefit in accordance with a decision made by the States Assembly. This therefore does allow the property to be sold at a restricted value and accordingly it is recommended that the decision(s) of the Minister for Housing is accepted.
Written By: Paul Griffin
Signature …………………………
Authorised By: David Flowers
Signature ………………………… 30 March
2009
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