Issue - meetings

Affordable Housing - Suggested Approach to Mortgagee in Possession Clauses

Meeting: 05/11/2020 - Cabinet (Item 81)

81 Affordable Housing - Suggested Approach to Mortgagee in Possession Clauses pdf icon PDF 350 KB

To consider a proposed approach to the treatment of requests for Mortgagee in Possession clauses within Section 106 agreements entered into under Section 106 of the Town and Country Planning Act “Section 106 Agreements”.


Note – The Legal, Governance and Democracy Lead Specialist (Monitoring Officer) drew attention to paragraph 7 of the report relating to legal implications and advised that it would be noted within the minutes that Members present who were also Members on the Planning Committee would reserve their position, with, as outlined at paragraph 7.7, a number of applications having already obtained approval and which had subsequently requested inclusion of a mortgagee in possession clause due to be taken back through Planning Committee or delegation sought for officers to deal with outstanding matters, when each case would be considered on planning merits.




The Housing and Innovation Portfolio Holder presented a report which referred to development proposals where affordable housing delivery was being secured by Section 106 Agreements in those parts of South Lakeland District Council outside the Lake District and Yorkshire Dales National Parks (i.e. the area for which South Lakeland District Council was the local planning authority).  In the National Parks, Section 106 Agreements were negotiated with the relevant national park authority, although still advised by South Lakeland District Council as Housing Authority.


Mortgagee in possession clauses were currently being sought on a number of sites affecting the delivery of affordable homes.


The report explained in detail what a mortgagee in possession clause was.  A mortgagee in possession was a lender (person or body) which had entered into a mortgage in respect of a dwelling constructed on the proposed development site or part of the proposed development site and had taken action, in the form of taking possession of the said dwelling, following a default by the borrower in respect of the repayment due under that mortgage.


In the context of Affordable Housing, as defined at Annex 2 of the National Planning Policy Framework June 2019, mortgagee in possession clauses were increasingly being sought in Section 106 Agreements by Housing Associations (Registered Providers) – both in new Section 106 Agreements and via modifications to existing Section 106 Agreements.  Most Mortgagee in Possession clauses sought to nullify requirements in Section 106 Agreements related to restrictions on sale price, rental, occupancy, income eligibility and local needs requirements in the event of ownership of the property transferring to a mortgagee from the housing association (Registered Provider, or owner of shared ownership or discounted sale property) through the inclusion of mortgagee in possession clauses.


The argument being put forward by applicants and housing associations (Registered Providers) as regards seeking mortgage in possession clauses was that lenders and (in the case of schemes supported by grant aid) Homes England were either making support for schemes conditional on mortgagee in possession clauses or development finance was being made available on less favourable terms.  It was, therefore, argued that the absence of mortgagee in possession clauses was preventing the delivery of affordable housing.


The mortgagee in possession clause issue related to the (very rare) circumstance in which a Housing Association (Registered Provider) failed and its assets had to be disposed of.  Assets might include affordable homes  ...  view the full minutes text for item 81