A new, more targeted, Help to Buy scheme has been announced by the Government which will launch from 1st April 2021. It will be restricted to first-time buyers and will include regional property price caps to ensure it reaches buyers who need it most. The new scheme will run from April 2021 to March 2023 (when Help to Buy is set to close entirely) and as per the current scheme, the Government will lend buyers up to 20% for properties in England and up to 40% of the cost of a newly built home in Greater London (up to a value of £600k).
The new scheme will only be available to first-time buyers, which is defined as those who have not previously owned or purchased property.
The regional property price caps will be based on local markets, which will set the maximum price of a new build home that can be bought with Help to Buy in any region and are set out as follows:-
Region Price cap for properties eligible for Help to Buy Equity Loan scheme from April 2021 to March 2023
North East £186,100
North West £224,400
Yorkshire and The Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
London £600,000
South East £437,600
South West £349,000
To qualify for the current Help to Buy scheme, all eligible plots in a development must be build complete by 31st December 2020. So what does this mean for developers and how will developers be affected if practical completion of their sites goes beyond December 2020?
Until the new scheme is introduced, buyers will continue to be able to purchase new-build homes through the current Help to Buy scheme unaffected. Buyers will however need to exchange and complete no later than 31st March 2021. It is therefore important for developers to consider when they will cease to take reservations under the current Help to Buy scheme. It is currently anticipated that developers will be able to take reservations under the new Help to Buy scheme from autumn 2020.
On 30th June the Government confirmed there are no current plans to extend the existing Help to Buy scheme. No further guidance has been provided as to what will happen where there have been build delays due to the impact of COVID. No doubt, there will be discussions taking place between the Government, Help to Buy and developers to ascertain if there can be some exceptions to the rule.
If developers are using the current Help to Buy scheme and anticipate that practical completion may not be achieved by 31st December 2020, contracts will need to be carefully drafted and developers may want to include broader provisions to enable a variety of options.
Our Help to Buy contracts already provide for completion to be conditional on the seller (or its nominated agent) being eligible to receive funding by way of the contribution from Help to Buy (for whatever reason and irrespective of whether such ineligibility has arisen prior to, on or after the date of exchange of contracts).
If contracts have been exchanged in accordance with the above and the completion date of the property is delayed beyond 31st March 2021 and the developer is unable to obtain funding, either the seller or buyer can terminate the contract whereupon the deposit paid will be returned to the buyer.
It may also be the case that contracts could be rescinded where exchange has taken place, permitting purchasers to enter into a new contract under the new Help to Buy scheme – if of course they qualify.
Although the Government has announced it wants to “build, build, build” its way out of the coronavirus crisis, we know the end is likely nigh for Help to Buy. Whether or not the Government will give any further guidance and allow developers to achieve practical completion beyond 31st December 2020 and carry through sales under the current Help to Buy scheme, beyond 31st March 2021, will need to be closely monitored.