Selling apartment but AH sellers devaluing MV

[Easter]

Hello Folks,

I'm looking to sell my AH, & last week I found out that I wont receive any money back on the sale of this property greater than 270 000 (my mortgage) & the current market value of property 345 000. I am very upset by this as for 12 years I was misled to think that anything greater than 270000 would be split between the council & I as per clawback, but no, the clawback only comes in under extreme circumstances as in the property selling for over the original market price back in 2008 of €470 000. So essentially, if you sell the property in year 1 or year 19 it doesn't matter coz you dont make any profit from it. Whereas if you sell after year 20, you own the whole property & can make in excess of 180000 after you clear your mortgage ???

Can anyone who knows about the AH scheme 2007 agree with me on this?
Are there any options for getting around this?
I just feel it's very unfair for this to be the case after residing in the property for 12 years.

..

You have been misinformed. If you have lived in the property for a full 12 years, you are entitled to 20% of anything above €270000.

Who told you otherwise? If it’s someone from the council you need to go higher. You have definitely been misinformed. Likelihood is that some council staff don’t know their stuff. It is only in the last year that they will be presented with this scenario. Many current staff weren’t involved in affordable housing. Don’t accept any other answer. Clawback does reduce by 10% for every year over 10 years that you live in the property.

 

[Easter]

So you got a massive discount in 2008 and even though the value is still €125, 000 below the market price of when you bought, you have an issue with that

I think it is unreasonable to have a go at the poster here. If you buy on the affordable housing scheme with the agreement that clawback reduces after a certain period, you would be justifiably aggrieved if those terms were changed after agreements were signed and purchases made?

 

[WillIBeRich?]

Hi Easter,

Thanks for your reply,

I purchased the apartment in Aug 2008.
Your right re: the clawback.
As the scenario I've been quoted by the council shows it doesn't make a difference if you sell on year 1 or year 19 of the contract coz theres no way the apartment is going to sell for less than €460 000 anyway. Surely, as you say, there has to be some incentive for staying on in the apartment to year 12 etc.

No they weren't purpose built affordable housing, the were built amongst a private complex & were obtained by the local authority under part V of the planning & development act 2000.

I have 2 solicitors on the case so we'll see what happens. I wonder if there may have been a change in the contract since 2008 (but I would've thought contracts shouldn't change) Coz nowhere in my contract in 2008 does it say that if the property sells for greater than 270000 & less than 465 000 that all that the money has to be paid to the council.
The council say they dont want to know about the property until it becomes sale agreed.

I think I have been misinformed, it's just that the lady in the council is adamant that she's right. Why do you say 20% over 270 000?

Thanks so much for your support Easter... & for sticking up for me.

I'll keep you posted.

WIBR

 

[Bitthedust]

To the OP
When did you purchase your apartment and when were these similar apartments sold as affordable housing? If it was 06/07 then the sellers do in fact have an incentive to sell at full market value. Because clawback reduces after 10 years by 10% per year, the sellers can take a percentage of the profit. It would make no sense for them to sell for less.

Hi Easter, I reserved the apartment and paid deposit in June 2006. It wasn’t ready for move in till October 2007. There was an earlier phase, my phase and a later phase. The later phase was around 2010 but there were delays in the sales of 2nd phase of AH apt’s actually going through because of outstanding building issues which were since rectified. People in the first and last phase definetely paid less than the middle phase. So people would all be aiming for different figures.

Secondly, were they purpose built affordable housing? If yes, then possibly they don’t have en-suites, underground parking, cheaper fittings and fixtures. I’m the voice of experience here ;-)
No, they weren’t purpose built for AH but the builders may have later added more AH than originally planned. Didn’t have parking as standard which people had to pay €10k extra for. Some did, some didn’t.

Thirdly, if you still think you are being undercut just go to the the council and complain. Everyone selling an affordable housing property has to get an agreement from the council as to market value. Just ring and complain if you think there is an issue. There seems to be a drop in what many apartments are achieving. Perhaps it was a natural dip, or perhaps there were multiple bidders for the property that sold for a higher price.

I’ve thought about going to the council. What I’d really like to achieve is to get a change to the revenue rules so that people who are in negative equity or have lost more than €100k in market value from price originally paid can’t be taxed on rental income that is far from asset income,

Apologies, I’ve messed up multiquote. Replies are underlined, within the post. Thanks.

 

[Easter]

Why do you say 20% over 270 000

I misinterpreted what you said about being misled for 12 years, I thought you were in the apartment for 12 years. If you bought in Aug 2008, by Aug 2019 you should be entitled to 10% of anything achieved over the 270k. Best of luck getting clarity on it. Go to Joe Duffy if you don’t get any joy ;-)

 

[Easter]

Others who got a 35% discount on the price of the property in the first place, get to break even and walk away.

This isn’t always the case. I bought on AH with a 35% discount and was still in negative equity for years. We are not protected against negativity equity. I could have been in even worse negative equity if I hadn’t made a judgment call on another AH property I was offered. I could see it simply wasn’t worth what the AH price was, never mind the MV.

I understand that it is frustrating to be in negative equity for so long. It is about personal responsibility for decisions too though.

Affordable housing likely has nothing to do with your predicament, but the title and content of this thread just drums up resentment of AH buyers.

I do think no tax on rental income for those in negative equity is a good idea. Wouldn’t agree on the suggestion for a tax break just because a property fell by 100k. There is always risk involved in property purchase.

 

[WillIBeRich?]

Thanks Easter ... I so hope your right

 

[elcato]

I do think no tax on rental income for those in negative equity is a good idea.

Reminds of of the submission I made to the then rookie TD Eoghan Murphy about allowing tax breaks for negative equity landlords when they were really up the creek. It still is on deaf ears to this day.

 

[peemac]

I think it is unreasonable to have a go at the poster here. If you buy on the affordable housing scheme with the agreement that clawback reduces after a certain period, you would be justifiably aggrieved if those terms were changed after agreements were signed and purchases made?

I think it's quite fair.
Profit should only come into consideration if the selling price is above the original full price.

Personally I think the op has done very well. Probably a reasonable mortgage for the past 12 years and no negative equity. Even though the dwelling is still being sold below the original value and the council is taking the hit.

 

[Bitthedust]

This isn’t always the case. I bought on AH with a 35% discount and was still in negative equity for years. We are not protected against negativity equity. I could have been in even worse negative equity if I hadn’t made a judgment call on another AH property I was offered. I could see it simply wasn’t worth what the AH price was, never mind the MV.

I understand that it is frustrating to be in negative equity for so long. It is about personal responsibility for decisions too though.

Affordable housing likely has nothing to do with your predicament, but the title and content of this thread just drums up resentment of AH buyers.

I do think no tax on rental income for those in negative equity is a good idea. Wouldn’t agree on the suggestion for a tax break just because a property fell by 100k. There is always risk involved in property purchase.

There’s a big difference between a few grand negative equity and @ one stage €150k+ negative equity.

I very much have taken personal responsibility for my mistake here. I am only hoping to get back in the black not recover the original price or 20% deposit paid. Don’t you think €100k is personal responsibility enough?

I didn’t have too many choices at the time. I was single and was being outbid on one bed apartments all over the city. Hindsight is a great thing. Maybe there were two of you or you are in a different city/ area.

You seem to overlook what I said earlier about differential pricing.My reading of it is that the clawback affects different purchasers in different phases differently. People in 2006 might have paid €180K affordable. People in 2012-14 might only have paid €130K. They are still owning their property <10 years.

it’s hard to explain well.
See the citizens information website as info included on affordable housing (sorry cant post links):
“If the proceeds of the sale of your affordable home are below the initial price actually paid, you will not be liable to pay the local authority a percentage of the proceeds of the sale.”

Brendan would you mind editing the title of thread? To: ‘Selling Apartment- Are AH sales keeping market values in negative equity-due to impact of clawback rules?’.

While my heart is broken at the prospect of being a slave to revenue for years to come, I don’t want to offend AH buyers but to highlight how unfair the whole thing is turning out for everyone-private sale buyers and AH buyers included.

 

[Easter]

I think it's quite fair.
Profit should only come into consideration if the selling price is above the original full price.

Of course it’s not fair. The poster was seeking advice on the terms of a legally binding agreement s/he entered into with with the council not being upheld. I would imagine that anyone should expect to not be shamed/silenced on here for seeking advice on a legal entitlement? Agreements were signed that stated that clawback would reduce by 10% for every full year the property is lived in after 10 years. Of course the poster is justified in fighting any attempt to not fulfill that agreement. It’s not fair to have a go at them just because you don’t agree with the agreement they were given.

 

[Easter]

While my heart is broken at the prospect of being a slave to revenue for years to come, I don’t want to offend AH buyers but to highlight how unfair the whole thing is turning out for everyone-private sale buyers and AH buyers includ

Fair enough. I do feel for you, I just live with generalizations and resentment about affordable housing all the time. I would advise you to go to the council with the apartment numbers in question and flag that you suspect they are selling below market values. The council won’t allow it to happen if it does turn out to be the case, the council do require valuations at point of resale.

It was closer to 100k that I was in negative equity for a number of years. The council’s MV on our properties was highly inflated at the time of original sale. Even with evidence that the developer was selling them for 50k less than the council’s MV, they wouldn’t budge. There is much that is misunderstood about affordable housing. Another one being that the council takes the hit for negative equity above the affordable price. They don’t, because they didn’t buy them. It was a condition of planning that developers had to supply them. In our case they did with a lower spec and inferior build.

 

[Easter]

When selling an affordable home, the council must be informed in writing. Seller will be subject to a redemption fee based on current market value. Seems impossible for AH resale to effect open market sales.

[broken link removed]

 

[Bitthedust]

Hi Easter,

I don’t actually know but I get the feeling that the different Council’s may be applying different criteria to AH. You seem knowledgeable- do you know if that is the case? Does anyone else know? The Dcc website no longer has specific criteria-website just says contact the loans team, the Dunlaoghaire rathdown website seem to focus on the rebuilding Ireland home loan. It’s hard to get specific information about criteria each council is applying to AH sales. My best neighbours in my apartment were all AH buyers so please be aware that while I might be ‘well jeal’ as I never got entitlement, I am absolutely behind the AH schemes. I just feel the whole thing in my particular complex has ended up screw@@@ everybody.

 

[peemac]

Of course it’s not fair. The poster was seeking advice on the terms of a legally binding agreement s/he entered into with with the council not being upheld. I would imagine that anyone should expect to not be shamed/silenced on here for seeking advice on a legal entitlement? Agreements were signed that stated that clawback would reduce by 10% for every full year the property is lived in after 10 years. Of course the poster is justified in fighting any attempt to not fulfill that agreement. It’s not fair to have a go at them just because you don’t agree with the agreement they were given.

Had a few minutes to spare and looked into this.

The council sites I looked at all had the same calculation and it was very simple.

The claw back is a percentage of the property value - in effect the council are equity shareholders in the property and only start to give that equity back from year 11 onwards to year 20.

The poster got a 42% discount on the property price - effectively the council "owns" 42% of the property until end of year 10. Then the equity reduces by 10% each year. As it is now year 12, the council currently "owns" 33.6% of the property.

A good part of the AH scheme is that the council can only take clawback from anything received over the price the AH owner pays. So if the poster only got €270,000, then the council gets nothing from that sale.

The poster is saying they will get 345,000 - as the 75,000 is below the current 33.6% equity the council owns (value 116,000), then the council gets this €75,000.

If you sold it in 2 years for say €370,000, at that stage the council equity would be 25% (25% of 370,000 - 92,500), leaving you with a "profit" of 7,500.

Its really from year 15 onwards that an actual surplus would be realised.

 

[Easter]

The claw back is a percentage of the property value - in effect the council are equity shareholders in the property and only start to give that equity back from year 11 onwards to year 20.

The poster got a 42% discount on the property price - effectively the council "owns" 42% of the property until end of year 10. Then the equity reduces by 10% each year. As it is now year 12, the council currently "owns" 33.6% of the property.

It’s misleading to say the council have equity in an affordable property. It’s not shared ownership. The council are due clawback if the property sells at a profit, that is very different to them owning a percentage of the property. What they are owed is dependent on market values at point of sale. They don’t own any fixed percentage. Your example is confusing because you are changing terminology. Clawback and equity are different things. I own 100% of my property. Currently it is worth less than 10% more than I originally paid for it because original value was inflated as crash was already happening, but council insisted on higher values. Council would be due about 9% back in clawback if I sold now. Better to stick to AH terminology I think - your example is confusing. The council only own a fixed percentage of a property in shared ownership which is a different scheme.

 

[peemac]

It’s misleading to say the council have equity in an affordable property. It’s not shared ownership. The council are due clawback if the property sells at a profit, that is very different to them owning a percentage of the property. What they are owed is dependent on market values at point of sale. They don’t own any fixed percentage. Your example is confusing because you are changing terminology. Clawback and equity are different things. I own 100% of my property. Currently it is worth less than 10% more than I originally paid for it because original value was inflated as crash was already happening, but council insisted on higher values. Council would be due about 9% back in clawback if I sold now. Better to stick to AH terminology I think - your example is confusing. The council only own a fixed percentage of a property in shared ownership which is a different scheme.

I said "in effect" they are equity holders.
The way some people want to understand it would make absolutely no financial sense. That you accepted the council's higher than market value is a different issue, but it that value that will be used by the council in the clawback. People would have no issue if market prices had risen from council's valuation. That's just market vagaries.

Why should those who got a very substantial discount on an affordable scheme not be penalised in any way for any drop below original value but suddenly get all the benefits of any price recovery above the discount price - that would simply be crazy. Coucnil loses, but home owner hits the jackpot. The HUGE benefit for those who got it was that if they had to sell in the recession, was the council would write off any shortfall in the subsidy. That was an amazingly generous condition

When I read it, and its the same on most council website, it was quite easy to understand, but at the time in 2006-2008 not many people thought prices would crash so much, so a market drop scenario was not thought through by most people.

Remember its the tax and rate payers (which would include yourself) that subsidises this.

 

[Easter]

Why should those who got a very substantial discount on an affordable scheme not be penalised in any way for any drop below original value but suddenly get all the benefits of any price recovery above the discount price - that would simply be crazy. Coucnil loses, but home owner hits the jackpot. The HUGE benefit for those who got it was that if they had to sell in the recession, was the council would write off any shortfall in the subsidy. That was an amazingly generous condition

I don’t for a second think that anyone should get a huge benefit of a price recovery. For one thing it takes 11 years before you’re entitled to any share of a profit. The council don’t write off a subsidy in the case of a price drop. Buyer still has to pay off the mortgage. Council never bought the property at full market value, the property was supplied by developer at a reduced price and purchase was from the developer. The council isn’t writing off a debt owed to them when clawback doesn’t apply. They never paid the full market value. Clawback is to ensure the scheme isn’t abused for profit. It doesn’t represent actual money paid.

I have no issue at all with the conditions of AH. I was happy with my purchase and will be delighted if there’s clawback to put in to public housing funds when I sell. You are preaching to the converted believe me.

What I did take issue with, and still do, is that you derided a poster for asking advice on the council rowing back on legally binding agreement. What next, the terms of the Fair Deal scheme should be changed after old people have signed agreements?

People should be free to post looking for advice if a legally binding agreement is not being upheld. Nothing you have posted changes that. To be honest I think you are genuinely missing the point.

 

[peemac]

What I did take issue with, and still do, is that you derided a poster for asking advice on the council rowing back on legally binding agreement. What next, the terms of the Fair Deal scheme should be changed after old people have signed agreements?

People should be free to post looking for advice if a legally binding agreement is not being upheld. Nothing you have posted changes that. To be honest I think you are genuinely missing the point.

The council did not row back on the agreement. I looked at the agreement as per the post and it was quite straight forward how it was constructed and the calculations the council are providing are correct.

Possibly the poster thought otherwise and they may not have been informed properly when the agreement was put in place.

What the council does not touch is any capital amount paid off by the home owner - so someone 11 years into their mortgage would have a decent amount of capital accrued.

 

[RAY1234]

You have been misinformed. If you have lived in the property for a full 12 years, you are entitled to 20% of anything above €270000.

Who told you otherwise? If it’s someone from the council you need to go higher. You have definitely been misinformed. Likelihood is that some council staff don’t know their stuff. It is only in the last year that they will be presented with this scenario. Many current staff weren’t involved in affordable housing. Don’t accept any other answer. Clawback does reduce by 10% for every year over 10 years that you live in the property.

Hi folks,
i am in the exact same situation, 12 years into AH and looking to sell and getting told that by the council that they are entitled to 100% of the profit.
the calculation using a 2007 MV comes up with a figure leaving me in negative equity, my 20% back for reaching the 12years is calculated from this figure and still leaves me in negative equity, the council are then saying i can't be in negative equity so they will write off the difference and i get back what i paid originally.

My argument is no calculation should put me in negative equity, the max clawback is the total profit, so i should be entitled to20% of the total profit.

Is it written anywhere that the max clawback that cab be sought is the actual profit on the property?
Im now at the stage politicians are being contacted, if i have no luck an appeal to the Ombudsman is the next option.