IHTM23181 - Special valuation matters: housing associations/sheltered housing schemes
This instruction provides guidance on valuing property which is held under an agreement with a Housing Association or with an operator of a Sheltered/Retirement Housing Scheme, where under that agreement the freedom to sell has been restricted, or is subject to a levy.
Typically the agreement will be in the form of a long lease and will include a provision stating what happens following the death of the person living in the property. It may permit a sale by the personal representatives (IHTM05012) (although usually only to an approved person), but direct that a percentage of the proceeds is to be paid to the Association or operator. Alternatively it may provide for the lease to be surrendered to the Association/operator who may then re-let the property. Then the sum paid to the personal representatives is arrived at according to a formula set out in the lease. Generally there will be severe restrictions on a disposal during the leaseholder’s lifetime.
Particular valuation difficulties arise in these situations because, although a sale in the open market is to be assumed, the value is the price paid to ‘stand in the deceased’s shoes’. This means, on the basis that the purchaser is subject to the various provisions concerning disposal.
If you become aware that the deceased held property under an Agreement such as this, you should ask for a copy of it and also enquire whether the property has been sold. If so, what were the gross proceeds realised?
Unless the widow(er) or surviving civil partner (IHTM11032) is able to continue in occupation, it is anticipated that, where a sale is permitted, it will take place soon after the death. If there is an open market sale within six months of the death and a small percentage of the proceeds is paid to the Association etc., the net figure may be accepted without further question (with no referral to the VOA (IHTM23002)).
If the lease has been surrendered you will need to check that the amount received by the estate is in accordance with the formula prescribed in the agreement. If it is and the amount is close to the ‘unrestricted’ open market value of the property (on which the VOA can be asked to advise if necessary), the value may be accepted as the amount actually received.
In any other situation, or in the case of difficulty you should refer to Technical .
It is possible you will not know from the information provided at the start that the property was held in this way and the facts come to light after the VOA has been asked for a valuation. Then you should proceed as above to clarify the facts, but also ask the VOA not to proceed whilst you reconsider the position. The VOA may return the papers. If it is the VOA who discovers the position the papers will be sent back with such information the VOA has about the agreement and any sale.