Report of the Select Committee on the First Time Buyer Arrangements at Harcroft Meadow (Petition for Redress)

PP 2016/0054a

REPORT OF THE SELECT COMMITTEE ON THE FIRST TIME BUYER ARRANGEMENTS AT HARCROFT MEADOW (PETITION FOR REDRESS)

2015-16

REPORT OF THE SELECT COMMITTEE ON THE FIRST TIME BUYER ARRANGEMENTS AT HARCROFT MEADOW (PETITION FOR REDRESS)

On Wednesday 21st October 2015 it was resolved –

That a committee of three Members be appointed with powers to take written and oral evidence pursuant to sections 3 and 4 of the Tynwald Proceedings Act 1876, as amended, to consider and to report to Tynwald on the Petition for Redress of residents of Harcroft Meadows presented at St John's on 6th July 2015 in relation to the provisions of a first time buyer scheme made by the Government and the residents of Harcroft Meadows.

The powers, privileges and immunities relating to the work of a committee of Tynwald are those conferred by sections 3 and 4 of the Tynwald Proceedings Act 1876, sections 1 to 4 of the Privileges of Tynwald (Publications) Act 1973 and sections 2 to 4 of the Tynwald Proceedings Act 1984.

Committee Membership

Mr D M Anderson MLC (Chair) Mr R K Harmer MHK (Peel) Mr L I Singer MHK (Ramsey)

Copies of this Report may be obtained from the Tynwald Library, Legislative Buildings, Finch Road, Douglas IM1 3PW (Tel 01624 685520, Fax 01624 685522) or may be consulted at www.tynwald.org.im

All correspondence with regard to this Report should be addressed to the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas IM1 3PW.

Table of Contents

I. THE COMMITTEE AND THE INVESTIGATION ...... 1

II. WHAT THE PETITIONERS WANT FROM THE DEPARTMENT ...... 2

III. THE HARCROFT ARRANGEMENTS: INNOVATIVE SOLUTION, FLAWED EXECUTION ...... 4

BACKGROUND TO THE HARCROFT ARRANGEMENTS 4

HOW THE DEPARTMENT EXPLAINED THE PRE-EMPTION CONDITION TO THE ORIGINAL PURCHASERS IN 2000 AND 2001 5

THE LEGAL ADVICE GIVEN AT THE TIME 7

IV. POLICY DEVELOPMENTS SUBSEQUENT TO HARCROFT MEADOW ...... 10

V. THE HARCROFT MEADOW RESIDENTS’ CAMPAIGN SINCE 2003 ...... 11

LATE 2003: THE TRUE POSITION EMERGES 11

EARLY 2004: THE RESIDENTS LOBBY THE DEPARTMENT 12

2004 AND 2005: A LEGAL QUESTION AND A POLITICAL ANSWER 13

2006: A FURTHER ATTEMPT TO SEEK A POLITICAL CONCESSION 14

AFTER 2006: THE CAMPAIGN RUNS OUT OF STEAM 15

VI. FINANCIAL POSITION OF THE HARCROFT MEADOW RESIDENTS...... 15

VII. SHOULD THE DEPARTMENT MAKE A CONCESSION TO THE PETITIONERS? ..... 17

VIII. CONSOLIDATED LIST OF CONCLUSIONS AND RECOMMENDATIONS ...... 19

ANNEX 1: INDEX TO EVIDENCE PROVIDED BY MRS GROGAN ...... 23

ANNEX 2: FINANCIAL ILLUSTRATION ...... 31

ORAL EVIDENCE ...... 33

1ST FEBRUARY 2016 EVIDENCE OF MRS Y GROGAN, MR L MCMURDO AND MR M MURPHY, PETITIONERS AND MR N BLACK, CHIEF EXECUTIVE, AND MS D REEVE, DIRECTOR OF HOUSING, DEPARTMENT OF INFRASTRUCTURE 35

WRITTEN EVIDENCE ...... 63

APPENDIX 1: LETTER DATED 22ND JANUARY 2002 FROM MR THOMAS HARMSTONE, GOUGH & CO. TO MISS Y GROGAN 65

APPENDIX 2: LETTER DATED 17TH FEBRUARY 2003 FROM MR THOMAS HARMSTONE, GOUGH & CO. 71

APPENDIX 3: LETTER DATED 21ST OCTOBER 2003 FROM MR L.V. CRELLIN, HOUSING POLICY MANAGER, DEPARTMENT OF LOCAL GOVERNMENT AND THE ENVIRONMENT TO MR AND MRS G AND J A KINLEY 73

APPENDIX 4: LETTER DATED 13TH NOVEMBER 2003 FROM MR PAUL KERRUISH, GOUGH & CO. TO MISS Y GROGAN 75

APPENDIX 5: LETTER DATED 27TH NOVEMBER 2003 FROM MR W.J.H. CORLETT, ATTORNEY GENERAL TO MR A.C. DUGGAN MHK 79

APPENDIX 6: LETTER DATED 5TH FEBRUARY 2004 FROM MR JASON COOLE TO MR L.V. CRELLIN, ESTATES AND HOUSING DIRECTORATE 85

APPENDIX 7: LETTER DATED 11TH JULY 2005 FROM MISS F A REEVES, LEGAL OFFICER, ATTORNEY GENERAL’S CHAMBERS TO MR JONATHAN WILD, QUINN KNEALE ADVOCATES 91

APPENDIX 8: LETTER DATED 25TH JULY 2014 FROM JULIE MCNICHOLL, HOUSING POLICY MANAGER, DEPARTMENT OF HEALTH AND SOCIAL CARE TO MISS Y GROGAN 93

APPENDIX 9: SUBMISSION DATED 11TH NOVEMBER 2015 FROM MISS Y GROGAN 97

APPENDIX 10: SUBMISSION RECEIVED 15TH NOVEMBER 2015 FROM H CAINE AND T LAVERY 101

APPENDIX 11: SUBMISSION DATED 16TH NOVEMBER 2015 FROM MRS W CARSON 105

APPENDIX 12: SUBMISSION DATED 19TH JANUARY 2016 FROM KELLY AND BRIAN LIGGINS 107

APPENDIX 13: SUBMISSION DATED 13TH NOVEMBER 2015 FROM CAROLINE MAYERS 111

APPENDIX 14: SUBMISSION DATED 12TH NOVEMBER 2015 FROM LINDA MCMURDO 115

APPENDIX 15: SUBMISSION RECEIVED 16TH NOVEMBER 2015 FROM MRS SHARON MILLER 117

APPENDIX 16: SUBMISSION DATED 13TH NOVEMBER 2015 FROM MR AND MRS SUMMERS 119

APPENDIX 17: SUBMISSION DATED 16TH NOVEMBER 2015 FROM SAMANTHA AND MICHAEL WORKMAN 123

APPENDIX 18: SUBMISSION DATED 30TH NOVEMBER 2015 FROM MR DAVID CRETNEY MLC 125

APPENDIX 19: SUBMISSION DATED 13TH NOVEMBER 2015 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 129

APPENDIX 20: SUBMISSION DATED 4TH JANUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 181

APPENDIX 21: SUBMISSION DATED 18TH JANUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 185

APPENDIX 22: SUBMISSION DATED 29TH JANUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 187

APPENDIX 23: SUBMISSION DATED 8TH FEBRUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 199

APPENDIX 24: SUBMISSION DATED 15TH FEBRUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 201

APPENDIX 25: SUBMISSION DATED 26TH FEBRUARY 2016 FROM MR NICK BLACK, CHIEF EXECUTIVE, DEPARTMENT OF INFRASTRUCTURE 209

APPENDIX 26: COUNCIL OF MINISTERS PAPER DATED 21ST JULY 2003 213

APPENDIX 27: COUNCIL OF MINISTERS MINUTE DATED 4TH SEPTEMBER 2003 217

APPENDIX 28: LETTER DATED 19TH FEBRUARY 2016 FROM THE COMMITTEE TO GOUGH AND CO 219

APPENDIX 29: SUBMISSION DATED 26TH FEBRUARY 2016 FROM MR PAUL KERRUISH, KERRUISH LAW 223

APPENDIX 30: LETTER DATED 16TH MARCH 2016 FROM THE COMMITTEE TO MR PAUL KERRUISH, KERRUISH LAW 227

APPENDIX 31: SUBMISSION DATED 23RD MARCH 2016 FROM MR PAUL KERRUISH, KERRUISH LAW 229

To: The Hon Clare M Christian, President of Tynwald, and the Hon Council and Keys in Tynwald assembled

REPORT OF THE SELECT COMMITTEE ON THE FIRST TIME BUYER ARRANGEMENTS AT HARCROFT MEADOW (PETITION FOR REDRESS)

I. THE COMMITTEE AND THE INVESTIGATION

1. This Committee was established by the following resolution of Tynwald on 21st October 2015:

2. Shortly after the Committee was established Mr Bill Malarkey MHK, who had moved the motion to establish the Committee, presented us with some 170 documents collected over the years by Mrs Grogan, the first named petitioner. These papers have been indexed by the Committee Clerk and placed for reference in the Tynwald Library.1 Selected items from Mrs Grogan’s collection are also reproduced within the Appendices to this Report.

3. We sought written evidence from Mrs Grogan on behalf of the petitioners; and from the Department of Infrastructure, the Council of Ministers, and Gough and Co. All the written evidence we have gathered is published within this report, with one exception. The exception is a set of reply slips and similar papers which we obtained

1 See index at Annex 1 1

from the Department of Infrastructure using an order under the Tynwald Proceedings Act 1876.2 We needed to see the slips themselves in order to understand clearly what they were like and who they were from; but we have decided not to publish them because of the amount of sensitive personal information which they contain.

4. We gave Mr Paul Kerruish, advocate, the opportunity to comment on the evidence we have collected relevant to Gough and Co where he was a partner when the Harcroft Meadow properties were first sold. Mr Kerruish responded that as the matters raised dated back over 13 years, he was not able to assist by way of any genuine recollection.3

5. On 2nd November 2015 we issued a public call for evidence. We received written responses from eight households in Harcroft Meadow in addition to Mrs Grogan.4 A tenth Harcroft resident, Mr Adam Kelly, put forward his view by telephone to the Committee Clerk.

6. We held separate private meetings with Mr Bill Malarkey MHK, Mr David Cretney MLC, and Elizabeth Smith, Director of the Civil Division of HM Attorney General’s Chambers.5

II. WHAT THE PETITIONERS WANT FROM THE DEPARTMENT

7. The prayer of the petition of the residents of Harcroft Meadow is merely that Tynwald establish a Committee and report. However, what the petitioners want is more substantive than that.

8. The 55 houses at Harcroft Meadow were built in 2001 and 2002. Mrs Grogan and the others who bought these houses at that time did so subject to certain conditions. The most significant of these conditions was that if they wished to sell their homes, the Department of Local Government and the Environment (or, today, the Department of Infrastructure) had an option to buy them. The price was to be determined according to rules laid down in a deed of conveyance signed by each purchaser. This condition is known as the Department’s “pre-emption right”.

9. A second condition is that on sale of the house, the purchasers would be expected to pay back all or part of a grant which had been paid to them under the House Purchase Assistance Scheme 1999.

10. The Department of Infrastructure described the effect of the deeds of conveyance to us as follows. If the property was sold within five years it could be bought by the Department for a sum equivalent to the original purchase price; but if it was sold

2 See Appendices 23, 24 and 25 3 See Appendices 28 to 31 4 Appendices 9 to 17 5 An email from Mr Cretney to us is at Appendix 18 2

after the first five years the Department would buy it at 70% of the then market value. No end date was referred to in the deeds of conveyance but the effect of section 10 of the Perpetuities and Accumulations Act 1968 is that the pre-emption period expires after 21 years. This means that from five years to 21 years the Department has a 30% equity share in each property. At the 21-year point the Department’s share drops to zero. 6

11. The “market value” of the property from which the equity share is calculated means the value of the property including any improvements which have been made. Therefore after the five-year point (and until the 21-year point), the Department’s 30% share would include 30% of any value added by any investment the owner had made in the property.7

12. The petitioners say that at the time when they signed the deeds of conveyance they were unaware of the pre-emption condition, and that therefore they should not be bound by it. In her submission to us Mrs Grogan wrote:

I feel considerations should be made in relation to the pre-emption period of 21 years a restriction too far, and a restriction that most would not have agreed to if they had known. I feel that all restrictions should be lifted from the property and we should be free from any encumbrances as was first thought after the five year period had ended, as we were first informed by Thomas Harmstone from Gough & Co Advocates.8

13. Other possible concessions have also been put to us, including: reducing the pre- emption period from 21 years to 15 years or some other period; reducing the Department’s share from 30% to 15% or some other figure; providing that the Department’s share be tapered over the remainder of the 21 years rather than remaining at 30% and then expiring all at once; allowing the petitioners to buy back the Department’s 30% share; and allowing the petitioners to sell their homes directly to the open market. The Department has confirmed to that to vary the existing agreements with the Harcroft residents would be legally possible; however, it has consistently recommended against any such change.9

14. In order to come to a view we have examined how the dispute came about.

6 See Appendix 19, paragraph 10 of main submission 7 See Appendix 19, paragraph 11 of main submission 8 Appendix 9 9 See Appendices 20 and 23 3

III. THE HARCROFT ARRANGEMENTS: INNOVATIVE SOLUTION, FLAWED EXECUTION

Background to the Harcroft arrangements 15. The arrangements at Harcroft Meadow represent a combination of a grant scheme (the House Purchase Assistance Scheme 1999) and a subsidised house price. The Department explained the background to us as follows:

2. The House Purchase Assistance Scheme (HPAS) 1999 was developed by the Department of Local Government and the Environment (DLGE) in consultation with Treasury, replacing earlier Government loan or “mortgage” schemes, specifically the House Purchase Assistance and Refurbishment Scheme 1991, by providing grant support for house purchases in the open market to supplement commercial mortgage availability…

3. Whilst this Scheme was initially successful in the open market it became clear that the rise in house prices at that time was becoming so rapid that the grant system could not bridge the gap between what someone could afford by way of a mortgage and savings and what a 2 or 3 bedroom house might cost on the open market.

4. By 2000/01 it was apparent that there was about a 30% shortfall and that increasing the grant support from the prevailing maximum of £16,500 to £40,000 or £50,000 was not viable – there was a strong view that increasing grants would only fuel inflation and not increase supply.

5. As a consequence a decision was made by the DLGE, in consultation with the Treasury, for Government to intervene in the supply side to build and control properties specifically aimed at First Time Buyers. To this end the DLGE released land in the Department’s ownership at Springfield/Harcroft, Douglas, for development by a local developer JG Kelly (selected by tender process).

6. The Harcroft development, in addition to open market housing built for private sale by the developer, provided 55 new build First Time Buyer properties built to the Department’s spatial specifications which were greater than for similar houses provided in the private sector. The market values for the 2 and 3 bed First Time Buyer houses were considered to be in the region of £110,000 to £120,000 in 2000. For context, the median Island house price in 2000 was £125,000, £139,800 in 2001, and £159,000 in 2002.

approximately 66% to 68% of market value (as at 2000, as no adjustment was made to reflect the rapid growth in house prices over the period of development). The Department received no payment from the purchaser in respect of their property purchase; the Department’s interest, (i.e. the notional 30% proportion of the property not paid for by the purchaser or the grant assistance, this subsidy reflecting to some extent the value of the land already in Government ownership), being held as a silent equity share as defined within the sale agreement. The aim of this release was to provide a supply of properties that could be accessed by first-time buyers within the £85,000 market value threshold of the HPAS and thus enable the payment of grant support. To ensure a supply of homes that it deemed suitable for first time buyers at less than £85,000 DLGE was acting as an equity partner. This approach had been funded by the transfer of the land at Harcroft Meadows to the developer for a nominal sum, the consideration being given in return by the developer taking the form of houses that were built to more generous spatial requirements and that were sold to eligible buyers at less than the £85,000 HPAS grant threshold. The HPAS itself does not provide for the shared equity and, indeed, in the majority of cases eligible first-time buyers sought grant assistance on open market properties. As the HPAS did not cover shared equity, a separate legal agreement was required to ensure that public funds invested in each property, ultimately from the discounted land sale, were secured. This separate legal agreement took the form of the pre-emption agreement.10

How the Department explained the pre-emption condition to the original purchasers in 2000 and 2001 16. In November 2000 the Department invited persons interested in the new Harcroft development to complete and return an application form. Its letter seeking expressions of interest said:

Under the sale agreement purchasers who wish to sell their property within 5 years of the purchase date will be required to offer the property back to the Department at the lower of 70% of the then market value, or the purchase price. Any purchaser wishing to sell at any time after the five years has expired will be required to offer the property to the Department at 70% of the then market value.11

10 Appendix 19, paragraphs 1 to 7 of main submission 11 Appendix D to Appendix 19 5

17. In 2001 the Department sent out letters to individuals who had been allocated plots at Harcroft Meadow inviting them to send back an acceptance slip. The allocation letter said:

5. The properties have been subsidised to enable the purchase price to be affordable to first time buyers. Under the sale agreement, if you wish to sell your property within five years of the purchase you will be required to offer it back to the Department at 70% of the then market value, or at the purchase price, whichever is the lower. After five years you will be required to offer it back to the Department at 70% of the then valuation.12

18. Both of these letters mention the pre-emption condition. Both are clear that the pre- emption period lasts beyond the five-year point. Neither suggests that the pre- emption period ends at the 21-year point. The Department explained to us:

The Department and Treasury originally intended the silent shared equity arrangement to be lifetime (as with the current Schemes) in order to recover Government’s investment at some point in the future (having received no monies from the purchaser from the original property sale). However, because the pre-emption period was not explicitly defined as “lifetime” it unintentionally fell under the provisions of the Perpetuities and Accumulations Act 1968, which limited the term to 21 years. Purchasers have already effectively been released early from the agreement.13

19. While the Harcroft residents acknowledge that the Department’s letters of 2000 and 2001 made reference to the pre-emption period, some of the residents say that they have no recollection of receiving these letters. Mr Jason Coole, for example, wrote on 5th February 2004:

I cannot recall receiving a copy of the offer letter and explanatory notes from the Department addressed to myself, and consequently I believe I did not sign and return the form, confirming my understanding of the conditions of the scheme.14

20. We asked the Department to provide copies of the application forms and return slips which would prove that the letters of 2000 and 2001 had been sent to the petitioners. The documentary records they held were incomplete. However, the Department was able to produce, for 31 of the 33 original households remaining on Harcroft Meadow, either an application form, a reply slip, or a record of having sent

12 Appendix C to Appendix 19 13 Appendix 20 14 Appendix 6 6

out the letter with the reply slip.15 In particular we were able to examine reply slips sent in by two of the three petitioners who appeared before us.

We conclude that in 2000 and 2001 the Department of Local Government and the Environment correctly adopted a policy of issuing letters to prospective purchasers at Harcroft Meadow explaining the proposed arrangements. The Department has demonstrated to our satisfaction in the majority of cases that such letters were sent. It is unfortunate that the records held today are incomplete.

We conclude that where a Department has a continuing financial relationship with any person, that Department should keep comprehensive records on that relationship for as long as the relationship continues.

Recommendation 1

That the Housing Division Department of Infrastructure should review its documents and records management policy in the light of the Harcroft Meadow experience, and report to Tynwald.

We conclude that the correspondence issued in 2000 and 2001 by the Department of Local Government and the Environment to prospective purchasers at Harcroft Meadow described the pre-emption condition in a manner which reflected clearly the Department’s own understanding at the time. The subsequent discovery of the 21-year limit on the pre-emption period was to the residents’ advantage.

We conclude that the Department expected the prospective purchasers’ advocates to draw their clients’ attention to the pre-emption condition and to ensure they had understood it.

The legal advice given at the time 21. The petitioners explained to us that many of the prospective purchasers at Harcroft Meadow instructed Gough and Co to act as their advocates for the purchase, and that a special rate had been agreed through the developer, J G Kelly.16 Mr Cretney told us it was his understanding that Gough and Co also acted for J G Kelly in these transactions.17

15 See Appendices 23, 24 and 25 16 QQ 13 to 15 17 Appendix 18 7

22. The pre-emption condition is set out at Clause 19 of a deed of conveyance which was drafted by the Attorney General’s Chambers.18 The price at which the Department will buy the property being set out at Clause 19(b), which reads:

(b) The purchase price shall be either –

(i) for the period of Five (5) years from the date of completion of the first purchase … such sum as shall be equal to the consideration paid by the Purchasers … together with an additional sum equal to the cost of all extras … and any improvements or

(ii) Seventy Percent (70%) of the value of the Scheduled Property in the open market … such value to be determined by the Government Valuer.

whichever is the lesser sum.19

23. Although the Clause is inelegantly drafted, its intention is clear enough – particularly when read alongside the Department’s letters of 2000 and 2001, which are much clearer. The reference to a five-year period occurs only in paragraph (b)(i). Therefore the time limit of five years applies only to method of determining the price and not to the Department’s right of pre-emption itself; and after five years the only possible price is that in paragraph (b)(ii) namely 70% of the market value as determined by the Government Valuer.

24. The purchasers who were advised by Gough and Co received the following advice, prepared by Mr Thomas Harmstone:

6. With regard to the draft Conveyance annexed to the rear of the Building Agreement, we would point out the following clauses to which you should pay particular attention:-

[…]

(b) Fourth Schedule – Clauses 19-20

These Clauses set out the terms and conditions upon which the Department of Local Government and the Environment will advance the Assistance Scheme monies. In short, should you wish to sell the property within the first five years then notice has to be sent to the Chief Executive giving the Department the option to purchase your property at either the price you originally paid or 70% of the then current market value whichever sum is the lesser amount. After the

18 Appendix 21 19 For the full text see Appendix B to Appendix 19 8

first five years, the Department can reduce the amount of the loan to be repaid to them at their discretion.20

25. This advice does not explain the pre-emption condition properly. It describes the conditions which would apply if the purchaser wished to sell within five years. However, when it talks about what would happen after the first five years it ignores the continuing pre-emption condition and talks instead about the Department reducing the amount of the loan at its discretion. This discretionary reduction, while relevant, is not in fact part of the deed of conveyance at all but is instead part of the House Purchase Assistance Scheme 1999.21

26. Mrs Grogan told us that on receiving this advice she queried it but, having been reassured, decided to proceed with the purchase.22 She moved into her house at Harcroft Meadow in August 2002.23

27. Six month later reassurance was again sought from Gough and Co about the terms of the pre-emption agreement. Mrs Grogan produced a document dated 17th February 2003 in which Mr Harmstone states:

Our interpretation of Clause 19 in the covenants to the purchaser is that you are restricted for the first five years as to who you may sell the property to i.e. back to DoLGE at the price you originally paid.

After five years have passed, you are then free to sell the property on the open market to whosoever you wish with your only obligation being to pay a percentage of the total grant back to DoLGE upon the sale.24

This is clearly wrong.

We conclude that the drafting of the deed of conveyance containing the pre- emption condition was inelegant and opaque.

We conclude that many of the prospective purchasers at Harcroft Meadow were badly let down by their advocates, who in 2001 and 2002 failed to explain the pre-emption condition to their clients at the time of purchase and in 2003 compounded their error by repeating it after the time of purchase.

20 Appendix 1 21 See Appendix 20, question (2) 22 Q 37 23 Welcome letter from J G Kelly in Mrs Grogan’s papers (see Annex 1). 24 Appendix 2 9

IV. POLICY DEVELOPMENTS SUBSEQUENT TO HARCROFT MEADOW

28. By mid-2003 Mrs Grogan was living at Harcroft Meadow under the mistaken belief that after five years she would own her house outright. In Tynwald, meanwhile, the House Purchase Assistance Scheme 1999, under which grants had been paid to purchasers and Harcroft and elsewhere, had been replaced by the House Purchase Assistance Scheme 2002; and in the Council of Ministers further thought was being given to pre-emption periods.

29. A paper drafted by the Department of Local Government and the Environment in July 2003 was considered by the Council of Ministers in September 2003. In its paper the Department commented that “there is an argument to say that preventing first time buyers from selling on the open market for a pre-emption period of 21 years is too long”. After the discussion the Council of Ministers decided that pre-emption rights under the House Purchase Assistance Scheme 2002 should be reduced to a period not exceeding 10 years; and that this reduction in the pre-emption period should be applied in retrospect to properties already purchased under the House Purchase Assistance Scheme 2002.25

30. The Department was later asked why the pre-emption period had not been reduced to 10 years also for properties at Harcroft Meadow. The answer given was:

The Department has decided that since purchase prices at Harcroft were calculated based on valuations and payments prior to the House Purchase Assistance Scheme 2002 and therefore on a different basis to more recent sales, the 21 year perpetuity rule will apply to sales completed before the introduction of the House Purchase Assistance Scheme 2002.26

31. The existence of a 10-year pre-emption policy became known to the Harcroft Meadow residents but it does not appear to have been explained clearly to them that this policy did not apply to Harcroft Meadow.27

We conclude that in September 2003 the Council of Ministers adopted a 10- year pre-emption period as a matter of policy. The new policy was applied in retrospect to some recent first time buyer properties but not to those at Harcroft Meadow. While the different treatment of Harcroft Meadow may have been justifiable in financial terms, more could have been done to explain this to the Harcroft residents and to their MHKs.

32. Under the schemes in operation today any equity share held by the Department is permanent and does not expire after 10 years or 21 years. There is, however, an

25 Appendices 26 and 27 26 Appendix 7 27 Letter and enclosure of 9th December 2005 from Quinn Kneale to Hon David Cretney MHK in Mrs Grogan’s papers (see Annex 1); see also Appendix 18 10

opportunity for residents to buy back the Department’s share. This has been achieved through a legislative, as opposed to contractual, mechanism.28

We conclude that the policy lessons from the Harcroft Meadow experience have already been learned and applied.

V. THE HARCROFT MEADOW RESIDENTS’ CAMPAIGN SINCE 2003

Late 2003: the true position emerges 33. Later in 2003 the true effect of the pre-emption condition became known to the Harcroft residents. A newsletter issued by the Department of Local Government and the Environment on 24th September 2003 to those on the register of first time buyers stated that:

When the houses at Harcroft were built the sale price was set at 70% of the value with the Department retaining 30% ownership.29

34. A letter sent by the Department on 21st October 2003 to a Harcroft couple with reference to a proposed extension stated:

the resale value of the property, as conditions of the sale agreement, are:

 if sold within five years of purchase, the purchase price or 70% of the market value, whichever is the lesser

 if sold after five years, 70% of the market value.30

35. Similar advice from the Department was included in an email sent to another Harcroft resident by his financial advisor on 7th November 2003.31

36. When Mrs Grogan telephoned Gough and Co on 11th November 2003 she was given by Ms Muriel Atkin advice very different from that given to her by Mr Thomas Harmstone before her purchase. Ms Atkin’s telephone advice was followed up by letter by Mr Paul Kerruish, who wrote on 13th November 2003:

I would specifically refer you to the provisions of Clause 19(b)(i) wherein it clearly states that for the initial five year period from completion you shall only be able to sell your property by way of conveyance back to the Department for the costs for which you purchased the same. After this five year period, the provisions of Clause 19(b)(ii) then apply to the extent that the price for which

28 Q 85; and cf Shared Equity Purchase Assistance (First Home Fixed) Scheme 2014 (SD 2014/0211) 29 The newsletter is in Mrs Grogan’s papers (see Annex 1) 30 Appendix 3 31 The email is in Mrs Grogan’s papers (see Annex 1) 11

the Department can purchase the same from you is that of 70% of the open market value…

I now take you on to the content of our letter to you of the 22nd January 2002… I consider this makes it adequately clear that the continuing effective charge over the property in the Department’s favour remains.

In all the circumstances of this matter, I am now a little bemused that you state you did not understand the full implications of the Charge the Department has over your property. I do not consider that we could have done anything more to further explain the same to you.32

37. A short while later Mrs Grogan was informed that Gough and Co had referred the matter to their insurers.33

We conclude that by late 2003 Gough and Co had arrived at a correct understanding of the pre-emption condition in the deed of conveyance and had embarked on a damage limitation exercise.

38. Meanwhile the advice which had been given by the Department about the pre- emption condition was confirmed in a paper prepared by the Attorney General’s Chambers and sent to the Harcroft residents’ MHK on 27th November 2003.34 This appears to have been the first time the residents were told about the 21-year perpetuity period.

Early 2004: the residents lobby the Department 39. On receiving this unwelcome advice from both the Department and her own legal advisers, Mrs Grogan gathered the views of other Harcroft residents and, with the assistance of Mr David Cretney MHK, approached the then Minister for Local Government and the Environment, Hon Pam Crowe MLC. Mrs Grogan’s papers include over 40 letters sent between November 2003 and February 2004 by Harcroft residents variously to Mr Cretney, Mrs Grogan, Gough and Co or the Department, all telling a similar story. They had not appreciated that the Department had any claim on their house after the five-year point; they felt bitterly aggrieved to have been told that this was the case; and they would not have signed up if this had been explained to them in advance.

40. A meeting appears to have taken place on 4th March 2004 at which Mrs Grogan and two other Harcroft residents accompanied by Mr Cretney explained their concerns to Mrs Crowe, with Departmental officers Mr Richard Senior and Mr Phil Halliwell

32 Appendix 4 33 Letter from Paul Kerruish dated 13th January 2004 in Mrs Grogan’s papers (see Annex 1) 34 Appendix 5 12

also being present. Mrs Grogan’s notes, which she later circulated to other Harcroft residents, describe it as a very difficult meeting. The notes went on:

The DoLGE were also informed at this time that Gough and Co have now instructed their insurers and their insurers have instructed a panel of advocates to investigate all deeds and documents regarding this matter. It was at this point that Mrs Crowe stated that she did not want to discuss the matter any further until we have completed matters with our advocate, but after that time she will be happy to come to some arrangement with us.35

We conclude that in early 2004, following the campaign by the Harcroft Meadow residents, the Department of Local Government and the Environment correctly concluded that the primary responsibility for the residents’ dissatisfaction lay with the residents’ legal advisers.

2004 and 2005: a legal question and a political answer 41. For the rest of 2004 and all of 2005 the energies of the campaigners were focused on their legal advisers. As noted above, Gough and Co had referred the matter to their insurers. Those insurers instructed another firm of advocates, Quinn Kneale, to look into the matter. Mrs Grogan’s papers show that matters did not progress quickly and that Quinn Kneale had to be repeatedly pressed for action by the residents and by their MHK, Mr Cretney, who also approached the Law Society on the matter.36

42. Quinn Kneale made little attempt to justify the inadequate advice which had been given by Mr Thomas Harmstone. Instead they engaged with HM Attorney General’s Chambers (and, through those Chambers, with the Department) to see whether a political solution could be found. They learned about the 2003 Council of Ministers decision to adopt a 10-year pre-emption policy and suggested that this policy should apply to Harcroft Meadow. It was in this context that, as mentioned above, the Department made a clear decision that it should not.37

43. On 9th December 2005, very nearly two years after having been engaged, Quinn Kneale provided Mr David Cretney with a paper which they said would assist him in making representations to the Council of Ministers.38

44. In oral evidence to us one of the petitioners, Mr McMurdo, recalled:

With Mr Cretney, we went down to the meeting and Gough & Co did not actually turn up; they actually sent their insurers, which were Mr Quinn –(Mrs Grogan: Quinn Kneale’s) Quinn Kneale’s – and they actually turned round to us

35 Meeting note in Mrs Grogan’s papers (see Annex 1) 36 See papers listed at Annex 1 37 Appendix 7 38 This note paper is in Mrs Grogan’s papers (see Annex 1) 13

… their insurers turned round and said, ‘If you write saying that you are not going to take Gough & Co to court we will help you fight this.’ So they have already, to me, admitted they have done wrong.39

45. The petitioners did not agree to indemnify Gough and Co but they did not make any attempt to sue either. In their oral evidence they explained that they were deterred by the cost of embarking on a legal challenge, and also by the prospect of such an action “engulfing your whole life”.40

We conclude that by the end of 2006 the legal advisers had succeeded in persuading the Harcroft residents away from any legal challenge and back towards the aim of resolving their grievance by political means.

46. The time limit for any legal action against Gough and Co in respect of advice given in 2002 and 2003 would have been six years and has therefore now expired. We do not consider that a legal action would have had much prospect of success anyway given the financial position of the Harcroft Meadow residents, as explained below.

2006: a further attempt to seek a political concession 47. Having got nowhere with the legal advisors, the Harcroft residents and their MHKs resumed their dialogue with the Department of Local Government and the Environment. A new Minister, Hon John Rimington MHK, had taken over from Mrs Crowe in 2004. On becoming acquainted with the matter, he wrote on 17th February 2006 “From the information I have been given I really cannot understand why the first time buyers believe they have been badly treated by the terms of the agreement that they signed.”41 Nevertheless he allowed work to proceed in search of a compromise. In August 2006 Mr Richard Senior of the Department wrote that the Department would consider a scheme for discussion with Treasury that would allow buy back of the 30% equity within the parameters of the then current House Purchase Assistance Scheme.42

48. The Department of Infrastructure told us in its written evidence:

After considerable exchange of correspondence and a number of meetings, where a range of options and proposals were considered, the then Director of Housing responded to Mr Cretney on behalf of the Minister and Members of the Department in a letter of 13 November 2006, stating that a unanimous decision had been reached that the terms of the purchase agreement should not be altered, the reasons summarised as follows;

39 Q 23 40 Q 27 41 Letter to Mr Cretney in Mrs Grogan’s papers (see Annex 1) 42 Letter to Mr Cretney in Mrs Grogan’s papers (see Annex 1) 14

a) Purchasers will have profited considerably, likely in excess of £50,000, after 5 years of ownership if they sell their house;

b) Purchasers will benefit from increased values after 5 years rather than 10 years under the subsequent HPAS 2002 (as amended);

c) The purchasers will benefit from the full sale price after 21 years i.e. the Department’s 30% equity will be extinguished;

d) The 21 year pre-emption in no way affects the value and sale price of the property after 5 years.

f) The above benefits compare very favourably with First Time Buyers under the HPAS 2002 (as amended) who would be likely to only profit by up to £10,000 after 5 years (due to grant reduction) and £47,000 after 10 years. They will also have to pay back their 30% loans in full plus interest within 25 years (and would still be subject to conditions of use for the whole 25 year term if assistance remains outstanding).43

49. This has remained the Department’s position to this day. In the nine years which have elapsed since the Department took the view quoted above, Mrs Grogan and some of the other Harcroft residents have attempted from time to time to obtain a change of policy but without success.

After 2006: the campaign runs out of steam 50. To judge by the dates of the documents collected by Mrs Grogan, the campaign appears to have run out of steam after 2006. Mrs Grogan appears to have concentrated her efforts on estimating the value of her property and seeing whether she could move on under the prevailing conditions. In 2008 and 2010 she corresponded with the Department about questions of valuation. Disappointed by the outcome of that correspondence, in 2014 and 2015 she made further attempts to seek a policy concession. But again this was to no avail, bringing her in July 2015 to Tynwald Hill.

VI. FINANCIAL POSITION OF THE HARCROFT MEADOW RESIDENTS

51. As noted above, the Department of Local Government and the Environment thought in 2006 that the purchasers at Harcroft Meadow would profit considerably, likely in

43 Appendix 19, paragraph 29 of main submission 15

excess of £50,000, after 5 years of ownership if they sold their houses; and that the benefits of the Harcroft arrangements compared favourably with other schemes.

52. According to evidence presented to us, the return after 12 years did not turn out to have been in excess of £50,000 but it did turn out in the region of £30,000 to £40,000 despite the financial crash. The Housing Division advised Mrs Grogan in 2014 that:

Each purchaser has benefited from purchasing a property at a reduced price which has increased in value considerably and has provided them with the means to move onwards up the property ladder as the Scheme originally intended.

As an example, from the re-sales that have been undertaken to date, applicants have made an average profit of between £33,600 and £38,800, after repayment of outstanding grant assistance, on the two and three bedroom properties which have not been extended or substantially altered. These figures do not take into account the equity that will also have been created through mortgage repayments.

A Harcroft property very similar to yours has recently been sold. If your property was to sell at a similar price, after repayment of your outstanding grant balance, you would stand to walk away with approximately £44,000 of released equity, which is a significant return for a First Time Buyer Scheme. Additionally this amount does not take into account any depreciation of your mortgage balance, which would further enhance the equity held in your property.44

53. Individual properties may have done better or worse than the figures quoted above. The illustration at Annex 2 is based on an a particular property whose owner asked for a Government valuation in 2010. The illustration suggests that the owner could have walked away from Harcroft Meadow with over £60,000 equity to put towards a further step on the housing ladder. (Although the illustration takes into account the mortgage on the property, it does not take into account the cost of any improvements in which the owner may have invested.)

54. Of course, if the owners of the property illustrated at Annex 2 were to wait until the end of the 21-year period, they would have even more equity because the Government would no longer be entitled to its 30% share and most of the grant would have been written off. But that is not to say that their position 2010 is particularly bad – rather that their position in 2023 will be particularly good.

44 Appendix 8 16

55. Given the general scale of the returns capabable of being realised on the properties at Harcroft Meadow, it is not surprising that 22 of the original 55 households have moved on. This represents a higher throughput than other first time buyer schemes.45

56. The petitioners have indicated that, because they stand to receive, as it were, a windfall at the 21-year point, they feel “trapped” in their properties and obliged to wait until the 21-year point before considering moving. For example, Mrs Liggins wrote:

We are stuck in this house until at least 2023 otherwise the Government will take approx £80,000 from us.46

The evidence of the other Harcroft residents who have moved demonstrates that they are far from trapped. To “sit out” the 21 years may be a legitimate financial decision. As time goes on it becomes an increasingly palatable option – we would not expect many properties to be sold to the Department at 70% of the market value by the time 19 or 20 years have elapsed. It is nevertheless still possible to move out at any time if the conditions are accepted and applied. Other residents have moved under these conditions as recently as 2015.47

57. The petitioners have drawn attention to the fact that the valuations provided by the Government Valuer are lower than the figures quoted by estate agents in their marketing advice.48 We consider that this is only to be expected given the different functions of Government valuations and estate agents’ marketing advice.

We conclude that the arrangements at Harcroft Meadow represented a good deal for the residents in financial terms. These arrangements allowed a realistic prospect of moving up the housing ladder, something which 40% of the original residents have already done.

We conclude that, although the legal advice given to many of the residents at the time of their purchase was inadequate, it would have been difficult for the residents in any legal action against their advocates to have demonstrated financial loss.

VII. SHOULD THE DEPARTMENT MAKE A CONCESSION TO THE PETITIONERS?

58. As noted above, the petitioners have requested:

45 Appendix 22 46 Appendix 12 47 Appendix 20 48 Q 3 17

that all restrictions should be lifted from the property and we should be free from any encumbrances as was first thought after the five year period had ended, as we were first informed by Thomas Harmstone from Gough & Co Advocates.49

59. We would summarise the arguments in favour of a concession as follows:

 the petitioners were poorly advised by Mr Harmstone and as a result entered into a deal which, it would appear, they did not understand at the time; and

 the Department’s 30% stake in the properties is a diminishing asset which by 2023 will be worth nothing – a reduction to a lower percentage stake might improve the Department’s chances of getting something back.

60. We would summarise the arguments against a concession as follows:

 the petitioners were advised by the Department at the time they bought the properties that the Department would have a 30% share in perpetuity. As things turned out they are actually better off than that, since the Department’s 30% share expires at the 21-year point;

 the primary responsibility for the petitioners’ dissatisfaction lies not with the Department but with the petitioners’ legal advisers;

 the petitioners realised that they had been poorly advised but chose not to pursue any action against their legal advisers;

 despite having had an unpleasant shock when the pre-emption condition was correctly explained to them in 2003, the petitioners have nevertheless had a good deal financially;

 the Harcroft Meadow arrangements do give a realistic prospect of climbing the housing ladder, as witnessed by the 40% of the original residents who have already moved on;

 some Harcroft Meadow residents have moved on as recently as 2015. This suggests that there may be a continuing prospect of others moving on before 2023 and of the Department realising its 30% share in at least some cases. A concession could not therefore be made without financial cost to the Department;

49 Appendix 9 18

 the Department has provided evidence that if a concession were made there would be a risk of legal challenge from the 22 who have moved on, particularly those who have moved most recently;50

 the Department believes that making a concession could create a wider risk for the Government by suggesting that anyone who does not like the terms of a contract can achieve a variation by political means.51

61. Having weighed up the arguments for and against a concession, we have decided on balance to recommend against. Nevertheless we consider that the Harcroft Meadow experience highlights the importance of competent independent legal advice. It is in the nature of independent legal advice that Government Departments and Boards cannot provide it directly. However, we consider that Government Departments and Boards should take such steps as are reasonable to encourage contracting parties to obtain proper advice.

Recommendation 2

That Tynwald calls on all Departments and Boards, when entering contracts with other parties, to take such steps as are reasonable to encourage all contracting parties to obtain proper advice.

Recommendation 3

That no concession should be made to the petitioners.

VIII. CONSOLIDATED LIST OF CONCLUSIONS AND RECOMMENDATIONS

62. The conclusions and recommendations of this Report are reproduced here for ease of reference.

63. We conclude that in 2000 and 2001 the Department of Local Government and the Environment correctly adopted a policy of issuing letters to prospective purchasers at Harcroft Meadow explaining the proposed arrangements. The Department has demonstrated to our satisfaction in the majority of cases that such letters were sent. It is unfortunate that the records held today are incomplete.

64. We conclude that where a Department has a continuing financial relationship with any person, that Department should keep comprehensive records on that relationship for as long as the relationship continues.

50 Appendix 19, paragraph 39 of main submission and Appendix G; also Appendix 23 51 Appendix 19, paragraph 38 of main submission; also Appendix 23 19

Recommendation 1

That the Housing Division Department of Infrastructure should review its documents and records management policy in the light of the Harcroft Meadow experience, and report to Tynwald.

65. We conclude that the correspondence issued in 2000 and 2001 by the Department of Local Government and the Environment to prospective purchasers at Harcroft Meadow described the pre-emption condition in a manner which reflected clearly the Department’s own understanding at the time. The subsequent discovery of the 21-year limit on the pre-emption period was to the residents’ advantage.

66. We conclude that the Department expected the prospective purchasers’ advocates to draw their clients’ attention to the pre-emption condition and to ensure they had understood it.

67. We conclude that the drafting of the deed of conveyance containing the pre- emption condition was inelegant and opaque.

68. We conclude that many of the prospective purchasers at Harcroft Meadow were badly let down by their advocates, who in 2001 and 2002 failed to explain the pre- emption condition to their clients at the time of purchase and in 2003 compounded their error by repeating it after the time of purchase.

69. We conclude that in September 2003 the Council of Ministers adopted a 10-year pre- emption period as a matter of policy. The new policy was applied in retrospect to some recent first time buyer properties but not to those at Harcroft Meadow. While the different treatment of Harcroft Meadow may have been justifiable in financial terms, more could have been done to explain this to the Harcroft residents and to their MHKs.

70. We conclude that the policy lessons from the Harcroft Meadow experience have already been learned and applied.

71. We conclude that by late 2003 Gough and Co had arrived at a correct understanding of the pre-emption condition in the deed of conveyance and had embarked on a damage limitation exercise.

72. We conclude that in early 2004, following the campaign by the Harcroft Meadow residents, the Department of Local Government and the Environment correctly concluded that the primary responsibility for the residents’ dissatisfaction lay with the residents’ legal advisers.

73. We conclude that by the end of 2006 the legal advisers had succeeded in persuading the Harcroft residents away from any legal challenge and back towards the aim of resolving their grievance by political means.

74. We conclude that the arrangements at Harcroft Meadow represented a good deal for the residents in financial terms. These arrangements allowed a realistic prospect of moving up the housing ladder, something which 40% of the original residents have already done.

75. We conclude that, although the legal advice given to many of the residents at the time of their purchase was inadequate, it would have been difficult for the residents in any legal action against their advocates to have demonstrated financial loss.

Recommendation 2

That Tynwald calls on all Departments and Boards, when entering contracts with other parties, to take such steps as are reasonable to encourage all contracting parties to obtain proper advice.

Recommendation 3

That no concession should be made to the petitioners.

D M Anderson

R K Harmer

L I Singer

March 2016

ANNEX 1: INDEX TO EVIDENCE PROVIDED BY MRS GROGAN

The documents listed here are available for reference in the Tynwald Library.

Date From To Description or extract

12/07/2000 DoLGE Scheme amendment

13/07/2000 DoLGE Explanatory leaflet

24/05/2001 Gough & Co Lavery and Proposed purchase Caine

13/06/2001 Crellin (DoLGE) Kinley You have been allocated a plot; if you wish to proceed please return slip

13/09/2001 Gough & Co Fee quote

01/11/2001 Crellin (DoLGE) You have been allocated a plot; if you wish to proceed please return slip

01/11/2001 Kelly Grogan You have been allocated a house on Plot 34

07/11/2001 Eccles (J G Kelly) Grogan Harcroft Meadow

07/11/2001 Harmstone Grogan Purchase of Plot 34 (Gough & Co)

06/12/2001 Gaynor (De Grogan Mortgage protection plan Montfort)

14/01/2002 DoLGE Grogan Grant has been approved

22/01/2002 Gough & Co Grogan Proposed purchase

29/01/2002 Kelly Grogan Contracts have been exchanged

30/01/2002 Gough & Co Grogan Purchase of Plot 34

05/04/2002 De Montfort Grogan Resignation of consultant 31/05/2002 Gough & Co Joughin Proposed purchase

21/06/2002 De Montfort Stock markets plunge

09/07/2002 DoLGE HPAS 2002 SD 23/02

13/07/2002 Gough & Co Grogan Completion of legal formalities

17/07/2002 JG Kelly Harcroft designs

26/07/2002 Borough of Completion certificate Douglas

29/07/2002 Gough & Co Grogan Purchase of Plot 34

04/08/2002 Kelly Grogan Welcome to your new home

17/02/2003 Harmstone After five years you are free to sell (Gough & Co)

Date From To Description or extract

06/09/2003 Kelly Grogan After-sales service

24/09/2003 DoLGE Allsey Register of First Time Buyers (refers to Harcroft and 30%)

21/10/2003 Crellin (DoLGE) Kinley Approval of extension; and resale conditions

07/11/2003 Knight (financial Summers Includes DoLGE advice re 21 years adviser)

11/11/2003 Grogan Atkin (Gough Shocked and distressed & Co)

13/11/2003 Crellin (DoLGE) Kinley Conditions for resale

13/11/2003 Harcroft residents Distressed and concerned

13/11/2003 Kerruish (Gough Grogan I do not consider that we could have done anything & Co) more to explain

20/11/2003 Cretney Harcroft Please be assured residents

27/11/2003 Corlett (Attorney Duggan Encloses report by legal officer General)

06/12/2003 Redmond Cretney Starting to wish we had stayed in Anagh Coar

17/12/2003 Corlett (Attorney Cretney Comments on Harmstone advice General)

24/12/2003 Cretney Harcroft Happy Christmas residents

24/12/2003 Cretney South Douglas Community Newsletter

06/01/2004 Harcroft residents Kerruish We have had no response from you since our (Gough & Co) meeting on 17 Nov 2003

13/01/2004 Cretney Crowe Encloses Gough & AG's conflicting advice

13/01/2004 Kerruish (Gough Grogan This matter has been referred to our insurers & Co)

27/01/2004 Crowe Cretney Dept would be prepared to consider allowing owners to purchase remaining shared equity

02/02/2004 Cretney Redmond Suggests contacting Law Society

05/02/2004 Coole Crellin Fundamental provisions should be explained

08/02/2004 Harrison How can we buy out the 30%?

09/02/2004 Kinley Cretney I feel I am now worse off

10/02/2004 Bevan Gough & Co Harmstone said free to sell after 5 years

10/02/2004 Jerram Cretney We were at the mercy of Mr Harmstone

Date From To Description or extract

11/02/2004 May and Cain We were not informed

11/02/2004 McMurdo Very concerned

11/02/2004 Spencer I had no knowledge of the 30/70 when I signed

11/02/2004 Summers Cretney Most distraught and worried

12/02/2004 Bradley The first time we were aware of the 30/70 was around July 2003

12/02/2004 Grogan Describes advice given in 2002 and 2003

12/02/2004 Kay and Wilson We were not made aware of this by DoLGE or Gough & Co

12/02/2004 Redmond Distressed, angry and aggrieved

13/02/2004 Caine It's no more than a glorified council house

13/02/2004 Illegible (66 Cretney If Gough and Co had informed me I would have Harcroft declined Meadow)

13/02/2004 Pitts Harmstone never told us of the 70/30 split

13/02/2004 Robinson I thought that after 5 years would be free of restrictions

14/02/2004 Hughes Pam Crowe Gough & Co have not been impartial MHK

15/02/2004 Manning Grogan At no point was I advised of govt share after 5 years

16/02/2004 Corran Cretney After 5 years I thought I could sell & just pay back the loan

16/02/2004 McCowliff Cretney After 5 years I thought I could sell & just pay back the loan

16/02/2004 Preston Grogan I feel we were misled

17/02/2004 Crellin (DoLGE) Coole Allocation process etc

18/02/2004 Cowin Atkin (Gough Request for assistance & Co)

18/02/2004 Edge Disbelief over the way I have been misled

20/02/2004 Joughin Lawyer, mortgage provider and Govt said could sell after 5 years at full price

20/02/2004 Kelly If advocates found the particulars misleading what chance is there for laymen?

20/02/2004 Workman I feel that my family and I have been conned

21/02/2004 Murphy What happens to our extension?

Date From To Description or extract

22/02/2004 Crossley and Crowe We feel we have not been correctly informed Parsons

22/02/2004 Sansom Concerned about the supposed 30% equity retained indefinitely

23/02/2004 Grogan Kerruish Scheduling of meeting (Gough & Co)

24/02/2004 Glassey We feel that we have been misled

24/02/2004 Grogan Crowe Arrangements for meeting with DoLGE Minister

24/02/2004 Grogan Cretney Arrangements for meeting with DoLGE Minister

25/02/2004 Grogan Attorney Covering letter General

25/02/2004 Grogan Houghton Covering letter

25/02/2004 Grogan Mr Crellin, Covering letter DoLGE

[25/02/2004] Corrin We were only informed in August 2003

[25/02/2004] Duggan and We were under the impression that could sell after 5 Wardell years

[25/02/2004] Fudge We could have kept Council house and had more each month

[25/02/2004] Gilmour and I feel I have been totally misled Liggins

[25/02/2004] Higgins I am shaken, saddened and sick

[25/02/2004] Kermode & Ferns We were told that we owned 100% after five years

[25/02/2004] Kinley A blunder has been made

[25/02/2004] M Mc A blunder has been made

[25/02/2004] McKinstry We were never informed

[25/02/2004] Murphy Cretney Government should be paying 30% of my outgoings.

[25/02/2004] Quilliam I have been given very poor advice

[25/02/2004] Quirk I was at no point advised that there was any restriction after 5 years

[25/02/2004] Teare Cretney We definitely were not aware

[25/02/2004] Volante I was told 70% only within first five years

02/03/2004 Houghton Grogan How did the meetings go?

02/03/2004 Kerruish (Gough Grogan Residents Association & Co)

Date From To Description or extract

04/03/2004 Grogan Notes for use during meeting on 4/3/2004

04/03/2004 Grogan Residents Description of meeting on 4/3/2004

04/03/2004 Grogan File note about meeting on 4/3/2004

04/03/2004 Reeves (AG's Grogan Nothing to add to previous report Chambers)

19/03/2004 Quinn Kneale Grogan We have been instructed by Gough & Co

[30/04/2004] Dunne I never signed anything that stated this

18/05/2004 Grogan Wild (Quinn Covering letter for letter from Patricia Dunne Kneale)

04/06/2004 Wild (Quinn Grogan Holding response Kneale)

20/07/2004 DoLGE HPAS 2004 explanatory leaflet

18/08/2004 Shimmin (AG's Summers Grant has been paid off Chambers)

03/09/2004 Cretney Wilde (Quinn What are your views? Kneale)

23/09/2004 Quinn Kneale Cretney This is a complicated matter

01/10/2004 Shimmin (AG's Summers Charge has been cancelled Chambers)

04/10/2004 Cretney Grogan Encloses holding response from Quinn Kneale

18/10/2004 Cretney Wilde (Quinn Please copy me in Kneale)

21/11/2004 Gaynor (De Grogan Mortgage application Montfort)

23/11/2004 Grogan Quinn Kneale Letter requesting a view (handwritten draft)

25/11/2004 Cretney Law Society

25/11/2004 Grogan Quinn Kneale Letter requesting a view

30/11/2004 Quinn Kneale Grogan DoLGE letter indicated 70:30

02/12/2004 Harvey (Law Cretney Acknowledgement Society)

27/04/2005 Cretney Grogan Includes email response from John Rimington MHK refusing a meeting

27/06/2005 Reeves (AG's Wild (Quinn 10-year pre-emption period Chambers) Kneale)

28/06/2005 Wild (Quinn Reeves (AG's 10-year pre-emption period Kneale) Chambers)

Date From To Description or extract

01/07/2005 Reeves (AG's Wild (Quinn 10-year pre-emption period Chambers) Kneale)

11/07/2005 Reeves (AG's Wild (Quinn 10-year pre-emption period Chambers) Kneale)

21/07/2005 Wild (Quinn Reeves (AG's 10-year pre-emption period Kneale) Chambers)

25/07/2005 Wild (Quinn Grogan Update Kneale)

26/07/2005 Reeves (AG's Wild (Quinn 10-year pre-emption period Chambers) Kneale) 03/08/2005 Wild (Quinn Grogan Encloses correspondence with AG's Chambers Kneale)

11/08/2005 Cretney Grogan Encloses email to CSO

26/08/2005 Cretney Grogan Letter and attachment

05/09/2005 Hughes Grogan Good luck

27/09/2005 Cretney Callister (CSO) Seeking CoMin papers

20/10/2005 Wild (Quinn Cretney Have you had anything from CoMin? Kneale)

24/11/2005 Cretney Grogan Encloses holding response from Quinn Kneale

09/12/2005 Wild (Quinn Cretney Kneale)

09/12/2005 Wild (Quinn Cretney Encloses note re representations to CoMin Kneale)

17/02/2006 Rimington Cretney I cannot really understand why the first time buyers believe they have been badly treated

20/02/2006 Reeves (AG's Cretney Buy-back provisions Chambers)

21/06/2006 Cretney Rimington Questions following letter of 17/2/2006

23/08/2006 Senior (DoLGE) Cretney Dept will consider allowing buy-back of the 30% share

29/08/2006 Cretney Senior (DoLGE)

09/09/2006 Cretney Grogan Includes letter from Richard Senior (DoLGE) agreeing to a meeting

01/08/2007 DoLGE Information about HPAS 2007

24/08/2007 Mahon (DoLGE) Summers No objection to increase in mortgage

Date From To Description or extract

12/02/2008 Mahon (DoLGE) Summers Terms and conditions

30/04/2008 Dean Wood Grogan Valuation

02/05/2008 Chrystals Grogan Valuation

06/05/2008 Mahon (DoLGE) Grogan Proposed buyback

[01/05/2008] Cowley Groves Information about three houses for sale

12/05/2008 Grogan DoLGE Valuation

13/05/2008 Harmony Homes Grogan Valuation

22/05/2008 Mahon (DoLGE) Grogan Valuation

08/01/2010 Grogan Valerga Proposed buyback (DoLGE) 13/01/2010 Valerga (DoLGE) Grogan Proposed buyback

21/01/2010 Cowley Groves Grogan Rental

10/03/2010 Valerga (DoLGE) Summers Valuation

19/04/2010 Grogan Houghton Questions

10/06/2010 Reeve (DSC) Houghton Explanation of scheme

15/06/2010 Houghton Minister for Tabled Question Social Care

13/07/2010 Dept of Social Tynwald Written Answer Care

01/09/2013 Summers Human rights

09/09/2013 Reeve (DSC) Summers Response to letter of 1/9/2013

15/03/2014 Grogan Quayle Please consider reducing pre-emption period

04/04/2014 Houghton Grogan Compliments slip

04/04/2014 Houghton Quayle Please review

30/04/2014 Quayle Grogan Inappropriate to reduce pre-emption to 10 years

16/06/2014 Grogan Quayle Seeking meeting

09/07/2014 Quayle Grogan Acknowledgement

25/07/2014 McNicholl Grogan You would stand to walk away with £44,000

17/03/2015 Quayle Grogan Encloses copy of letter from Julie McNicholl of 25/7/2014

26/06/2015 Malarkey Tabled motion

ANNEX 2: FINANCIAL ILLUSTRATION

The figures in this illustration relate to a particular property at Harcroft Meadow and are based on written evidence presented to the Committee.52

Purchase price (2002) 79,310

Met by means of

Mortgage 62,560

Grant 16,500

Deposit 250

Available from Department (2010) 123,800

Based on

Valuation by Government Valuer 195,500

Department’s 30% share 58,500

Grant to repay 13,200

Assuming an interest-only mortgage, seller would walk away with 61,240

52 See documents dated 1st November 2001, 14th January 2002, 22nd January 2002 and 13th January 2010 in Mrs Grogan’s papers (see Annex 1) 31

ORAL EVIDENCE

1st February 2016 Evidence of Mrs Y Grogan, Mr L McMurdo and Mr M Murphy, Petitioners

And

Mr N Black, Chief Executive, and Ms D Reeve, Director of Housing, Department of Infrastructure

S E L E C T C O M M I T T E E O F T Y N W A L D C O U R T O F F I C I A L R E P O R T

R E C O R T Y S O I K O I L B I N G E R – L H E H T I N V A A L

P R O C E E D I N G S D A A L T Y N

FIRST-TIME BUYER SCHEME (PETITION FOR REDRESS)

HANSARD

Douglas, Monday, 1st February 2016

PP2016/0022 FTBS, No. 1

All published Official Reports can be found on the Tynwald website:

www.tynwald.org.im/business/hansard

Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, IM1 3PW. © High Court of Tynwald, 2016 37 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Members Present:

Chairman: Mr D M Anderson MLC Mr R K Harmer MHK Mr L I Singer MHK

Clerk: Mr R I S Phillips

Contents Procedural ...... 3 EVIDENCE OF Mrs Y Grogan, Mr L McMurdo and Mr M Murphy, Petitioners ...... 3 The Committee adjourned at 3.08 p.m. and resumed at 3.32 p.m...... 17 Procedural ...... 17 EVIDENCE OF Mr N Black, Chief Executive, and Ms D Reeve, Director of Housing, Department of Infrastructure ...... 18 The Committee adjourned at 3.57 p.m...... 25

______2 FTBS 38 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Select Committee of Tynwald on the First-Time Buyer Scheme (Petition for Redress)

The Committee sat in public at 2.30 p.m. in the Legislative Council Chamber, Legislative Buildings, Douglas

[MR ANDERSON in the Chair]

Procedural

The Chairman (Mr Anderson): Good afternoon and welcome to this public meeting of the Select Committee into the First-Time Buyer Scheme (Petition of Redress). My name is David Anderson. I am chairing this Committee. With me are Mr Ray Harmer, on my left, MHK, and Mr Leonard Singer, Deputy Speaker, MHK, on my right. 5 Can you please ensure that your mobiles are switched off or on silent so we do not have any interruptions. Thank you. For the purpose of Hansard, I will be ensuring that we do not have two people speaking at once. As you know, the Committee was established by Tynwald on Wednesday, 21st October, with a remit to consider and report on the Petition of Redress of the residents of Harcroft Meadows. 10 This Petition was presented to Tynwald on Tynwald Hill in July 2015. Today we are going to hear first from the Petitioners and later on from representatives of the Department of Infrastructure.

EVIDENCE OF Mrs Y Grogan, Mr L McMurdo and Mr M Murphy, Petitioners

Q1. The Chairman: I thank you very much. If I could just start by thanking you for coming along this afternoon and giving us the opportunity to ask you questions and for you to put your 15 case over. Obviously we have had a large amount of correspondence regarding the history of Harcroft Meadows, particularly thanks to Mrs Grogan for her information that has come through Mr Malarkey. We thank you for that. Can we start by saying that maybe if Mrs Grogan would like to set the scene for us and give us anything that she has not put within her correspondence to us or give us a brief background. 20 Obviously, we have looked in detail at all the information you have supplied to us and we have some questions for you, but if you would like to maybe set the scene for us to start with.

Mrs Grogan: Okay. Initially we all decided to buy these properties, which we were all very excited about, and were told, ‘Well, you know, you’re then on the ladder, as it were, to buy a 25 property and you have a future on the property market.’ But then we exchanged contracts with Gough & Co, who were our advocates at the time. I think they were the advocates for pretty much, I do not know, 95% of the people – 90% of the people. There were a couple of other

______3 FTBS 39 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

residents who had a different advocate, but they were also told the same information as ourselves, by our advocate, which was that the first five years we were beholden to Government 30 with our properties and if we sell before then, well, then we would have to just sell it for what we purchased it, so then we would not make any profits, but after that period we would be free from any encumbrances and we would not have any restrictions or the Government would not have any hold on the property. Obviously, you could say, well, did I go into that unknowingly or not knowing that that was 35 right. I deliberately asked over and over again really so I would be clear in my mind before I signed those documents. Plus I also had a letter, as everybody has a letter, from the advocate before you sign when you buy a property, outlining the information and other various items about what you should consider before you buy a property. So it was clearly outlined there, but these things were not put, as you already know from the documentation that I have given to you 40 … that it does not state that there were these restrictions on our property. I was told that after the five years we were then free to sell our property on the open market. So it has then since become clear that that was not the case and that there were restrictions on the property, so there was obviously a lot of confusion.

45 Q2. The Chairman: So can I just pick up there: basically, one of the first faults with the scheme that you found was that you did not have the information that was required, that you would expect to have had as a first-time buyer, from your advocates.

Mrs Grogan: Yes, I can honestly say that I equally did not understand or was not fully 50 informed by the Department either. I think some earlier residents did have a letter that stated something about the 70-30 share, but I certainly did not get one of those letters. So that was significant as well because I think … and also we liaised quite a lot with the builder who organised or suggested which advocates we should all use and that is why we all ended up having a special deal to use the same advocates as them. They also did not make it 55 clear about the 70-30 share or the fact that there would be a restriction on valuation as well. We had to have a valuation by the Government Valuer. I thought – and this has only come to light afterwards as we go deeper and deeper into it – that after the five years you could sell on the open market at the market value price. I did not realise that was determined by the Government Valuer and they decided what that valuation would be. 60 When I was considering moving at one point and I had some valuations done by the estate agents, they were quite considerably different to the Government valuation.

Q3. Mr Singer: How much?

65 Mrs Grogan: Some £30,000 to £40,000 difference. I had five done – I put them all in that documentation to show you that – and I thought, ‘Well, that’s a big difference.’ So not only are you losing your 30% but then you have got a down valued valuation done. But obviously that is debatable because at the time I did question it, but they said, ‘Well, in our opinion that is what those properties are worth. Properties on the estate agents are not necessarily sold at that 70 price.’ So that was the argument to that.

The Chairman: Mr Singer.

Q4. Mr Singer: Can I ask when was that – when you had those valuations? 75 Mrs Grogan: I cannot remember the exact date, but they were in the documents there. I do not know – about seven years, maybe, after the period of time when we moved in.

Q5. Mr Singer: 2010?

______4 FTBS 40 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

80 Mrs Grogan: I think so. Something like that. I might not be exactly correct on that.

Q6. Mr Singer: Approximately what valuation were you given by the estate agents on average?

85 Mrs Grogan: Between about £130,000 and £140,000.

Mr Singer: And what did the – ?

Mrs Grogan: That was about £180,000. I have had valuations since. I think that went up to 90 £205,000.

Q7. Mr Singer: So the average for the estate agents was £180,000 and the Government Valuer said about £130,000?

95 Mrs Grogan: Yes.

Mr Singer: Okay, thanks.

Mr Murphy: We did the same thing and it was considerably less. 100 Q8. The Chairman: Can we just be clear, if anybody would like to build on those comments … Mr Murphy, do you want to say something at this stage?

Mr Murphy: Yes, we did exactly the same and the value was a lot less. I got three valuations, 105 because we built an extension as well, and I was just saying that the Government Valuer came out – because we were in the middle of buying a business at the time, that we bought but we got the funds another way – and it was a lot less; it was about £60,000 less.

Q9. The Chairman: So what date would this be? 110 Mr Murphy: It would have been six years ago, nearly seven years ago. (The Chairman: Right. Okay.) I think the three estate agents valued it at between £280,000 and £290,000, and he valued it at £220,000 – the Government Valuer.

115 The Chairman: Mr Harmer.

Q10. Mr Harmer: Have you had any valuations since then? (Mr Murphy: No.) Has that been the last – ?

120 Mr Murphy: No, because we were in the middle of thinking of buying a business and we have bought it now, but we could not do it anyway because the Government have got a hold on your mortgage so you cannot get any equity out on your house, because the house is only valued at say £220,000 and the Government have got their 30%, so you cannot release any equity because the Government have got a hold. Do you see what I mean? 125 So when we went to the Isle of Man Bank my lawyer did all the stuff to buy a … We were buying a restaurant, so when we went, it came back and said, ‘Sorry you cannot use your house as equity because the Government have got a hold on it.’ So I did not know that at the time – that you could not release any equity on the house. Even though I have spent £50,000 on an extension, or just less than £50,000, the Government owns 30% of that as well – 130 Mrs Grogan: Yes, that is the case, isn’t it?

______5 FTBS 41 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Mr Murphy: That is the case. Then I went to see the Government officer. She said, ‘Well, that is how it runs’ … so, ‘You do not pay 30% of my rates!’

135 Mrs Grogan: If you have an extension or improvements you lose 30% of that when you want to sell –

Mr Murphy: We built an extension. Like a lot of people, we had one child, two bedrooms and then we had another child and you just try to better yourself so you build an extension and then 140 you cannot sell your house because we had to work extremely hard to get the money to build the extension because you cannot get equity out.

Q11. Mr Singer: And the value of your extension, approximately?

145 Mr Murphy: In the end, all in all, it is about £50,000 because I have done more work. I did have a garage and I have knocked it through to one room.

Q12. Mr Singer: So that is about a third value or a quarter value extra on your house?

150 Mr Murphy: Hopefully, yes. We have made it a family home, so I do not want to –

Mrs Grogan: Yours was only two bedrooms, wasn’t it?

Mr Murphy: Mine was only two bedrooms, so I have made a bigger living area and an extra 155 bedroom for my daughter and stuff like that. I have not done it to sell, I have done it because my family has got bigger. But the Government owns 30% of my extension, so I do not think that is fair really.

Q13. Mr Singer: Can I just ask Mrs Grogan just to elaborate on a point she made? (The 160 Chairman: Yes.) You said you were offered a special deal to go to Gough’s. (Mrs Grogan: Yes.) What was the special deal? Do you know what the value was?

Mrs Grogan: With the builders, everybody was offered a special rate –

165 Mr Murphy: If it was at Harcrofts –

Mr McMurdo: It was £800.

Mr Murphy: If you were buying a house in Harcroft there was a special rate through Gough & 170 Co.

Q14. The Chairman: Is this J G Kelly’s offer?

Mr Murphy: J G Kelly’s, yes. 175 Mrs Grogan: Yes, through J G Kelly’s. So that is why a majority of people used Gough & Co.

Q15. Mr Singer: And was it a considerable saving?

180 Mr McMurdo: Well, the –

The Chairman: Mr McMurdo, sorry, just for the tape.

______6 FTBS 42 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Mr McMurdo: Sorry. The price that they charged was £800 for lawyers, which we were told is 185 a considerable discount because we were buying into Harcroft. (Mr Singer: Right. Okay.) But there were other ones who used their own.

Q16. Mr Singer: You do not know how much they paid?

190 Mr McMurdo: No, I do not.

Mrs Grogan: I would just like to say as well, the other thing that we felt was not pointed out to us was this 21-year pre-emption period. That just knocked me to the floor when I found out that I was tied up for 21 years. I was actually told it was indefinite – 195 Mr Murphy: That is what I was –

Mrs Grogan: – but apparently, by law, because it is –

200 Mr Murphy: I went to the Government about my extension and I did not realise they owned 30% and the lady in the Government offices said, ‘Well, we own it indefinitely,’ and I was like, ‘No, but I have got a letter here that says otherwise.’ No –

Q17. The Chairman: Okay, but that point was clarified, through Mr Cretney, I think, (Mrs 205 Grogan: Yes.) that there was a set period and it was 21 years.

Mrs Grogan: Apparently, by law, it cannot be taken beyond the considered life of a mortgage, so yes that is the 21 years.

210 Q18. Mr Harmer: When did you discover that? It was not in the deed of conveyance then specifically?

Mrs Grogan: Yes, I think initially all of this came about when one of the first neighbours were wanting to do – like yourself – improvements on the house and then when they went to the 215 bank they discovered there were issues with getting a loan because of the charges that the Government had and they were told then that there were issues or restrictions, so then I started to ask questions. Then I rang the Attorney General’s office as well and asked them and they said, ‘Oh, no that is not the case.’ So there was confusion there. Then I asked the advocate and they said, ‘No, that 220 is not the case.’ So I left it for a couple of years and then I went to have a valuation done and it came up all again and I asked the questions again and rang the Commissioners’ office and they said, ‘No, this is the case.’ So I dug deeper and then found out, yes. So it is over a couple of years that I started to get bits of information about what was really the case and what these restrictions were. 225 Q19. The Chairman: Yes, so you were clear then from what year the 21 years was the period?

Mrs Grogan: Yes.

230 Q20. The Chairman: So when did you learn that? What year would that be?

Mrs Grogan: We have been discussing this, haven’t we, since ...? I do not know – at least 10 years ago now, so we have been all trying to sort this out since then. Obviously, we intitially went back to Gough & Co, and then they instructed another advocate 235 to investigate and oversee it all, and that came to no fruition really. They just said, ‘Well, yes,

______7 FTBS 43 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

this is the case, but these restrictions are ... or this is what the Government have proposed, but if you go to court there is not much you can do really; it will just come back to, ‘Well, that was what was proposed and it is just unfortunate you had not been informed properly.’

240 Q21. Mr Singer: So Gough’s just wiped their hands of it, did they, and said we did not – ?

Mrs Grogan: They did, yes.

Q22. Mr Singer: Did they admit they did not tell you to start off with? 245 The Chairman: Mr McMurdo.

Mr McMurdo: The thing is we had a meeting, we arranged a meeting with Gough & Co –

250 Q23. Mr Singer: This is when?

Mr McMurdo: 2009?

Mrs Grogan: You have got all the dates on my file, but – 255 Mr McMurdo: Approximately 2008. With Mr Cretney, we went down to the meeting and Gough & Co did not actually turn up; they actually sent their insurers, which were Mr Quinn – (Mrs Grogan: Quinn Kneale’s) Quinn Kneale’s – and they actually turned round to us … their insurers turned round and said, ‘If you write saying that you are not going to take Gough & Co to 260 court we will help you fight this.’ So they have already, to me, admitted they have done wrong.

Q24. Mr Singer: Do you have that in writing?

Mr McMurdo: It was at the meeting. David Cretney was there and Yvonne and myself were 265 there, and they actually did say that.

Q25. The Chairman: Can I just go back one step, please. A lot of the – or some of the – purchasers said they had a letter from the Department spelling out the 70-30%. You three say you did not have that letter? 270 Mrs Grogan: No, a majority of residents did not have it, because I have spoken to every single resident on the estate. I think there are maybe one or two who have actually probably moved on now, but everyone I have spoken to since, who are still there – there might be one who said they had some inclination that was the case, but – 275 The Chairman: Yes, we have had representation from one of the buyers who said they understood the 70-30%.

Mrs Grogan: Yes, there might be one. 280 Q26. The Chairman: Yes, so obviously there was fault by your advocates not informing you –

Mrs Grogan: Well, yes, when you buy a property you are trusting the advocate to know the law to make sure you as a lay person would understand or be informed fully as to what you are 285 letting yourself in for.

______8 FTBS 44 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q27. Mr Singer: So the meeting with Quinn – was it with Quinn? – when they asked you for this assurance, which you did not give them … (Mrs Grogan: No.) the meeting just broke up then?

290 Mrs Grogan: That was it really. ‘Unless you are going to get together and get your own advocates and fight it in court …’ which obviously –

Mr Singer: Expensive.

295 Mr McMurdo: Very expensive.

Mrs Grogan: It is not just the money either, it is engulfing your whole life with that every day for years on end.

300 Mr Murphy: I certainly would not have bought a house if indefinitely someone owned 30% of it, because the way it was explained by the Government when we came – because we were going to buy another house … but they said, ‘Well, this scheme is designed to get your foot on the ladder. That is what it is for.’ So you can build, but at the moment you cannot get your foot on the ladder because if you sell your house and the Government take their 30% and they give 305 you your valuation, you still cannot buy a house bigger than you have just sold. So you cannot really get your foot on the ladder.

The Chairman: Mr Harmer.

310 Q28. Mr Harmer: Just to confirm: so you did not know when you bought the house about the 70-30%?

Mrs Grogan: No, definitely not.

315 Q29. Mr Harmer: How many years ago was it when you found out?

Mr McMurdo: 2002, I signed.

Mrs Grogan: We signed up in 2002, so I do not know, maybe it was about three or four years 320 later until we actually really knew what –

Mr McMurdo: It was about four or five years when somebody decided to think about moving.

325 Mrs Grogan: It was the extension, I think, that Tim Maladery and his partner were –

Q30. Mr Harmer: It was the extension and the looking forwards when you were moving.

330 Mrs Grogan: Yes, and then somebody knew somebody I knew and they had said they had been to the bank and there was an issue with the properties. So I thought, ‘Oh, I’m going to ring up. That’s not what my advocate told me,’ and then I obviously contacted Gough and they said, ‘No’. I looked through all my documentation and thought this is the bit you read before you sign on the dotted line and it certainly does not say anything there. That is something significant, 335 isn’t it, that would have to be set out – 70-30 equity share –

Q31. Mr Harmer: So it is in none of the guidance documents?

______9 FTBS 45 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Mrs Grogan: – or 21 years until you own your house, or you have to have your house valued by the Government; it is not actually the open market, the value is determined by the 340 Government valuer which is fine if that is fair, but … So there are quite a few things that were not clearly put in our letter.

Q32. Mr Harmer: So perhaps in the deeds of conveyance it was not actually in any of the guidance or any of the letters, or any of the correspondence? 345 Mrs Grogan: Yes. I just do not understand why the advocates did not interpret the deeds in the right way as the Government were presenting them. Obviously it was thought that ... a little bit ambiguous, the way they are written, maybe, I do not know.

350 Q33. The Chairman: Okay, but there were clearly, from documentation we have received, first-time buyers who did understand that 70-30, so somewhere … whether they had different advocates (Mrs Grogan: Yes.) that did the job properly working for them …

Mrs Grogan: They did not get that information from their advocates – definitely not. They 355 might have got it from the Government initially when they first enquired about the property, but none of them got the information from their advocates in that way. That definitely was not –

Q34. Mr Singer: This includes the other advocates –?

360 Mrs Grogan: Yes, that includes the other advocates. They also did not interpret the deeds correctly either and ill informed their clients or did not inform them correctly.

Q35. The Chairman: Is there anything else –?

365 Mrs Grogan: I think there were only two other advocates besides Gough & Co, otherwise everybody else used Gough & Co.

Q36. The Chairman: Okay. Is there anything else you want to tell us about the relationship between J D Kelly ... that you had at the time of the purchase? 370 Mrs Grogan: They were very helpful. They gave us all the information we needed – obviously bar these really important things – and it all went quickly and smoothly, to buy the property, to find out what you might want to have in your bathroom or your kitchen colour and your tiles.

375 Mr Murphy: I was not on the Island. I was working away when I moved in, so my wife dealt with most of the … So I used to come back and I signed and the Government officers and stuff … I was in the Army at the time.

The Chairman: Okay. Thank you. 380 Can we move on. Mr Harmer, have you got a question?

Q37. Mr Harmer: No, it was really just, again, all about the conveyancing and whether you knew what was going on and when you knew it, and I think you have covered that and you also covered the fact about the 21. 385 So in your eyes, just to really summarise what you thought you had, in terms of what you thought the proposal was, can you just summarise what you thought you had – ?

Mrs Grogan: Basically, that I clearly asked the advocate several times to make sure I knew exactly what the situation was and they said, ‘You are restricted, because you are buying a

______10 FTBS 46 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

390 Government house, for the first five years, then after the five years you are free to sell your house on the open market, free from any encumbrances.’ So I said, ‘Well, that is fine.’

Mr Harmer: Of course there is a grant as well –

395 Mrs Grogan: Yes. That is a separate thing.

Q38. Mr Harmer: And that is also five years as well?

Mrs Grogan: The grant is reduced by 20% every five years or until the 21-year period is 400 finished and I think then it is cancelled.

Q39. Mr Singer: Mr Murphy said that he would not have bought the property if he had known what he knows now. Would you?

405 Mrs Grogan: No. I would definitely not have tied myself up for 21 years, because you see yourself as wanting … even though you do not think you are going to make it or do not think you are going to be able to … your circumstances, you like to think that you could get somewhere else if you wanted to. You want to achieve something. Or you came into inheritance or something like that and you want … The way that the situation has come about, you are going 410 nowhere.

Q40. Mr Singer: I think about a third of the houses have been sold, haven’t they, and paid their 30% back?

415 Mrs Grogan: There is still quite a considerable number: 20 –

The Chairman: Twenty-two have been sold.

Mrs Grogan: Yes, I think I got letters or signatures from – 420 Mr McMurdo: About a third.

Q41. Mr Singer: About 30%, isn’t it? So are there people, in your opinion, who are now going to hang on for 21 years before they sell it? 425 Mrs Grogan: If the situation stays as it is, yes, obviously they have got no choice, have they.

Q42. Mr Singer: Can I put something to you (Mrs Grogan: Yes.) about the fairness of the 30% that you have to pay back? As I understand it, the houses initially … the actual valuation was 430 between £110,000 and £120,000 initially when they were built –

Mrs Grogan: I do not know whether that is quite right because the (Mr Murphy: No.) private houses were –

435 Mr Murphy: The private houses were a hundred and … They were no more than £115,000 for a private house.

Mrs Grogan: That is a detatched. There were a selection of houses that were sold as private houses to compensate – 440

______11 FTBS 47 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q43. Mr Singer: But the valuation of the houses on the first-time buyers were between £110,000 and £120,000, weren’t they? The actual valuation?

Mrs Grogan: No. 445 Q44. Mr Singer: What was the valuation of those then?

Mrs Grogan: We never saw a valuation.

450 Mr Murphy: We never saw a ... They said to us, ‘You are buying them at a discounted rate,’ and I spoke to the guy from J G Kelly’s at the time and I said, ‘No, because the house down the road has just gone for £109,000,’ and he said, ‘Yes,’ and I said, ‘Well, that is detached, with a garage, an extra bedroom and an extra bathroom. Mine is £78,000.’

455 Mr Singer: Say it was round about £100,00, (Mrs Grogan: Yes.) then I think people paid between £74,000 and £79,000.

Mrs Grogan: £80,000. Seventy-nine something, something.

460 Mr McMurdo: £79,310! (Laughter)

Mr Singer: Any pence?

Mr McMurdo: No! 465 Q45. Mr Singer: Okay, so they paid £79,000 and then there was a £16,000 grant, I understand. Is that right?

Mrs Grogan: Yes, for those people who – 470 Q46. Mr Singer: So it actually brought the house down to about £60,000 to £65,000. So that was approximately a 40% to 50% discount on the actual valuation. So, if they are asking for 30% back, is that unfair, because you have got maybe almost a 40% to 50% discount in the first place? 475 Mr Murphy: But obviously the Government have overvalued when they put them and undervalued when you sell back, because my house was valued at nearly £300,000, but they will only give me £220,000.

480 Mr Singer: Yes, I understand that.

Mr Murphy: So that is £80,000 off.

Q47. Mr Singer: But if people – I am only playing devil’s advocate here – only paid about 485 £60,000 to £65,000 for a house worth £100,000, are there people on the estate now who bought these houses who could not have bought these houses if it had not been a first-time buyer scheme? Are there some people on the ladder now who would not have been on the ladder if they had not had the various discounts and grants?

490 Mrs Grogan: There are bound to be people who have got the opportunity to get on the ladder, and that is the idea.

______12 FTBS 48 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Mr Singer: Okay, so when they are better off –

495 Mrs Grogan: They could have waited a bit longer, saved a little bit more and bought something equally … and owned at 100%.

Mr Murphy: I think eight months after we bought ours, I think they did a scheme in either Glen Vine or Laxey – they have sold their houses. 500 Mr Singer: A different scheme, yes.

Mr Murphy: A different scheme. They have sold their house and they have gone on to a bigger house, but like I tried to explain before, if I tried to sell my house the Government would 505 take 30% but they would only take 30% of £220,000, not £300,000. So then you still cannot buy a house bigger than you have just sold. I would have to get a £200,000 mortgage to buy my house with.

Q48. Mr Singer: But would you admit there are people who have houses now, who managed 510 to get on the ladder because of the large discount from Government?

Mrs Grogan: We are not disputing that the Government have done something good in providing people with houses and enabled people to have a roof over their head, but I think we saw it as a little bit ... 515 Q49. Mr Singer: You have actually said you think all restrictions should be lifted from the property. How would that be fair to the other people who have sold their properties for 70% of the market value?

520 Mrs Grogan: Well, you tell me.

Mr Singer: I am asking you.

Mrs Grogan: Obviously people have chosen to leave. If it is restricted up to a 15-year period 525 that does not, maybe, affect the people who have already left.

Mr Singer: Okay.

Mr McMurdo: I mean the Government – 530 The Chairman: Mr McMurdo.

Mr Murphy: A lot of people have left because of the scheme and they have just thought, ‘Right, I am young enough.’ (Mrs Grogan: That is true.) ‘I am leaving now because I am obviously 535 not going to get my money back.’ So they have jumped, gone and mortgaged even higher to get …

Q50. The Chairman: But there are those who have written to us who say that they think the scheme enabled them to get on the housing ladder, even though it had its faults, and they would 540 not have done otherwise; but you three are obviously saying if you had known what you now know at the beginning you would not have entered into the agreement.

Mrs Grogan: It is not actually just us three.

______13 FTBS 49 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

545 The Chairman: No, but you are representing –

Mrs Grogan: We represent the Harcroft estate.

The Chairman: I realise that. 550 Mr McMurdo.

Mr McMurdo: If I had waited four months … My step-daughter moved into her house – first- time buyers in Peel … four months after I signed; 10 years, she has sold, done, dusted and she is gone. She was able to buy another property. There was no 30%, 30-70. That is how she is 555 moving on, because –

Mr Murphy: Yes, it is only this scheme. It is only the Harcroft –

Mr McMurdo: This is the one and only that is the 70-30. 560 Mr Murphy: People who have left the Harcroft have not made the money that they would have made if they had bought another house.

Mrs Grogan: Going back to that discount that you said with the houses as well, we went into 565 this because we thought the scheme was offering people like us who could not necessarily get on the property market, an opportunity to get on the market; and that is why the Government were offering properties to those specific people who could not afford other houses and that is why they were reduced a little bit more than the general market, which would not necessarily have been that much more if we had hung on and waited and saved, and then we would have 570 had our houses 100%.

Mr Murphy: If I was to buy my house as a private J G Kelly’s it would only be about £80,000 – mine was only a two-bedroom – we would have been nowhere near, but it would be worth £220,000 maybe now – probably more if I had built an extention, but it would be mine, I would 575 own it. That is the problem. You have got more say in a council house than you do in our houses. We cannot rent them out. We do not own them.

Q51. Mr Harmer: When you say you cannot rent them out …

580 Mr Murphy: We are not allowed to rent.

Mr Harmer: Not allowed to rent.

Mrs Grogan: He means if you decided that for one reason or another you wanted to go and 585 live somewhere else (Mr Harmer: Right, okay.) (Mr Murphy: You cannot.) or work in England or whatever, you are restricted –

Mr Murphy: You are not allowed. You are not allowed to rent.

590 Mrs Grogan: – you have to stay in that house, because there are several residents who decided … There was a girl who is from Ireland and she went to go back and she was asked to come back again, because they said she could not leave her house.

Mr Murphy: Daniel Bentham was another one. He moved in with his girlfriend and rented it 595 out and they sent him a letter saying, ‘You cannot rent the house out,’ so he had to move back in.

______14 FTBS 50 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q52. The Chairman: That is standard practice for first-time buyers. (Mrs Grogan: Yes.) Okay, moving on then, we are obviously hearing from the Department shortly and we have got documentation from the Department. 600 Is there anything else you would like to ask them? We are meeting them on your behalf to ask questions. We have your correspondence which is quite fulsome. (Mrs Grogan: Yes.) Is there anything else you would like to add?

Mrs Grogan: Everything is quite documented in those files and you can see the history of 605 everything and at the time when all the residents … There were 75 residents and every single one of those residents wrote a letter and gave their story about how they felt about the situation; how they felt they were informed or not informed. It clearly shows you there that everybody was not informed. So I think that is quite significant, from the very beginning.

610 Q53. Mr Singer: So as far as you are concerned, there is only one solution to this. Have you got any alternative solutions?

Mrs Grogan: No, we have not really. We are just hoping that you look at it and consider that we are genuine, honest people who went into this unknowingly really, what it was all about, and 615 find ourselves in a situation where our hands are tied to do anything about it. That is why we have asked the Government to help us, to sort some kind of solution out to it.

The Chairman: Okay. Thank you.

620 Mr McMurdo: Whether it was miscommunication from Gough & Co with the builders or Gough & Co with the Government, I do not know. When my kids leave home … I am getting old. I am a 50-year-old. I want to downsize and leave it for another first-time buyer. It is tied up at the moment.

625 Mrs Grogan: That is something, isn’t it? (Mr McMurdo: Yes.) If this does not come to anything then everyone is just going to sit and wait till the 21-year period is up anyway (The Chairman: Yes.) and those houses are not going to be free for any other people to buy on the market. So that is a significant point.

630 Mr Singer: Just to go back to –

The Chairman: Hang on a minute. Mr Harmer.

635 Mr Singer: Oh sorry.

Q54. Mr Harmer: It seems to me that one of the issues is obviously with Gough & Co and the fact that … Would you say that they seemed to act in your interests at all, or did they just really leave you with – ? 640 Mrs Grogan: At the time or afterwards, do you mean?

Mr Harmer: At the time.

645 Mr McMurdo: At that meeting, to be honest, because I said I would not sign saying I would not hold them to blame, they just totally … just that was it. They did not know where they stood, but that was their insurers for them, so I mean –

______15 FTBS 51 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q55. Mr Harmer: Do you think there are any lessons going forward for future schemes? 650 Mr McMurdo: The lessons are that whoever is going to be the lawyer, whether it is coming from the building company, they must have everything written out. I mean the meeting with Gough & Co that I went down to, we were in and out within 15 minutes. This is a house! You know, they should have gone through everything and it was all just quick, quick, because 655 perhaps Gough & Co thought, ‘Well, it is discounted. Just fire them through.’ Well, this is what has happened. There has been a miscommunication with the builder, Gough & Co … whether Government, I do not know.

Mrs Grogan: I must say I did contact the builders afterwards as well and they said they did 660 not interpret everything that way either. So I do not think they fully understood.

Mr McMurdo: So a miscommunication somewhere along the line. Whether in future, places like Gough & Co know exactly what they have got to go and whether it is all set out properly. I got an A4 piece of paper telling me this, this, this and if you just sign there. I was out in 665 about 15 minutes. Now, we are talking somebody’s –

Mrs Grogan: I think if everybody had a different advocate from the builder and the Government as well, that would have ... (The Chairman: Helped.) helped.

670 Mr McMurdo: Yes. (The Chairman: Okay.) I think this bulk, ‘Use them’ ...

Q56. Mr Singer: People did though. You said other people did use –

Mrs Grogan: Two other people did. Yes, so – 675 Q57. Mr Singer: As far as you know, did they understand the pre-emption period?

Mrs Grogan: No. No, they read them the same as Gough & Co.

680 Q58. Mr Singer: Can I just come back to a question that I asked, just for clarity. I said to you as far as you are concerned you have only got one answer, which I assume you want the last five or six years cancelled, (Mrs Grogan: Yes.) but then you said, ‘We want Government to sort it out.’ But you only want them to sort it out with that answer?

685 Mrs Grogan: Yes, I mean we would just like … Yes, I do not expect to go into anything to do with Gough & Co and things. We are not really interested in –

Mr Murphy: It is not a witch hunt. I think we just want our house to be our house. My son is going to be going to university soon so all I want to do is ... It would be nice to have a … but you 690 cannot use your house as any sort of collateral. You own something but it is not worth anything.

Mrs Grogan: It is just, 21 years is a long time to be restricted.

Mr McMurdo: When you get told five, and it has been 14 years this year, so it is not as if we 695 have come to you after five years and said, ‘We want all this sorted out.’ Fairness is fairness.

Mr Murphy: I think there has been a lot of time and effort put in by everyone – Government and the residents. People have left because – ‘I am going because I cannot extend, I cannot do this …’ 700

______16 FTBS 52 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Mrs Grogan: The problem is when we have kept trying to address it there is a different person in charge as well, as time has gone on, as you will see in the history of it all – the files that I have kept.

705 The Chairman: Yes, people move on and schemes move on. (Mrs Grogan and Mr Murphy: Yes.) I think the good lesson is they seem to have learnt from this scheme, but there are problems still with your scheme. We appreciate that.

Mrs Grogan: And if we ring the Department up no one will speak to us. 710 Mr Murphy: Yes. ‘You need to speak to the Attorney General.’ But you cannot speak to the Attorney General; speak to a lawyer, but that costs money and you are flogging a dead horse really.

715 Mr McMurdo: Lawyers keep it going, keep it going and it still costs more and more money. I do not have a bank account where I can say, ‘Yes, go on.’

The Chairman: Right. Any further questions?

720 Mr Harmer: No.

Mr Singer: No.

The Chairman: Can I thank you for your attendance this afternoon. It has been very useful to 725 fill in on the bits, to give us a bit more understanding. Obviously, we are going to take evidence from the Department later and we will be putting some of the points you made to them. Thank you for your attendance this afternoon.

730 Mrs Grogan: Okay.

Mr Murphy: Thank you very much.

Mr McMurdo: Thank you very much.

The Committee adjourned at 3.08 p.m. and resumed at 3.32 p.m.

Procedural

735 The Chairman: Good afternoon and welcome to the Select Committee on the First-Time Buyer Scheme (Petition for Redress). We have heard from the Petitioners this afternoon and we are going to hear from your good selves in a minute. My name is David Anderson. I chair this Committee. With me are Mr Ray Harmer, MHK, and 740 Mr Leonard Singer, MHK and Deputy Speaker. Can I ask you to ensure that your mobiles are turned off or on silent and that we do not have any interruptions as a result. For the purpose of Hansard, I will be ensuring that we do not have two or more people speaking at once.

______17 FTBS 53 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

The Committee was established by Tynwald on 21st October, with a remit to consider and 745 report on the Petition of Redress of the residents of Harcroft Meadows. This Petition was presented on Tynwald Hill in July 2015.

EVIDENCE OF Mr N Black, Chief Executive, and Ms D Reeve, Director of Housing, Department of Infrastructure

Q59. The Chairman: Can you give your name and position, please.

Mr Black: Good afternoon. Nick Black, Chief Executive, Department of Infrastructure. 750 Ms Reeve: Hello. Debbie Reeve, Director of Housing, Department of Infrastructure.

Q60. The Chairman: Thank you. Can I ask you: would you like to make an opening statement in relation to this or would you 755 just like to take questions?

Mr Black: Thank you, Chairman. I think Ms Reeve and I are simply here to assist you, so if you would like to ask any questions we will do our level best to either answer directly or, if necessary, to provide you with further information. 760 The Chairman: Thank you and I appreciate some time has gone on since the creation of this scheme and officers in the Department have come and gone in the meantime. Maybe if I could just pass over to Mr Harmer at this stage.

765 Q61. Mr Harmer: Thank you, Chairman. We have been circulated a discussion from the Council of Ministers in September 2003. Was this discussion relating to Harcroft development and what was your understanding of what came of it? There are are three elements to it, which were: it relates to the pre-emption rights and legal 770 agreements for first-time buyers under the scheme to be reduced to a period of not exceeding 10 years; the second one was a reduction in pre-emption agreement would be applied in retrospect for properties already purchased under the House Purchase Assistance Scheme 2002; and, thirdly, that legislation be introduced to cover the Department’s rights of pre-emption.

775 Mr Black: Mr Harmer, may I be rather unfair as to ask you just to clarify the question?

Q62. Mr Harmer: Was that relating to Harcroft Meadows? What came of that discussion and what action was taken as part of that discussion?

780 Ms Reeve: If I take a lead on it, Mr Harmer. The CoMin discussion, I believe, was actually relating to the HPAS 2002 scheme, so it was not the Harcroft scheme that it was in relation to. That is my understanding of the information I have been able to glean.

785 Mr Black: I would have to add, Chairman, if I may, this is exactly the situation that you predicted would happen. Neither Ms Reeve nor I were responsible for drafting that Council paper. In fact, I had not seen it until your Committee started looking for it and you would probably have to find the Minister at the time and ask him what was discussed in Council.

______18 FTBS 54 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

We have no records to indicate that it was directly related to the Harcroft scheme. It appears 790 from our records to be related to a more general discussion of the House Purchase Assistance Schemes that were going through at the time.

Q63. Mr Singer: But item C does say, ‘Legislation be introduced to cover the Department’s rights of pre-emption.’ So that would cover any scheme, would it not? 795 Mr Black: I can certainly see that it could be applied to Harcroft, Mr Singer, but –

Mr Singer: I know you were not there.

800 Mr Black: – I do not know the intention of why it was brought to Council in the first place.

Q64. Mr Singer: But do you have any idea why the Council of Ministers asked for legislation to be introduced to cover these points? The way Government works sometimes, it could still be in the legislative programme from 15 years ago. It was never implemented – ? 805 Mr Black: Mr Singer, as you know, I would have to agree with you: it could still be in the legislative programme. All I can tell you is, from looking at our own legislative programme, it does not appear to feature in that currently. I am afraid we are really just trying to almost guess as to what might have been in the minds 810 of politicians and their officers, realistically, nearly 15 years ago. So I am sorry we are not able to help you. We can search back further through our records but we brought with us what we have and that is very minimal information, I am afraid.

Q65. Mr Harmer: I just want to clarify one further thing. In your original written submission, 815 of 13th November 2015 – and just to repeat it, you said in paragraphs 29 to 30:

... the then Director of Housing responded to Mr Cretney MLC on behalf of the Minister and Members of the Department in a letter of 13th November 2006, stating that a unanimous decision had been reached that the terms of the purchase agreement should not be altered ... The letter referred to above concluded that the Department had given due consideration to the issues raised and could not keep revisiting the matter.

Does that remain the Department’s view?

Mr Black: Mr Harmer, you really would have to ask the Minister what his view is on these matters, or Mr Thomas, as the Member for Housing. As an officer, as I am sure you will 820 appreciate, it is not for me to determine or direct what the Department’s view might be. Certainly, I have not been party to any discussion where there has been a proposal to make a change from that position. No one has said to me, would I make arrangements to release anybody from a pre-emption agreement. I am aware that, of course, if I was asked to give a view on whether that should be done, I 825 would have on one hand, as I said, written to your Clerk to say, to balance the fact that this is taxpayers’ assets that effectively would be written off, there would have to be some Treasury concurrence and there would have to be, I presume, some justification politically for why the Minister would want to write-off a value of potentially tens of thousands of pounds. I can say that I have not been asked to engage in any of those discussions or give any of that 830 advice, but that is not to say of course that the Minister would not have it in mind to consider the matter. So I am afraid, in the absence of the Minister or the political Member, I cannot give you a clear answer other than to say I have not been asked to do any work to change the position from that.

835 Mr Harmer: Thank you.

______19 FTBS 55 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q66. The Chairman: In maybe countering that a little, can I just ask then ... there is not a great deal of movement in these properties at present and the time is running out when the Department will actually get its 30% back potentially on these properties, so the risk is not significant, is it, do you think, as a liability to the Department? 840 Mr Black: I think, Mr Chairman, it would probably depend on how the Minister wanted to view it. On one hand, he could say, with six and a half to eight years left to run on the agreement roughly, the fairest thing might be to let them run so that the people who are party to that agreement secured the full benefit. At the end of the 21 years, of course, the Department’s 845 interest disappears altogether, so if you are a house owner and you wished to stay that length of time then the maximum return would come from sitting out the 21 years, the Department’s 30% would effectively then disappear. If there was a situation where, as you say, the Department was looking to maximise its return rather than its social good, then, yes, there might be some benefit in saying, ‘Well, let’s take 850 something now rather than sit the terms out,’ but then that would depend entirely on whether the Minister was trying to secure income to reinvest into the affordable housing scheme or whether he was trying to see out the terms of a scheme designed to get people into houses who perhaps otherwise might not have been able to afford them. So I can certainly understand why you could argue there is a benefit from an early change. 855 Certainly I can see that, but again I would have to say you would really have to ask the Minister to attend to ask for his views on the matter.

The Chairman: Okay.

860 Q67. Mr Singer: You are obviously very well familiar now with the scheme, even if you were not before. Do you accept that mistakes were made in administering this scheme and information people were given from the Department about the scheme? Because, as you know, the complainants, the people who have put the Petition forward, are saying, ‘Look, we were not told by the Department. The Department did not tell us that there was the pre-emption scheme 865 of 21 years, etc.’ That seems to be unanimous amongst them and yet the Government did send a letter out saying they had told people.

Mr Black: Mr Singer, again, as you quite rightly say, all I can do is go from my reading of the files and the reports prepared. The Department’s position is that the legal agreements signed by 870 the purchasers made it clear that there was the pre-emption agreement, as distinct from the House Purchase Assistance Grant scheme that both ran in parallel. Whilst I can understand if those individuals felt they were not aware and they may feel that the legal advice they had taken should have made them aware of that, then the view from the Attorney General’s Chambers that we have taken as a Department, and indeed its predecessor 875 Department, is that that contract is valid and was properly made, properly signed and that if those individuals felt ill advised then their first course of recourse should be to the people who gave them that legal advice or of course to the complaint scheme for legal professionals. So I think we have letters on file where people have made modifications to the properties, where they are, according to the terms, required to notify us and at that point where permission 880 has been given, it has again been drawn to their attention that they may not realise the full value of the investment in the property because the Government has the 30% stake. So I do not accept that mistakes were made. I cannot go back in time to the time these properties were sold, Mr Singer, and say how much was made of that aspect. I understand that when you are excited about buying your first house that might seem a very small part of the big 885 decision. I was not there to see if it was in a press release, or whether everyone was sat down and particularly talked through it, but fundamentally when entering a legal contract you take legal advice.

______20 FTBS 56 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q68. Mr Singer: Basically, there is not much you can tell us, in your position or Ms Reeve’s position, about what went on, at all. It is just guess work, if anything. 890 Mr Black: I would hope it is slightly more than guess work, Mr Singer. All I can do is look at the papers from the time and to look at the reports of our officers, to say how did this scheme work, what were the agreements? We have checked the advice that was given. We have checked that in our view it is legally sound and that these contracts are just that; they are 895 contracts that surrounded the sale. The Government at the time decided to assist people into affordable housing, not by changing the terms of the House Purchase Assistance Scheme to increase the threshold at a time of rapid house inflation, but by providing land so that a scheme could be developed whereby the house price was reduced and, as you have seen from the papers that we have provided, the 900 price of these houses was significantly less than that at the time when – as a number of you, I am sure, will remember – the house prices on the Isle of Man were roaring ahead with some very significant gains in the early 2000s –

Q69. The Chairman: Can I just interject there. So that is where the 30% came from – because 905 of the value of the land that the Government put in, which was not a cost to the builder?

Ms Reeve: Yes.

Mr Black: Yes, that is absolutely right. 910 In order to keep the house price down, the then Department of Local Government and the Environment provided land it owned at Harcroft to the developer, with an agreement with the developer that the developer would sell houses that were slightly better than its normal minimum standard, i.e. they were to the Government standard; and it would sell those at a price that fell within the thresholds of the House Purchase Assistance Scheme then in force at the 915 time, so that individual householders could buy a house that was within that scheme, thereby benefitting from a grant. But to allow them to buy that house, the price was reduced through the grant of land, the Government’s equity in that house then was the land value and that was set at the time in the scheme and in the legal contracts that followed at 30%. Whether that 30% was a true reflection of the actual split of equity, I cannot now tell you 920 because I cannot go back and value that land again; but that was what all those contracts say – that 30% was the Department’s share.

Q70. Mr Singer: So what you are saying is you cannot accept that mistakes were made because you were not there. But if the same thing arose now, what would you do to make sure 925 that there were not the alleged mistakes that people are saying … to ensure that there was a fairness to the people buying, that they make sure they understood everything and they were not going to come back in another 10 years and say, ‘Well, we did not know about this’?

Q71. The Chairman: I think what Mr Singer is highlighting is the communication or lack of 930 communication between different parties. Do you think there is some way that a checklist or whatever could … should have been put in place, obviously was not put in place, or certain parties had that information and it was not relayed to the parties that were buying?

Ms Reeve: Mr Chairman, I cannot comment as to whether there was information provided at 935 the time or not, but I can certainly comment with regard to the schemes that we run now and it is very clear in all of the literature that you are strongly advised to get some independent financial advice before you even approach Government with regard to coming forward for first- time buyer’s assistance, because obviously you need to be mortgageable and you need to have managed a bank account in order for you to have done that.

______21 FTBS 57 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

940 In addition to that, as and when we move through the schemes with First Home Fixed – because there are two different schemes running at the moment – the advice is to get your own legal advice on any contract. You are signing up to a contract not just with the bank for your mortgage, but you are signing a contract with a builder to buy a new property and if you are receiving assistance from Government there is a legal agreement that sits alongside that 945 conveyance and we make it very clear to people that they get independent legal advice on those agreements.

Q72. Mr Harmer: So would you say now that it has improved – the first-time buyer scheme – in terms of communication, in terms of – 950 Mr Black: Mr Harmer, I think if I may jump in, it is difficult. Ms Reeve has told you she did not know what was done originally, so we cannot say it has improved because that implies a comparison. I think she is trying to reassure you that the situation now is one where there is good 955 information and people are told to check. I think if you were to – and you may well have done this … I looked at the original contracts that were exchanged. Section 19 of the contract relating to purchase price, I find myself to be quite clearly written. I accept that I am used to dealing with the written word, though I am not legally qualified in any way. It says, ‘This will be the purchase price and you are obliged to sell the property back to Government with two months’ notice,’ and 960 how you do it, and recorded delivery … it is all laid out and that is in the legal document. But I understand of course that that legal document could have been handled by an advocate and someone could have been told by their advocate, ‘Well, sign here.’ There was a letter from ourselves, indeed, in the documentation you were sent on the date that your Chairman has referred to; the letters explaining what happened. ‘Properties have been 965 subsidised …’ – I am quoting here from a letter of 13th June 2001 – ‘Under the sale agreement, if you wish to sell within five years you will be required to offer it to the Department at 70% of the market value. After five years you will offer it back for 70% of the then valuation.’ So there were letters that all ... whether or not you now find them acceptable, given the level of understanding that Petitioners have demonstrated, they may not have been adequate, but it 970 is not that the Department at the time did not try to communicate –

Q73. Mr Singer: Should that letter have been sent to each purchaser or did it just go to the advocate?

975 Ms Reeve: It went to the purchaser.

Mr Black: It went to the purchaser – ‘Dear Mr and Mrs.’ It is included in the papers we sent to you.

980 Ms Reeve: Appendix C.

Q74. Mr Singer: Are you confident that did go out, because, again, we are told that they were never received?

985 Ms Reeve: The letters in question are actually … there is a slip at the back that actually says, ‘We accept the offer of a plot to proceed to sale.’ So you have to have sent that slip back –

Q75. The Chairman: That was a cut-off slip on the back of that?

990 Ms Reeve: It is a sheet at the back of the letter.

______22 FTBS 58 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

Q76. Mr Harmer: May I ask if we have still got records of all of those slips or would it have been too long ago?

995 Mr Black: We can look.

Ms Reeve: I can certainly have a look.

Mr Black: We will happily look for you, Mr Harmer. 1000 But certainly our copies have the names and addresses of the plot holders and I do not see how they can have accepted the offer without returning the slip and the slip was with the letter. But if we get the copies of the slips I can understand how that would help you and we will put those with the letters and try to identify one for each property.

1005 Q77. Mr Singer: One question is on the valuation of the houses. We have a Government valuer who is … I know the Government Valuer is from Treasury –

Mr Black: Yes, that is right.

1010 Mr Singer: – but who is he working on behalf of?

Mr Black: The Government Valuer is currently Mr Andrew Wallis.

Q78. Mr Singer: There is a deputy as well, isn’t there? 1015 Mr Black: There is, but Andrew is the Government Valuer. He is employed by Treasury and he works on behalf of Government as a whole.

Q79. Mr Singer: Accepting that a normal estate agent does value above what they consider 1020 market value in order that they can move round their prices, why would you think that there could be a £40,000 to £50,000 difference – as we have been told today – between the Government valuation and the estate agent valuation?

Mr Black: Again, I suspect you would have to ask Mr Wallis directly, Mr Singer, but when I 1025 have dealt with him in other situations where there have been different values put on by different parties, I have reached the conclusion that the RICS and their various Government bodies have clear standards as to how valuations are achieved and that they have to take into account market data, similar transactions and a whole range of factors. They have a professional code and I do not think it is in any way possible for a valuer, professionally, to distort a value to 1030 suit the ends of the client or the customer. I am sure Mr Wallis would answer that for you if you wish to approach him directly.

Q80. Mr Singer: Evidence has been given to us, for example, that one particular house had, I think, four or five valuations from estate agents and they were all within £10,000; yet when it 1035 went to the Government Valuer it was £40,000 or £50,000 less.

The Chairman: We would have to ask him about that.

Mr Black: I am sure he would be able to explain it to you, Mr Singer, but I can understand 1040 why you would wish to ask him.

Q81. Mr Harmer: On that same point, in a sense, has that been your experience? Have you, anecdotally, thought that Government valuations are modest or reasonable compared to the market?

______23 FTBS 59 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

1045 Ms Reeve: A valuation is only ever a pin point at any one point in time, so it is always a difficult one and, as Mr Black has said, it will depend on the experience of the market in that area, that location. But in the job that I do, the valuations are there or thereabouts of the true value of the property.

1050 Mr Harmer: Thank you.

The Chairman: Okay. Any ... Roger?

The Clerk: No. 1055 Q82. The Chairman: Okay. Is there anything else that you would like to say that has not come up in our questioning?

Ms Reeve: No, I do not think so. 1060 Mr Black: I think, Mr Chairman, perhaps the only point that I have gathered from my reading of the scheme – and I am sure you share my understanding – is that there is a big difference between the House Purchase Assistance Scheme, as a grant scheme that could be applied to anybody, and to Harcroft Meadows, where there was also this pre-emption in respect of the 1065 land value that you and I have recently discussed just this afternoon. So they are very separate things. The Department continues to provide affordable housing support through the schemes that Mrs Reeve has explained, but issues to do with this changing the purchase price through subsidising land transactions, from what I can understand, had not been repeated; that the approach now is a simple grant scheme. There are variations; there is 1070 First Home Fixed and First Home Choice, and those involve equity shares, but those schemes are laid down in the Tynwald approval documentation. I do not believe the Department is currently considering, or has recently considered, any system whereby some sort of equity was put in in terms of notionally free land.

1075 Q83. Mr Harmer: But just to clarify, there is a scheme where the Government has 30% of a property?

Mr Black: Equity schemes.

1080 Q84. Mr Harmer: And they tend to last for 10 years, but some of them, if the Government still has that equity, could go on in perpetuity?

Mr Black: Yes, they could. Those are equity schemes. I am trying to make the distinction, Mr Harmer, that we have not tried to manipulate the price of a property to bring it within a scheme. 1085 That was a particular problem at the time when house prices rose rapidly.

Q85. Mr Harmer: And those equity schemes, they are on the Government valuation or are they on the open market?

1090 Ms Reeve: They are on Government valuation for the First Time Fixed. Just to clarify, with regard to such, the shared equity scheme we have at the moment, because we do not go down the route of cross subsidising with land values … If I can put it in such colloquial terms, Harcroft was a silent equity share. So as and when you sold your property, 30% of that value at that point in time would come back to Government. 1095 The current shared equity scheme is an equity loan. So it would not be a silent share. After the first two years you would start to pay and be charged interest on that equity loan and that is actually, from the Government’s perspective, to encourage people to staircase up and buy all of

______24 FTBS 60 SELECT COMMITTEE, MONDAY, 1st FEBRUARY 2016

the property as they become more financially sustainable, to actually make that happen for them. That money then comes back into Treasury to enable other first-time buyers to be 1100 assisted.

Q86. Mr Singer: Can we just come back to these slips that you are going to look for. Obviously if you can find the slips then that gives us information; what do we assume if you cannot find the slips? 1105 Mr Black: I think, Mr Singer, all you could safely assume was that we had looked and unfortunately had not found them. Given the age of these pieces of paper, they could be well beyond the dates from which we would normally keep records. However, because they relate to what became a legal contract, I think there is a much better 1110 chance than average that we will have them with property folders or with the documentation the AG has held –

Q87. Mr Singer: What I am coming to, obviously, is it is said by the purchasers that they never received them. Obviously, you are saying – 1115 Mr Black: They should have done.

Mr Singer: – they should have; if they had not received them they would not have been able to sign for the properties. So the question that I come back to is if you go through all your 1120 records – and you are saying they should have been kept – and they are not there, what do we assume? That they did not receive them.

The Chairman: Let’s cross that bridge –

1125 Mr Black: Yes, let’s cross that bridge –

The Chairman: – when we come to it, if we come to it. But you are aware that we would like that information as soon as possible.

1130 Mr Black: Absolutely.

The Chairman: And if there is any further information that we require, Mr Phillips will be in contact.

1135 Mr Black: Of course.

The Chairman: If there are no further questions, that is the end of our session and we will now be sitting and meeting in private. Thank you for attending this afternoon.

1140 Mr Black: Thank you, Mr Chairman.

Ms Reeve: Thank you.

The Chairman: The meeting is now closed.

The Committee sat in private at 3.57 p.m.

______25 FTBS 61 62

WRITTEN EVIDENCE

Appendix 1: Letter dated 22nd January 2002 from Mr Thomas Harmstone, Gough & Co.

to Miss Y Grogan

65 66 67 68 69 70

Appendix 2: Letter dated 17th February 2003 from

Mr Thomas Harmstone, Gough & Co.

71 72

Appendix 3: Letter dated 21st October 2003 from

Mr L.V. Crellin, Housing Policy Manager, Department of Local Government

and the Environment to Mr and Mrs G and J A Kinley

73 74

Appendix 4: Letter dated 13th November 2003 from

Mr Paul Kerruish, Gough & Co.

to Miss Y Grogan

75 76 77 78

Appendix 5: Letter dated 27th November 2003 from

Mr W.J.H. Corlett, Attorney General to Mr A.C. Duggan MHK

79 80 81 82 83 84

Appendix 6: Letter dated 5th February 2004 from

Mr Jason Coole to Mr L.V. Crellin, Estates and Housing Directorate

85 86 87 88 89 90

Appendix 7: Letter dated 11th July 2005 from

Miss F A Reeves, Legal Officer, Attorney General’s Chambers to Mr Jonathan Wild, Quinn Kneale Advocates

91 92

Appendix 8: Letter dated 25th July 2014 from

Julie McNicholl, Housing Policy Manager, Department of Health and Social Care to Miss Y Grogan

93 94 95 96

Appendix 9: Submission dated 11th November 2015 from Miss Y Grogan

11th November 2015

Jonathan King, Clerk of the Select Committee, Legislative Buildings, Douglas, Isle of Man, IM1 3PW

Dear Jonathan King,

In relation to your letter dated 30th October 2015 I would like reply to your questions as follows:

Q1. When did you sign up for the irst time buyer scheme and whom were you dealing with at the time? A1. Initially I illed in and signed an application form, but was not dealing with anyone in particular from the department. All my further dealing were with J.G.Kelly Property Management Company, then I was referred to Gough & Co. Advocates. I don’t have the exact date as you have all my document, but I signed the deeds on 7th August 2002.

Q2. What was your understanding at the time of the provision relating to selling the property within 21 years, and what is your understanding now? A2. Initially before and after signing the deeds I had no knowledge about the 21 year restriction on selling the property. In fact when I found this information afterwards from the DOLGE, I contacted J.G. Kelly and they said they had no knowledge of this and I also contacted the Attorney Generals Ofice who also said that this was not right and that they had no knowledge of this and that this was incorrect. I then spoke to Gough & Co. who also said they had no knowledge of this and at irst said that this was not right. They then contacted their lawyer. (You have all the information for this in my iles that Mr Malarky has presented to you)

Q3. What steps were taken at the time to ensure that you understood the provision? A3. None, as I clearly did not understand as I would have understood if I was told. In fact I asked the correct questions at the time of purchase and was clearly told the incorrect information. My advocate clearly did not interpret the deeds in the right way or understand the way they were written.

Q4. Have you invested in home improvements, such as a new kitchen or extension and does the First Time Buyers Scheme affect you in this regard. A4. I have made several home improvements such as; Gerloor (Karndeen) loor throughout the ground loor, a new kitchen, redecorated throughout, Garden plants, grass, decking and path, large double door garage, 6ft fencing all around the property,

98 ireplace, shower in upstairs bathroom, re-insulated and boarded small bedroom, shelving on walls in small bedroom, taken down cupboard etc.

Q5. To the best of your knowledge, are any similar schemes in existence? A5. No!

Q6. To the best of your knowledge, are there any plans to introduce any such schemes in the future? A6. No!

Q7. What would you like the select Committee to recommend to Tynwald? A7. Considering that we are genuine people and genuine purchasers, who clearly wasn’t made fully aware of the conditions of the purchase of the above properties. I feel considerations should be made in relation to the pre-emption period of 21 years a restriction too far, and a restriction that most would not have agreed to if they had known. I feel that all restrictions should be lifted from the property and we should be free from any encumbrances as was irst thought after the ive year period had ended, as we were irst informed by Thomas Harmstone from Gough & Co Advocates (as you will see from the documents that I provided to your committee) This has had a big affect on may peoples lives and how they have had to lead them, it is very restricting and debilitating. After 13 years I think that we have proved that we are not just speculators and have a genuine complaint regarding our purchase of these properties.

Yours sincerely

99 100

Appendix 10: Submission received 15th November 2015 from H Caine and T Lavery

101 i. I can’t remember the exact date I signed up to the first time buyer’s scheme; I have an original offer letter dated 22 November 2000. I dealt with Les Crellin from memory. ii. There was no mention what so ever of a 21 year perpetuity period at the time of agreeing to accept the house, no mention from the department or from my lawyer and it does not mention it in the house deeds either, I found out about it 2 years later after moving in when we tried to re-mortgage and the bank refused because the government had a first charge on the house , I contacted Les Crellin at the housing and my MHK David Cretney, Les Crellin told me the houses were subject to a 70/30 agreement because the houses were actually worth 115,000 and in order for people to be able to purchase them the government offered them at a reduced price and retained 30% of the value, I then started informing any neighbours that I was familiar with that the houses were subject to clauses, some of the residents myself included formed and informal committee to try and find out more, we did a doorstop survey at each residents house to try and find out if anyone knew about the clauses not one person knew not one we were greeted with disbelief , David Cretney sent a letter to Pam Crowe (I have the original dated July 2003) and we ended up having a meeting with her, another neighbour got Alfie Duggan on board he contacted the Attorney General’s office who sent back a report (dated Nov 2003) in that report it stated that there was a 21 year perpetuity that was the first time I had ever heard of it. I understand now that the house is subject to a perpetuity covenant and we cannot sell on the open market until that time has passed, although I still have no idea of when that time is up I presume it runs from the day we completed on the house but I’m not sure.

iii. No steps were taken to ensure we knew it was never mentioned at the time. iv. We have made many improvements on the house we have added a conservatory an extension by the way of a garage, a new kitchen, a replacement pvc front door and windows, added a slabbed patio, decked area ,shed and summer house, installed oil central heating. We thought if we have to stay here 21 years we may as well have the house how we want it we had two teenagers at the time of moving in so we needed more space, interestingly John Houghton took a selection of questions about the estate to Tynwald in 2010 and the then minister of social care said the house should never been extended to increase its market value to a level where it exceeds the maximum value prescribed under the terms of the current HPAS for first time buyer properties while a pre –emption period is valid, In other words we were not supposed to improve and extend, well 2 of our improvements went through the planning process and were publically advertised in the paper at no time did anyone from the housing ever say stop you can’t do this! I think at one point the planning office and housing were in the same building, is this another case of making the rules up as they go along? I understand the department get a 30% share in any home improvements the way

102 it stands at the present time, even though I’m yet to be convinced that this is legal since it does not mention in the deeds what happens after 5 years. v. I believe the FTB scheme has been changed to an equity share; this is fine for people who knew what they were getting into unlike on our estate. vi. I know that it has already been introduced. vii. I would like an independent conveyancing lawyer to read the actual deeds I have in my possession and tell me how the department can legally exercise a right on the terms they are proposing when it does not say it in black and white on the deeds. I only have the housing departments word and the Attorney Generals that that’s is what the deeds mean but as I keep saying that is not what the deeds say, whoever drafted up the deeds made a mistake and maybe omitted a paragraph . This is why my lawyer did not pick up on it, The residents have a letter from the original Lawyer saying that there is a clause for 5 years then the house would be free from encumbrance’s, I would like this looked in to.

Yours sincerely

H Caine, T Lavery.

103 104

Appendix 11: Submission dated 16th November 2015 from Mrs W Carson

105 Mrs W Carson 16.11.2015

Dear Sirs: Re: Select Committee

I would like to provide the following information to the above committee as follows:

I signed up for the first time buyer scheme in December 2000 and purchased my property in March 2002. At that time my understanding was that after a period of 10 years I would be able to sell my property on the open market without any monies due to the IOM Government. At no time did a representative of Government or my lender or lawyer explain this was not the case and I would be bound to Government for 21 years. I have lived in my property for the last 13 years and have made substantial improvements both inside and outside the property, e.g. new kitchen, bathroom, fireplace landscape garden which obviously affects my first time buyer scheme. To the best of my knowledge I do not know of any such similar scheme in existence at this time or that there are any proposals to introduce such a scheme in the future. In view of the above I would urge Government to Quash this scheme in it's present format as I believe I was not provided with the full details of the scheme when I signed the agreement.

Yours Sincerely

106

Appendix 12: Submission dated 19th January 2016 from

Kelly and Brian Liggins

107 From: kelly Sent: 19 January 2016 21:19:25 To: Jonathan King Subject: First time buyers scheme Harcroft Meadows Importance: Normal

Dear Mr King

I am writing in regard to the petition that Tynwald are now looking into regarding the Government owning 30% of our property. Firstly, please accept my sincere apologies for the delay in my email however, my Dad is very ill and this all happened around the time we received your letter and I totally forgot about writing to you. I feel my email my still be of some use so I wanted to send it anyway.

I live at 29 Harcroft Meadows and myself and my husband bought this house back in September 2002. It was a 2 bedroom house when we bought it and we had one child who was 1 year old when we finally moved in. I was 20 years old at the time and am now 34 years old. Obviously, when you buy your first house at age 20 you don’t really expect to stay in that house forever. Our 1st child is severely physically disabled and wheelchair bound. When he was born we did not know at this time that he would never be able to stand or walk. If we did we would have requested a 3 bed roomed house as it would have provided a downstairs toilet and more storage space for all the special equipment we had for Cole. We then went on to have 2 more children and while pregnant with our second child we put in for planning permission to extend our 2 bed house into a 4 bed roomed house. This included a downstairs bedroom and bathroom with wheelchair access for Cole. We received planning permission but then received a letter from the DOLGE telling us were can not extend without their permission. I then wrote to them and we exchanged various emails over the space of 1 year! They knew exactly why were were extending our house and they just keep replying to me stating “without prejudice” and basically ignoring our requests. In the end I involved David Cretney and within 2 days we had the permission to put the extension on. During this year we already had our remortgage money from Abbey National and as part of the agreement we had to pay back our Government Grant. We paid the full £3,766.00 back to the Government and received a receipt to cancel. To cancel what I have no idea as apparently this makes no difference to the fact the Government own 30% of the full value of our extended house apparently. The fact they take 30% of the unextended house is bad enough but to then want to make money out of the fact we have extended our house and only done so because we couldn’t afford to move house is terrible.

When all the rumours started about this 30% years ago I rang Gough and Co and spoke to Thomas Harmstone who was the solicitor we used to buy our house and also received a discount for using them as they were recommended by the Government. Strange we received a discount for using someone that didn’t know about the 30% isn’t it? Thomas confirmed that this was not true and explained that the grant decreases over a period of 5 years by a percentage each year until you don’t have to pay it back. Obviously this was not true. I took my deeds to Quinn and Kneale and they confirmed that there is no end date stated in the deeds and they have basically been written in a way to screw us over to be blunt.

Our lives would be so much easier if we could move to a bungalow and by having to give the Government more money than we paid for the original house in the first place if we moved means we could never afford to do this. Cole can’t get up the stairs and has to phone me if he needs to toilet etc but if we all lived on the same level I know he would feel much happier. I have tried everything to get the Government to help me with this and it’s like banging my head against a brick wall. I even asked if they would be willing to transfer the 30% ownership to a new property just so we could move and was told no. I have even been in the office in tears and still came out in the same situation. What is more annoying is that originally the Government were meant to be adding the single story extension to our house and paying for this and I know they have done this for other people. However, this process was turning into another

108 battle so we just put ourselves in a lot of debt and did it ourselves as we wanted to make ours and Cole’s life easier. It’s just annoying that the Government are than happy to take back our money on this. The DOLGE kept telling me this was the reason we got our houses cheap. I don’t believe that £75,310 back in 2002 for a two bed house with terrible plastering no fencing at the back boundary and a massive mud heap for a back garden was any more favourably priced than any other house during that period. I think it was reasonable considering what they do for the 1st time buyer houses now. Why didn’t the Government just make increase the cost of the houses? Obviously because they wanted to make money out of us.

I have probably given you enough information to help now and I really do hope that this can be resolved otherwise my son will be 22 before we can ever consider moving to a bungalow. I feel this is so unfair considering we have paid the mortgage all the bills, full rates and maintenance of our house but the Government just end up with a load of money for nothing if we do sell. Also the 21 years also only came into play at a later date as by Manx law they weren’t allowed to make it any longer. The Government were meant to be helping us but we are no better of as just stuck in a first time buyers estate. Abbey no longer allow us to do any remortgage if you live in Harcroft Meadows due to all this with the Government and even when they did we had to tell the Government all our business as to why were borrowing money and how much and they had to agree it. This is all just so wrong. So unless we move mortgage company we can never borrow any money in the future even if we wanted too. We are stuck in this house until at least 2023 otherwise the Government will take approx £80,000 from us so I’m not really sure what the point in buying a house was really. We might as well have waited for a council house at least they would have had to provide us with a suitable one for our son. They don’t care that we have always tried our best to help ourselves and make our life easier by working hard. I have had to have several severe operations due to lifting my son and am now totally unable to do that and a bungalow could have changed this had we had the option years ago.

I’m sorry for such a long note but I really do feel this is important and hope this may help to change this situation for all of the residence at Harcroft as well. Even if the Government agree they will drop this from this date forward would be amazing.

Thank you for taking the time to read this and I really do appreciate your help.

Kind regards

Kelly

Kelly & Brian Liggins

109 110

Appendix 13: Submission dated 13th November 2015 from Caroline Mayers

111 112 From: Mayers, Caroline Sent: 13 November 2015 16:15 To: Jonathan King Subject: FIRST TIME BUYER SCHEM

Dear Sir,

I’m sorry to email regarding the above today. Just conscious that I needed to submit my feelings on this before Monday the 16th. I can and will if necessary follow up with a signed hard copy.

In answer to some of the issues raised, please see below.

• I originally signed up for the 1st time Buyers Scheme in 2001. It was a representative from the Government and JG Kelly that I met with. I was basically shown the plans of the house and told of the scheme and what may be Available to us in regard to a grant from the Government. • I was told that the Property could only be sold back to the Government However not informed that they owned 30% of the Property. I did understand that the Grant reduced over time. • One of my main problems is that I can not renovate or improve my home as My Husband (by your Rule) is not allowed to be added to the Title Deeds. Which therefore means that I can not seek an equity release to improve my home. I.e., Kitchen or extension as we have 4 adults living in the house. There is obviously a lot of equity in the house but the 30 per cent owned by the Government does not enable us to utilise this. • I know that the next development in Warcraft has a totally different scheme which seems FAIR. I’m NOT SURE that anybody would buy a house and only own 70%. • It would be nice going forward if we could do something with regards to the 30%. Even if I was able to put my Husband on the Mortgage would be a start, enabling us to do work to the Property which is so badly needed. • We were recommended to Gough and CO Solicitors by the Government who suggested it would be easier and more cost effective as he had been dealing with the Deeds. At not one time was it mentioned that we only owned 70% of The Property. I find it hard to believe that every single Purchaser in this Scheme was not notified.

I hope my thoughts are acceptable by email, Please let me know if you require more.

Kindest regards

Caroline Mayers.

1 113 114

Appendix 14: Submission dated 12th November 2015 from Linda McMurdo

115

12.11.15

Dear Mr King

Thank you for your letter dated 30.10.15 regarding our home at Harcroft Meadow.

I will try to answer your questions as best I can

Question i:- We signed up to the First Time Buyer Scheme in September 2002 dealing with Gough & Co. ii. Our understanding of provision relating to selling the property was that if we were to sell within 5 years the property had to be offered to the Government first and 70% of the sale price would be ours with the Government owning the remainder 30%. The Government had their own valuers which valued the property at less than the market value.

Between selling after 5-10 years we were led to understand the property could be valued by our own appointed valuer and the Government still owned 30%.

We were told by a Mr Harmstone that if we wished to sell after 10 years we could sell at 100% AT NO TIME 21 YRS WAS EVER MENTIONED!!! If it had been we probably wouldn’t have gone ahead and bought the property. iii. There were no steps taken at the time to ensure we understood we would be unable to move on for 21 years. iv. We have not invested in home improvements v. There are no similar schemes in existence to the best of my knowledge vi. Not to the best of my knowledge vii. We would like the Select Committee to recommend to Tynwald to reduce the 21 yrs to 15yrs. This would enable us to downsize (as our two boys are now adults and will be leaving home soon) and release the property for a first time buyer family. Also there is no way we will get another mortgage at our age now so we will be here for life whether we like it or not if it remains at 21yrs.

I hope I have been of help and please don’t hesitate to contact me if I can be of further assistance.

Yours sincerely

116

Appendix 15: Submission received 16th November 2015 from Mrs Sharon Miller

117

To whom it may concern

I write to agree with the actions taken by some of our neighbours to dispute the contract clause we are under.

I wrote some years ago towards Yvonne’s petition and still feel the same, that we were duped into thinking any clauses would cease after 5 yrs.

In answer to questions listed.

We signed for first time buyer scheme approx year 2000.

We understood we could sell on open market after 5 yrs, only now believe we own 70% of our home.

No steps were taken as the legal advice given at time of purchase also was to believe these clauses would cease.

We have spent money in our kitchen and bathrooms exceeding thousands of pounds and in the garden.

No other schemes have this particular 70/30 % clause.

I doubt this mistake will be made again in the future by the government, or people wouldn’t buy!!

I would to recommend that after being here for 13 yrs already that we are given the right to sell on open market.

Our family has grown in this time and ideally we would move to a bigger house, if we couldn’t sell without the clause then we simply can’t afford to progress.

I feel this is unfair when we both work full time and should be in a better position to provide a bigger home for our family.

Yours Sharon Miller

118

Appendix 16: Submission dated 13th November 2015 from Mr and Mrs Summers

119 13th November 2015

Re: ‘Petition for Redress’ - Harcroft Meadow first time buyer’s scheme

Dear Select Committee,

With regards to your letter to Mrs Yvonne Grogan dated 30th October 2015, who has kindly passed it on to residents to give each of them the opportunity to reply in our own words.

i. These properties were first purchased from around 2000 or thereabouts, residents were advised by JG KELLY builder’s to use GOUGH & Co as the advocate for conveyancing because they were doing a cheaper deal for the Harcroft development first time buyers, which as far as were aware mostly all of the residents used.

ii. Firstly in order to qualify for a First Time Buyers House an application was made in order to have the right criteria towards obtaining a financial assistance grant used to secure a second charge on the property, thankfully we managed to secure a financial assistance grant on the understanding it secured by way of second charge on our property through the House Purchase Assistance Scheme (HPAS 291).

Please note: (We paid our financial assistance grant back to the department in 2004 or thereabouts and have a receipt from the Attorney general Chambers stating the second charge was removed from our property, 21 Harcroft Meadow).

iii. Within the first five years the understanding was that if you wished to sell the property you had to sell it back to the Department for the original Purchase price of the property plus the full financial assistance granted to us. If you wished to sell the property after the (five year period) the purchaser has to firstly offer the property back to the Department (the option) to purchase the property at 70% of the market value at that time or the Government valuation whichever was the lesser, if the department did not exercise its option to purchase the property then the purchaser could sell the property on the open market and then repay the financial assistance granted to them on completion of the sale, our understanding was that the 70% pre-emption period ended after 10years like any other Scheme that the government HPAS has to offer, however when it was queried some years 120 late we were told that even if we were to sell after 5years the pre-emption period remained for 21years, we said ‘No way would we of signed up to that’ so thinking about it whatever alterations extensions that have been made the Government can get 30% of the whole property including all that too, the deeds also state that providing that the department has not exercised its right to purchase back the scheduled property and providing that the sale of the property is after the expiration of five years the Department has the discretion to reduce the amount of financial assistance repayable by the purchasers in accordance with the scheme, well I think it surely must of diminished by now. iv. We are a family of five including our three children, In January 2008 we were in a situation of thinking about selling our property because we needed to improve on its size, we wrote to the Department and asked if it was possible to upgrade to possibly buy a four bedroom house through a second time buyer type HPAS, we were told that the Department did not support this and that the Department could not assist in anything more than a three bedroom property of which we already had so we chose to build an extension, we personally invested around £98.450 on our property by way of extension, Single garage/utility room, up and over large bedroom with large en-suite bathroom, downstairs large dining room, a sun room-kids play room with tiled pitched roof leading onto brick paved patio and walkway leading to the driveway, this has almost doubled the size of our house. v. To my knowledge there are no similar schemes for FTB because after the Government did the HPAS for Harcroft they changed the scheme and I personally feel they quickly thought up the (21year Pre-emption right) because house prices had risen so quickly within that timescale of the scheme being started, however Harcroft residents shouldn’t have to be penalised because of that. Whilst extremely grateful to of got a foot onto the property ladder we feel that to be restricted the way we are for the pre-emption 21 years is discriminatory against Harcroft Meadow residents compared to the other people that have purchased properties through the HPAS schemes (One rule for one scheme - One for another), It doesn’t even state (in the deeds) or anywhere else regarding this 21 year pre-emption period, Why? We were all vulnerable to off signed up to this agreement especially as nobody knew this was the case, yes some people have sold from here now and moved on but most of them were well before 10 years anyhow, as soon as the new scheme for FTB moved to 10 years so should of the Harcroft HPAS. When we first heard of this the only advice we got was ‘please ask your advocate to explain the deeds through with you’, why? When we know what the deeds say it’s written in black and white, nothing is mentioned about this 21year Pre-emption right, then when we challenged it the advice was ‘please take legal advice on the details regarding your house purchase’, vi. There was a plan to introduce a similar scheme again just recently however that was under scrutiny straight away because of the unfair complexity of the situation once again. vii. The resolution should be that the residents of Harcroft should be able to sell and not have massive penalties incurred from now on especially as this is now

121 15years, ‘nobody’ would of signed up for a term as long as 21 years as stipulated ‘out of the blue’ by the Department, I’m sure you can understand and appreciate how frustrated we are in this situation, surely 15years is long enough and what they are stating is without reasonable doubt against Human Rights? This is affecting people’s lives, it’s certainly not a healthy situation to be in and extremely stressful to all the families involved, I would like to Refer to an article below that was downloaded from the Government website regarding ones human rights;

Does the Human Rights Act affect the way the Government and public bodies behave?

The Act says that all public authorities must pay proper attention to your rights when they are making decisions that affect the public. Public authorities include Government departments, local authorities and also agencies like the police; and even private companies carrying out public functions are covered by the Act.

This is not new – respecting rights and balancing rights and responsibilities has always been an important part of the public service ethos. The Human Rights Act makes sure that public bodies cannot ride roughshod over people’s rights; even if they think they are doing it for a good reason.

Public bodies have to be careful about the balance they strike and think hard about how they can cause the least possible harm to individuals, whilst still meeting the needs of the wider community.

The Human Rights Act is about ‘prevention’ rather than ‘cure’. Therefore public bodies need to ensure their legislation and procedures comply with Human Rights standards. They must keep people’s rights in mind when they make decisions and design new policies.

The 21years pre-emption decision was made ‘out of the blue’ with the Harcroft HPAS development, that is totally going against the above statement made by our Government, it is not stated anywhere in our deeds that the pre-emption right for the Harcroft HPAS is 21years.

I would like to take this opportunity to thank you for your time in looking into this matter on behalf of Harcroft Residents; we do hope there is a resolution to this.

If you require any further information or would like a copy of the receipt to cancel the second charge on our property after we paid our grant assistance back to the department for evidence, or in any case anything else you think we could help you with please don’t hesitate to contact us.

Kind Regards

Mr & Mrs Summers

122

Appendix 17: Submission dated 16th November 2015 from Samantha and Michael Workman

123 From: Workman, Samantha Sent: 16 November 2015 15:21 To: Jonathan King Subject: Re: Select Committe on the First-Time Buyer Scheme (Petition for Redress)

Please see our responses to the following letter sent to Yvonne Grogan on 30 October 2015:

We signed up for the First-Time Buyer Scheme about 1999 and dealt with the housing department in Government and Gough Kneale were the advocates used.

We thought there was only a 10 year provision on the house until Yvonne Grogan drew our attention to the 21 years limit.

None that I’m aware of.

We have invested in new kitchen, bathroom, wood flooring, and our back garden has been completely redone. We feel we have added value on to our property which we won’t benefit from if we ever chose to sell.

Don’t know about any other scheme like this within the First-Time Buyer Scheme.

We would like the Select Committee to recommend to Tynwald that we can purchase the 30% held by Government at a fair price (not the present day value of the property) that takes into consideration the money, time and upkeep we have spent on a home that we thought would one day belong totally to us.

Kind regards

Samantha and Michael Workman

Isle of Man. Giving you freedom to flourish

WARNING: This email message and any files transmitted with it are confidential and may be subject to legal privilege. You must not copy or deliver it to any other person or use the contents in any unauthorised manner without the express permission of the sender. If you are not the intended addressee of this e- mail, please delete it and notify the sender as soon as possible.

No employee or agent is authorised to conclude any binding agreement on behalf of any of the Departments or Statutory Boards of the Isle of Man Government with any party by e-mail without express written confirmation by a Manager of the relevant Department or Statutory Board.

RAAUE: S’preevaadjagh yn çhaghteraght post-l shoh chammah’s coadanyn erbee currit marish as ta shoh coadit ec y leigh. Cha nhegin diu coipal ny cur eh da peiagh erbee elley ny ymmydey yn chooid t’ayn er aght erbee dyn kied leayr veih’n choyrtagh. Mannagh nee shiu yn enmyssagh kiarit jeh’n phost-l shoh, doll-shiu magh eh, my sailliu, as cur-shiu fys da’n choyrtagh cha leah as oddys shiu.

Cha nel kied currit da failleydagh ny jantagh erbee conaant y yannoo rish peiagh ny possan erbee lesh post-l er son Rheynn ny Boayrd Slattyssagh erbee jeh Reiltys Ellan Vannin dyn co-niartaghey scruit leayr veih Reireyder y Rheynn ny Boayrd Slattyssagh t’eh bentyn rish.

1 124

Appendix 18: Submission dated 30th November 2015 from Mr David Cretney MLC

125 From: David Cretney Sent: 30 November 2015 15:04:25 To: Nina Lowney Subject: Harcroft Meadows Select committee. Importance: Normal

Dear Nina,

I welcome the consideration of this matter by a Tynwald select committee.

I was a little disappointed with some of the media coverage when the committee was established with suggestions that the residents voices would "at last be heard "for example.

As MHK for South Douglas I took my responsibilities very seriously even when during my 18 years as a Minister from time to time this placed me in a difficult position regarding other Ministers portfolios. I had many meetings with residents individually or as a group to discuss and take forward their concerns.

As stated in Tynwald the developers and some house purchasers used the same legal firm despite this being a matter raised during the first time buyers select committee report as something that should not happen and I really trust that this message will be firmly endorsed for any future schemes. It simply does not work. Residents, many of whom had not purchased property previously believed that the full implications of the scheme they were signing up to were not properly explained in advance. I attended the lawyers offices subsequently with a number of residents to put their side but clearly this was after the event.

I also sought and obtained meetings with every Attorney General prior to the current one and every Minister with responsibility for housing together with residents on a number of occasions and individually to discuss residents concerns and seek a clear indication of when they would be freed from the legal restrictions imposed by the scheme but to no avail as each Minister felt they could not assist in such clarification despite the doubts and perceptions over what was explained and what was not at time of purchase.

In September 2003 Council of Ministers paper (568/03) discussed legal rights of house purchasers under the House purchase assistance scheme and concluded that pre-emption rights in the legal agreements for first time buyers under the scheme be reduced to a period not exceeding 10 years; that such reduction in the pre-emption period be applied in retrospect to properties already purchased under the House Purchase Assistance Scheme 2002; and that legislation be introduced to cover the Department's rights of pre- emption.

I had, as it appears now, incorrectly assumed that this would apply to my constituents who had purchased in good faith and who even at that time I was making strong representations in relation to the bad advice received in conflict with the recommendations of the previous Tynwald select committee report. I was not alone in my understanding of this as a senior official was also unsure.

All the time this has been unresolved I have as well as my representations to AGs Chambers and Ministers with appropriate responsibility argued,sadly without success that this scheme had never been properly clarified to the innocent parties here, the first time buyers at least in part because of the duplication of legal advice. I have on a number of occasions raised my concerns in Tynwald,

126 particularly at the time of the most recent housing review when a proposed similar scheme was being put forward.

The fact remains that this was the only scheme to use this particular mechanism and I believe that says something quite loudly. I trust my former constituents can obtain long overdue clarity and that the situations of lawyers acting for both parties will be consigned to history.

Kind regards,

David.

David Cretney MLC. Member Legislative Council. Tynwald the 1000 year Parliament.

Member Department of Economic Development. Responsible for Tourism, Motorsports, Villa Marina and Gaiety Theatre. Member Department of Environment, food and Agriculture. Responsible for Forestry, Amenity and Lands Division, Curraghs Wildlife Park.

Trustee Manx National Heritage.

Chairman Manx Labour Party.

Isle of Man. Giving you freedom to flourish

WARNING: This email message and any files transmitted with it are confidential and may be subject to legal privilege. You must not copy or deliver it to any other person or use the contents in any unauthorised manner without the express permission of the sender. If you are not the intended addressee of this e-mail, please delete it and notify the sender as soon as possible.

127 128

Appendix 19: Submission dated 13th November 2015 from Mr Nick Black, Chief Executive, Department of Infrastructure

129 From: Wilson, Christine on behalf of Black, Nick

Sent: 13 November 2015 15:07 To: Jonathan King Subject: First-time buyer scheme Attachments: Harcroft meadow Select Committee - November 2015.pdf; HOUSING DIVISION - SCHEME COMPARISON - HISTORY.pdf; HARCROFT MEADOW - FIRST TIME BUYER SCHEME - APPENDICES.pdf

Importance: High

Dear Jonathan

Thank you for your email of 30th October 2015 concerning the Select Committee’s investigation into the first-time buyer scheme assisted properties at Harcroft Meadow. You will appreciate that the Department has had only a brief time to prepare this response. As a significant amount of research work has been required, it is possible that not all relevant documents have come to light and that further submissions may be required.

I believe that the following submission includes the documents you sought and addresses the points in your email of the 30th October. However, as the submission was prepared to provide as clear an explanation of the genesis and operation of the scheme as possible, the Department has not been able to precisely match the document to the numbered questions in your email. However, to assist, I will point to those sections of the submission that address your questions.

i) addressed in paragraphs 1 and 2 ii) addressed in paragraph 10 with context contained in paragraphs 3 to 9 iii) addressed in paragraph 11 iv) addressed in paragraphs 21 to 26 v) addressed in paragraphs 12 and 33 vi) addressed in paragraph 33 vii) addressed in paragraphs 27 to 32

Officers would be pleased to assist your Committee either by way of an informal briefing or by way of attendance at a public hearing.

Also attached is a paper detailing the history of schemes for information.

I trust that this assists but if I can provide any clarification please do not hesitate to contact me.

Regards

Nick

From: Jonathan King [ ] Sent: 30 October 2015 10:08 To: Black, Nick Subject: First-time buyer scheme

1 130 Dear Nick On Wednesday 21st October 2015 Tynwald appointed a Select Committee to consider and report on the Petition for Redress of residents of Harcroft Meadows presented at St John’s on 6th July 2015 in relation to the provisions of a first-time buyer scheme made by the Government and the residents of Harcroft Meadows. The Committee would be grateful if you could please supply by 13 November 2015 a copy of the first-time buyer scheme referred to in the petition and a written submission responding to the submission. It would help the Committee if, as part of your submission, you could please address the following questions. i. when was the Scheme referred to in the petition prepared, and by whom?

ii. why was the provision relating to selling the property within 21 years, included in the Scheme?

iii. what would be the effect of the provision in a case where a homeowner had invested a capital sum in home improvements, such as a new kitchen or extension? Would he have to pay to the Government 30 per cent of the full sale price or could a deduction be made for identifiable proceeds of his own subsequent investment?

iv. what steps were taken to ensure that the first-time buyers understood this provision?

v. are any similar schemes in existence?

vi. are there any plans to introduce any such schemes in the future?

vii. before presenting their petition for redress, what previous communication have the petitioners had with the Department? What do they want, and has the Department been able to satisfy them to any extent?

Many thanks.

Jonathan

Isle of Man. Giving you freedom to flourish

2 131

Harcroft Meadows

Response to Select Committee – November 2015

1. The House Purchase Assistance Scheme (HPAS) 1999 enabled grant assistance to be provided to purchasers of the First Time Buyer development at Harcroft Meadows.

2. HPAS 1999 was developed by the Department of Local Government and the Environment (DLGE) in consultation with Treasury, replacing earlier Government loan or “mortgage” schemes, specifically the House Purchase Assistance and Refurbishment Scheme 1991, by providing grant support for house purchases in the open market to supplement commercial mortgage availability. The Scheme document was drafted with the Attorney General’s Chambers and came into effect, after approval by Tynwald, on 13 September 1999, with a subsequent amendment coming into effect on the 14 June 2000. (copies attached at Appendix A)

132

be in the region of £110,000 to £120,000 in 2000. For context, the median Island house price in 2000 was £125,000, £139,800 in 2001, and £159,000 in 2002.

7. The properties were sold to purchasers by the developer, JG Kelly, as part of the terms of the land release between August 2001 and December 2002, at the pre-agreed subsidised values of between £74,000 and £79,310 i.e. approximately 66% to 68% of market value (as at 2000, as no adjustment was made to reflect the rapid growth in house prices over the period of development). The Department received no payment from the purchaser in respect of their property purchase; the Department’s interest, (i.e. the notional 30% proportion of the property not paid for by the purchaser or the grant assistance, this subsidy reflecting to some extent the value of the land already in Government ownership), being held as a silent equity share as defined within the sale agreement. The aim of this release was to provide a supply of properties that could be accessed by first-time buyers within the £85,000 market value threshold of the HPAS and thus enable the payment of grant support. To ensure a supply of homes that its deemed suitable for first time buyers at less than £85,000 DLGE was acting as an equity partner. This approach had been funded by the transfer of the land at Harcroft Meadows to the developer for a nominal sum, the consideration being given in return by the developer taking the form of houses that were built to more generous spatial requirements and that were sold to eligible buyers at less than the £85,000 HPAS grant threshold. The HPAS itself does not provide for the shared equity and, indeed, in the majority of cases eligible first-time buyers sought grant assistance on open market properties. As the HPAS did not cover shared equity, a separate legal agreement was required to ensure that public funds invested in each property, ultimately from the discounted land sale, were secured. This separate legal agreement took the form of the pre- emption agreement.

8. The pre-emption agreement, which is attached to each Harcroft property, is a legal agreement separate to the financial assistance provided by the HPAS 1999, the purpose of which is to preserve the Government (public) interest in these properties and prevent profiteering given they were developed on land transferred from Government ownership and were to be offered for purchase considerably below market value.

9. The pre-emption agreement was in response to the Treasury Value For Money (VFM) Committee’s requirements that an appropriate mechanism was put in place to ensure against any excess profit being realised on the “heavily subsidised” first time buyers properties, and also to ensure that the properties should remain within reach of first time buyers. The VFM

133

Committee proposed that the purchasers should only benefit from annual rises in the property market based upon their original purchase price and not on actual market value. For example, if a purchaser decided to sell their 3 bedroom property, originally costing £75,000 and the average price of Island housing had increased by 5%, they should expect to sell their property for £78,750 and not the prevailing market value. The pre-emption agreement was drafted by a legal officer of the Attorney General’s Chambers, taking account of the outcomes of further discussions between the Department and the Chief Internal Auditor and VFM Committee, and forms part of the sale agreement.

10. The pre-emption terms in the Fourth Schedule, titled “Covenants and Restrictions on the Part of the Purchaser” determine, at clause 19, that if the property was sold within the first 5 years it could be bought back by the Department for a sum equivalent to the original purchase price, after which the Department would buy back at 70% of market value (with the intention of recovering the nominal subsidy of 30% as an equity share). No end date, aside from point of disposal of the property, was referred to in the agreement. Under Manx Law where the pre-emption period is not otherwise specified, i.e. is “silent”, the Perpetuities and Accumulations Act 1968 states that the period shall be 21 years. As a consequence this is the pre-emption period which applies to the original Harcroft development (copy of sale agreement with pre-emption terms attached at Appendix B).

11. As the pre-emption agreement explicitly refers to the Department’s option to purchase at 70% of the prevailing market value of the property, this would proportionally include value added by any investment that the owner had made in the property during the period of covenant. It is however a condition within the pre-emption agreement (Fourth Schedule, clauses 9 & 10 – Appendix B) that the purchaser should seek the Department’s permission prior to making any changes to the structure of the property. Where permission was sought in accordance with the pre-emption agreement, then where permission was subsequently granted the Department routinely indicated that the value of the investment would not necessarily be realised (because of the pre-emption terms).

12. Shared Equity and Shared Ownership models for housing assistance have been available within the housing sector since at least the 1990s – the equity partner can be private or public sector e.g. the housebuilder or a social landlord. Unlike most models, the 30 plus % discount provided by Government in relation to the Harcroft development had no other financial conditions attached i.e. there was no interest liability or “rent” element due for the

134

proportion of the property the applicants had not funded as would be the case in similar shared ownership schemes. Government is simply a silent partner for 21 years.

13. Some 249 purchasers in total, including those at Harcroft Meadows, received grant assistance from the HPAS 1999 and as amended Scheme. However the 194 open market purchasers who bought their properties with assistance under HPAS 1999 paid the full market rate for their homes, with only grant assistance determined by level of income supplementing the commercial mortgage funding available to them. As has already been made clear, the HPAS did provide grant assistance to the purchasers of properties at Harcroft Meadow but these purchases also benefitted from DLGE’s decision to intervene in the property supply market such that properties which would have had a market value of between £110,000 and £120,000 in 2000 were sold in 2001 and 2002, a time of rapid house inflation, for values of less than £80,000.

14. The HPAS 1999 (as amended) was the vehicle which enabled grant assistance to be provided at Harcroft in addition to the equity value in the subsidised property. As with those purchasing on the open market, purchasers were able to access grant funding to a maximum of £16,500 to assist with their purchase.

15. The grant funding available via the HPAS 1999 (as amended) is held as a charge against the property but can be written off at 20% of the original value every 5 years and is therefore fully expired after 25 years. If the property is disposed of during that period only the balance of grant outstanding is repayable.

16. With the addition of the grant element to the subsidised property price the Harcroft purchasers, in most cases, funded less than 57% of the market value of the property at point of sale, without taking account of the fact that by the time the development was completed the market value of the properties was considerably higher than it had been in 2000 when the purchase values were agreed. In real terms most purchasers funded less than 50% of the true value of the property at time of purchase. A total of £705,776 was provided by the Department in grant assistance to the 55 purchasers at Harcroft Meadows.

17. The period of covenant remaining for the original purchasers ranges from just under 6.5 to 8 years depending at what stage of the development their property was purchased. On expiry of the 21 year covenant (pre-emption) the owner is free to dispose of the property as they

135

wish at full market value (including any improvements they have made) subject only to the repayment of any residual grant. If a homeowner is intending to remain in the property long term there is therefore little risk in, for example, extending the property as they will ultimately get the benefit of that investment in full.

18. To date 22 of the 55 properties have been bought back for resale by the Department with the original purchasers having received equity from the sale (in addition to any realised by reduction of mortgage over the period of ownership) ranging from £24k to £90k, with the exception of two of the properties which were bought back within the initial 5 year period following sale for the original purchase value as per the terms of the legal agreement.

19. Each House Purchase Assistance Scheme is entirely separate from the next, having different terms and conditions which then form part of the legal contract of sale for each First Time Buyer property. The Schemes are now secondary legislation under the provisions of the Housing (Miscellaneous Provisions) Act 2011.

20. All “approved” properties, which are the new build properties sold to eligible purchasers at a discounted value, have a separate pre-emption contract attached which forms part of the sale agreement, which places covenants and restrictions on the disposal of the property and sets out conditions of use. This protects the Department’s interest in the subsidised property and allows the properties to be resold to new first time buyers where the original purchaser disposes of the property within the pre-emption term.

21. Purchasing a property with assistance from any of these Schemes is subject to the same legal process for transferring ownership as for any other land or property transaction under Manx law. Each purchaser receiving Government purchase assistance, including those at Harcroft, contracts with an Advocate of their choice to review and scrutinise the sale agreement and associated documentation on their behalf as part of the standard legal process for the conveyance of property, as would be the case for any unassisted purchaser in the open market.

22. All purchasers were therefore legally represented and should have been made fully aware of the terms of their purchase by their Advocates before making a commitment. The Attorney General’s Chambers act on behalf of the Department in the conveyance process. Neither the

136

Department nor the Attorney General’s Chambers can provide legal or financial advice to the purchaser in these circumstances.

23. As indicated at 19. and 20. above, the provisions of the prevailing Scheme and pre-emption terms form part of the legal contract of sale attached to each property. In addition, the offer letter to purchasers for the Harcroft development (Appendix C) contained the following statement; “4. The properties have been subsidised to enable the purchase price to be affordable to First Time Buyers. Under the sale agreement, if you wish to sell your property within five years of the purchase you will be required to offer it back to the Department at 70% of the then market value, or at the purchase price, whichever is the lower. After 5 years you will be required to offer it back to the Department at 70% of the then valuation.”

24. The offer letter required the applicant to complete and return an attachment to the Department to indicate their acceptance of the offer. Therefore applicants could not subsequently have been allocated a designated plot without first returning the acceptance slip.

25. The offer letter had been preceded by a general “expressions of interest” letter to the potential purchasers which also referred to the terms of disposal attached to the development (Appendix D).

26. The legal agreement (Appendix B) in the Fourth Schedule, clause 19, states as follows; “(a) The Purchasers shall sell and convey to the Department and convey the Scheduled Property to the Department for an estate in unencumbered customary fee simple absolute in possession for a price (hereinafter called “the purchase price”) to be determined as hereinafter provided (b) The purchase price shall be either – (i) for the period of Five (5) years from the date of completion of the first purchase by the original Purchasers from the Company of the Scheduled Property such sum as shall be equal to the cost of all extras as agreed between the Vendor and the Purchasers and any improvements (other than normal maintenance decoration and repairs) supported by invoices or other satisfactory evidence of such cost made to the Scheduled Property by the Purchasers or

137

(ii) Seventy Percent (70%) of the value of the Scheduled Property in the open market and with vacant possession at the time of receipt by the Chief Executive of the Department of the option notice such value to be determined by the Government Valuer whichever is the lesser sum”

27. A number of the current petitioners have been in communication with the Department since soon after completing their purchases and have been represented from time to time as individual constituents and the Harcroft Residents Association by Mr Cretney MLC and other local politicians. As an example, a letter to Mr Cretney MLC from the Attorney General dated 27 November 2003 (Appendix E) responds to queries raised in respect of the Department’s pre-emption rights.

28. The petitioners have consistently requested that the Department’s equity share be extinguished stating that they had no awareness of the pre-emption term extending beyond the initial five year period despite it being cited in the offer letter and legal agreement. A significant proportion of those who submitted responses either as individuals or via the Residents Association did acknowledge that their own Advocate had failed to advise them properly.

29. After considerable exchange of correspondence and a number of meetings, where a range of options and proposals were considered, the then Director of Housing responded to Mr Cretney MLC on behalf of the Minister and Members of the Department in a letter of 13 November 2006, stating that a unanimous decision had been reached that the terms of the purchase agreement should not be altered, the reasons summarised as follows; a) Purchasers will have profited considerably, likely in excess of £50,000, after 5 years of ownership if they sell their house; b) Purchasers will benefit from increased values after 5 years rather than 10 years under the subsequent HPAS 2002 (as amended); c) The purchasers will benefit from the full sale price after 21 years i.e. the Department’s 30% equity will be extinguished; d) The 21 year pre-emption in no way affects the value and sale price of the property after 5 years.

138

e) If the purchasers do not wish to move house there would be little point for them in buying out the Department’s 30% stake because they will receive 100% value at no additional cost after 21 years. f) The above benefits compare very favourably with First Time Buyers under the HPAS 2002 (as amended) who would be likely to only profit by up to £10,000 after 5 years (due to grant reduction) and £47,000 after 10 years. They will also have to pay back their 30% loans in full plus interest within 25 years (and would still be subject to conditions of use for the whole 25 year term if assistance remains outstanding).

30. The letter referred to above concluded that the Department had given due consideration to the issues raised and could not keep revisiting the matter. However, approaches continue to be made by individual petitioners. The Department’s response has been consistent in confirming that the legal agreement is valid and that even with the 21 year pre-emption the purchasers have or will accrue considerable financial benefit from the original terms.

31. Some Assistance Scheme provisions may appear from time to time to be more favourable, however a single provision cannot be viewed in isolation as the other criteria will also differ to reflect the purpose of the Scheme as a whole and the prevailing market/economic circumstances at the time of the Scheme inception.

32. The development at Harcroft was promoted in the best interests of the purchasers, i.e. a. They have been helped by Government to take their first step on the property ladder b. They were able to buy a house on a relatively low mortgage (approximately 50% of the actual property value at time of purchase) which they otherwise would not have been able to afford c. The development is of a good standard d. All purchasers will have made a substantial profit after the initial 5 year restriction even with the Department’s silent equity holding in effect e. The profit will continue to grow as the grant is written off every 5 years and if there is further house price inflation

33. The Department of Infrastructure currently offers two Shared Equity Purchase Assistance Schemes, First Home Choice (Open Market properties), and First Home Fixed (Approved properties). An example at Appendix F compares Harcroft with the current provisions for Purchase Assistance. As illustrated in the Table, the Harcroft purchasers have benefitted

139

considerably more to date than purchasers would have done under the terms of the current Shared Equity Purchase First Home Fixed Scheme, which has no grant element, a much reduced discount advantage, and an interest liability in respect of the Equity Loan.

34. As has been indicated, 55 properties were originally purchased on the Harcroft development. Whilst a number of purchasers have been very vocal in disputing the terms of the agreement either individually or as contributors to submissions by the Residents Association, others have accepted those terms and 22 have since moved on, some taking the time to comment on the benefit they have had from the Scheme (see example letter at Appendix G).

35. Of the original 55 purchasers 33 remain with pre-emption terms of no more than 8 years remaining. 25 households appear to have signed the Petition for Redress.

36. The Petition states that; “Residents of Harcroft Meadows were assisted in buying their houses by way of a Government grant in a First Time Buyer Scheme; the residents signed up to the Scheme, most of them acting on the advice of the advocates who were also acting for the Government in the sale (1), without realising the precise terms of the agreement (which was couched in complicated language); the agreement ties them in to repaying 30 per cent of the sale price of their houses to Government if they sell within 21 years (2). No allowance is made for any improvements which owners may have made to their houses, such as adding extensions. (3) This situation means that many owners cannot afford to move house and it is creating an obstacle to the houses being sold, even though they are highly suitable for first time buyers. (4) There is no court remedy available. (5)”

37. A number of the statements in the Petition appear to be materially incorrect or misleading and are addressed directly as numbered above and below; (1) The Attorney General’s Chambers acted on behalf of the Department. Purchasers selected their own advocates and three legal practices subsequently acted on behalf of the purchasers. The developer JG Kelly had negotiated favourable terms with their advocates Gough & Co and most purchasers, of their own volition, elected to take advantage of the reduced rates offered via the contractor. The Advocates acting for the purchasers had a clear duty of care to explain the legal arrangements to their clients. Advocates operate to professional practice standards and must carry liability insurance in the event that they should wrongly advise their clients. As such, neither the Department nor the Attorney

140

General’s Chambers had responsibility for ensuring that the independent legal practitioners engaged directly by the purchasers would provide quality advice in respect of the terms of sale. From correspondence on file, one particular Advocate may have provided incorrect advice, with the practice, whilst not accepting liability at that stage, pre-emptively notifying their insurance company of a potential claim. As their relationship with their Advocate is a private contractual matter purchasers have been consistently advised by the Department and the Attorney General’s Chambers to seek remedy via their appointed legal advisors and/or the Law Society if they felt the advice they received from their legal representatives in respect of their obligations under the Harcroft sale agreement was flawed. (2) The provisions as stated in the offer letter and legal agreement require that the property is offered back to the Department at 70% of market value after 5 years i.e. the provision is not a repayment of 30%. The Attorney General’s Chambers has consistently advised the Department that the offer letter and conveyancing documentation was clear and that, as above, the residents should refer back to the Advocate that acted for them at the time of purchase. (3) This is true, however the legal agreement also requires that the purchaser seeks Departmental agreement prior to carrying out any significant adaptation or extension to the property (as with all approved properties in subsequent Schemes). In granting consent the Department’s standard letter advises that the investment made may not necessarily be reflected in the value of the property because of the pre-emption terms. However, a number of purchasers undertook unauthorised works without first requesting permission. This is actually a breach of the legal agreement. (4) The pre-emption terms have no impact on the prevailing market value of the property. 22 of the 55 purchasers have already moved on with 20 of those realising between £24k and £90k of equity in addition to any reduction in their mortgage balance. If the purchasers intend to stay in the property then they will ultimately get 100% of the benefit of any investment made so the benefit of building an extension for example will be fully recouped, especially as the majority now have only approximately 7 years of the pre- emption remaining. As most will have only paid for around 57% of the original market value, when taking the combined effect of the discount and grant write off into account, then they will have already realised a significant financial benefit. (5) If the contract was ambiguous or deliberately misleading or had not been properly executed the petitioners would have potential remedy via the Courts. However this is not the case.

141

38. In the Department’s view varying the terms of a valid Government contract retrospectively by Petition is potentially a dangerous precedent to set as the terms of other Government contracts may also be viewed less favourably today than they were within the context of when originally agreed.

39. As 22 households at Harcroft have already sold their properties under the terms of their legal agreements, they would almost certainly be due financial compensation from Government to reflect the impact, either financially or personally, of any retrospective amendment to the purchase agreement should this occur.

LIST OF APPENDICES

Appendix A – The House Purchase Assistance Scheme 1999 & The House Purchase Assistance and Refurbishment (Amendment) Scheme 2000

Appendix B – Sale Agreement with pre-emption terms

Appendix C – Harcroft offer letter & return slip

Appendix D – Expressions of Interest letter

Appendix E – Attorney General’s letter to Minister Cretney MHK

Appendix F – Comparison of Harcroft grant and pre-emption and current Shared Equity Purchase Assistance (First Home Fixed) Scheme 2014 (as amended)

Appendix G – Letter and email to Department from purchasers

142 APPENDIX A

Government Circular No. 27/99

Department of Local Government and the Environment

THE HOUSE PURCHASE ASSISTANCE SCHEME 1999

Approved by Tynwald 13th July 1999

Citation, commencement and interpretation

1. (1) This Scheme may be cited as the House Purchase Assistance Scheme 1999 and shall come into operation on the day on which it is approved by Tynwald.

(2) This Scheme shall expire on the 30th June 2002.

(3) In this Scheme —

"assistance" means assistance under this Scheme;

"assisted person" means a person to whom assistance is given (or, if assistance is given to 2 or more persons, both or all those persons);

"approved mortgage provider" means a bank or building society carrying on business in the Island which is approved by the Department after consultation with Treasury for the purposes of this Scheme;

"the Department" means the Department of Local Government and the Environment;

"the dwelling" means the dwelling in relation to which assistance is given, and includes any land forming the curtilage thereof or otherwise occupied therewith;

"income", in relation to an applicant for assistance or an assisted person, shall be construed in accordance with paragraph 7.

(4) The Interpretation Act 1976 applies to this Scheme as it applies to an Act of Tynwald.

Price: £1.05 Printed by Authority

143 Purpose of Scheme

2. (1) The purpose of this Scheme is to enable financial assistance to be given by the Department by way of grant to supplement a loan by an approved mortgage provider, in order to assist persons qualified under paragraph 3 to buy dwellings for their own occupation (including dwellings to be constructed or in course of construction);

(2) No application for financial assistance under the House Purchase and Refurbishment Scheme 1991 shall be accepted after the commencement of this Scheme;

(3) The provision of financial assistance under this Scheme shall not prevent the granting of assistance under any scheme in place from time to time to assist in the repair and modernisation of a residential property.

Qualifications for assistance

3. (1) Subject to sub-paragraphs (2), (3) and (4), an application for assistance may be made by any of the following persons

(a) any person who has lived in the Island either for an uninterrupted period of 5 years up to the date of application, or for a period or periods amounting in the aggregate to 15 years before that date;

(b) the widow or widower of a person who lived in the Island either for an uninterrupted period of 5 years up to the date of death of the spouse, or for a period or periods amounting in the aggregate to 15 years before that date.

(2) The Department may refuse to entertain an application by a person who lives, or intends to live, alone, except in relation to a property comprising 2 or fewer bedrooms.

(3) The Department may refuse to entertain an application by a person who is not in full-time permanent employment or engaged full-time in an all-year-round business as a self-employed person in the Island.

(4) The Department shall refuse to entertain an application by a person who, in the opinion of the Department, has sufficient means or sources of finance to enable him to buy a dwelling suitable for his own occupation without assistance under this Scheme.

2 144 Applications

4. (1 ) An application for assistance shall be made in the first instance to the Department on a form prescribed and supplied by the Department, and shall be accompanied by the fee specified in paragraph 9.

(2) The Department shall reject an application where —

(a) any information required to be given by the application form, or any further information required by the Department, is not given, or any information given is false in a material particular;

(b) the income of the applicant (subject to paragraph 7(3)) does not fall within the limits from time to timeprescribed by the Department;

(d) the applicant's financial circumstances do not conform to the criteria from time to time prescribed by the Department;

(e) in the opinion of the Government Valuer, the dwelling comprises more than 4 bedrooms.

(I) any approval of plans for the purpose of building control and any planning approvals, registered building consents and other consents required for the carrying out of works (including the constniction of the dwelling) for which assistance is sought have not been granted;

(g) the applicant is unable to demonstrate that he can obtain commercial mortgage arrangements, with an approved mortgage provider, to fund the balance of the property purchase price;

(h) the applicant, except in a case under the provisions of paragraph 5(5), owns or has previously owned a residential dwelling.

Assistance

5. (1) Subject to the provisions of this scheme the Department may provide assistance towards the purchase price of a dwelling of such amount as it may determine after consultation with Treasury.

(2) Subject to the provisions of sub-paragraphs (3) to (6) assistance shall be repayable if the dwelling is disposed of (whether by sale, gin, lease,

3 145 assent or otherwise) by the assisted person or any person deriving title through or under him.

(3) At the expiry of each 5th year from date of the provision of assistance, the Department may, at its discretion and having regard to whatever criteria it may, with the approval of the Treasury, consider appropriate, by notice to the assisted person reduce the amount repayable by such proportion as is specified in the notice.

(4) The proportion by which the amount repayable may be reduced under sub-paragraph (3) shall not on any occasion exceed 20 per cent of the original amount of the assistance.

(5) Where an applicant disposes of the dwelling by way of sale for the purpose of acquiring a larger dwelling in order to avoid overcrowding, as determined under section 28 of the Housing Act 1955, the Department may permit the assistance to remain outstanding, subject to its being secured in accordance with sub-paragraph (6) on the larger dwelling.

(6) Repayment of assistance under sub-paragraph (2) shall be secured on the dwelling by a charge by way of bond and security ranking in priority to all other charges on the dwelling except that granted to an approved mortgage provider to secure a loan made for the purpose of buying the dwelling.

A larimum assistrutru

6. (1) Subject to the following provisions of this paragraph, the amount of assistance shall be such as the Department may determine in each case (having regard, among other things, to the resources of the assisted person)

(2) The aggregate of the assistance and any loan made by an approved mortgage provider shall not exceed £75,000.

(3) The amount of assistance shall not in any case exceed £15,000 and shall not exceed the amount specified in the following table in relation to the approved income (as defined in paragraph 7) of the applicant:—

Approved income Maximum assistance not exceeding £18,000 £15,000 £18,000 to £18,999 £12,000 £19,000 to £19,999 £9,000 £20,000 to £20,999 £6,000 £21,000 to £21,999 £3,000 £22,000 or over Nil

4 146 Calculation of income

7. (I) For the purposes of paragraph 6(3), the approved income of an applicant is his income calculated in accordance with sub-paragraphs (2) and (3), adjusted by the deduction —

(a) in a case within sub-paragraph (2)(a), of two-thirds of the permanent gross income of the applicant's spouse or partner;

(h) in a case within sub-paragraph (2)(h), of two-thirds of the lesser of the two permanent gross incomes.

(2) In this paragraph "permanent gross income" means —

(a) in the case of an employed person, his gross basic income, plus regular overtime up to one-sixth of basic income, as certified by his employer, plus his income from other sources to the extent allowed by the Department;

(b) in the case of a self-employed person, the average of his last 3 years' gross income as shown by audited accounts, or such other estimate of his income as the Department may in a particular case approve, plus (in either case) his income from other sources to the extent allowed by the Department.

(3) For the purpose of this Scheme the income of an applicant for assistance or an assisted person is calculated as follows —

(a) where the applicant or assisted person is one individual, the aggregate of his permanent gross income and the permanent gross income of his spouse or partner;

(b) where the applicant or assisted person is two individuals, the aggregate of their permanent gross incomes.

Other conditions of assistance

8. ( 1) The assisted person is responsible for all professional, mortgage and other fees and charges incurred by him in connection with an application for assistance and the giving of any security therefor.

(2) The dwelling must be used for the personal occupation of the assisted person and his family, and must not be —

(a) used for the purposes of any trade or business, or

(b) let or sub-let,

without the prior consent in writing of the Department.

147 (3) The Attorney General must be satisfied as to —

(a) the assisted person's title to the dwelling; and

(b) if the dwelling is a flat, the arrangements for the maintenance of the building of which it forms part.

(4) Whilst there remains a charge upon the property in favour of the Department the assisted person must —

(a) keep the dwelling in good repair at all times;

(b) pay all outgoings in respect of the dwelling;

(c) comply with all requirements of the legislation from time to time in force relating to town and country planning and building control;

(d) insure the dwelling against fire and all other risks required by the Department in the joint names of the assisted person and the Department, and produce the last premium receipt to the Department on demand;

(e) allow persons authorised for the purpose by the Department to inspect the dwelling at any time while any assistance is repayable under this Scheme.

(5) No assistance shall be given for the construction of a dwelling where works which are normally carried out by craftsmen of a class to which the Scheme for the Certification of Craftsmen 1990 applies unless those works are carried out by craftsmen registered in accordance with that Scheme.

(6) Where interim payments are to be made under a contract for the construction of a dwelling, the Department may make payments on account of assistance not exceeding 95 per cent of the amount of the assistance, the balance to be payable when the Department receives certification that the dwelling has been completed to the satisfaction of the approved mortgage provider.

(7) The deed by which any repayable assistance is to be secured under paragraph 5 shall be in such form, and include such provisions for ensuring compliance with the above conditions and any other conditions which the Department may consider appropriate, as the Attorney General may require.

(8) On any failure by the assisted person to comply with the conditions of this Scheme and any other conditions mentioned in sub- paragraph (7), the Department may by notice to the assisted person require any

6 148 assistance to be repaid, and such assistance shall thereupon become due and repayable.

Fees

9. An application fee of £20 shall be paid by the applicant to the Department on making an application for assistance.

Amendment of Scheme

10. The Department may from time to time by instrument in writing vary any of the following matters under this Scheme —

(a) the amount of any fee;

(b) the maximum or minimum amount of any assistance;

(c) any conditions specified in paragraph 7 or 8; but any such instrument shall be laid before Tynwald as soon as may be after it is made.

MADE 21st June 1999

W. A. Gilbey

Minister for Local ment and the Environment

149 Government Circular No. 28/00 Department of Local Government and the Environment

THE HOUSE PURCHASE ASSISTANCE AND REFURBISHMENT (AMENDMENT) SCHEME 2000

Approved by Tynwald 12th July 2000

1. Citation and commencement This Scheme may be cited as the House Purchase Assistance and Refurbishment (Amendment) Scheme 2000 and shall come into operation on the day on which it is approved by Tynwald.

2. Amendment of the House Purchase Assistance Scheme 1999' (1) The House Purchase Assistance Scheme 1999 is amended as follows. (2) In paragraph 3 after sub-paragraph (b) insert "(c) any person who owns or has previously owned a residential dwelling for a period of 5 years or more and is disposing or has disposed of the dwelling to a person to whom assistance is given for the purpose of acquiring it" (3) In paragraph 4 delete sub-paragraph (2Xh). (4) In paragraph 4 after sub-paragraph (2)(g) insert- "(h) the applicant owns or has previously owned more than one residential dwelling. (5) In paragraph 6, for sub-paragraphs (2) and (3) substitute- "(2) The aggregate of assistance and any loan made by an approved mortgage provider shall not exceed - (a) £85,000, where the applicant does not own and has not previously owned a residential dwelling; or (b) £1 10,000, where the applicant owns or has previously owned a residential dwelling. (3) The amount of assistance shall not in any event exceed- (a) £16,500, in a case within sub-paragraph (2)(a);

I GC 27199

150 (b) £25,000, in a case within sub-paragraph (2Xb). (3A) The amount of assistance, in relation to the approved income (as defined in paragraph 7) of the applicant as mentioned in column I of the following table, shall not exceed the corresponding amount as specified in-

(a) column 2 of the table, in a case within sub-paragraph (2)(a); (b) column 3 of the table, in a case within sub-paragraph (2)(b).

Column I Column 2 Column 3 Approved Income Maximum Assistance Maximum Assistance not exceeding £18,000 116, 500 f25,000 118,000 to f18,999 f13,200 122,000 119,000 to f19,999 0,900 £19,000 f20,000 to f20,999 16,600 116,000 121,000 to 121,999 13,300 f13,000 122,000 or over NIL NIL

3. Amendment of the House Purchase and Refurbishment Scheme 19911 (1) The Howe Purchase and Refurbishment Scheme 199] is amended as follows. (2) In paragraph 5(6) after "as the case may be, plus" insert "a charge which shall be"

(3) After paragraph 5(6) insert- "(6A) If a charge falls due under 5(6) above due to the sale of the property to an assisted person under House Purchase Assistance Scheme 1999', the charge shall be converted to grant assistance under the terms of paragraph 5 of the 1999 Scheme subject to the maximum assistance eligible in column 3 of the table under 6(3A) of that Scheme. Any charge in excess of the maximum assistance shall be repayable.

MADE 14th June 2000

W. A. Gilkey Minister for Local Government and the Environment

2 GC 21191

151 APPENDIX B

• 033 REGISTERED , -9 AUG 2001 al 0 9 4-o 5- No. 5o33 gr by 6. P. fc--EVEui SM IS DEED made this day of /9'/a 1 200

G KELLY HOMES LIMITED a Company incorporated in the Isle of Man company

number 47020 and having its Registered Office situate formerly at Falcon Cliff Palace Road

Douglas in the Isle of Man but now situate at 3rd Floor 19-21 Prospect Hill Douglas aforesaid

(hereinafter referred to as "the Vendor" which expression unless inconsistent with the context

shall include its successors) of the first part and the DEPARTMENT OF LOCAL

GOVERNMENT AND THE ENVIRONMENT (a Department of the Isle of Man

Government) of Murray House Mount Havelock Douglas Isle of Man (hereinafter referred to

as "the Department" which expression unless inconsistent shall include its successors and

assigns) of the second part and MIIIIIII1111.11.111111111111111111111111111.111111.1.

1.11.111111111 both of 41.11111.1.111111111111111.11.116 Douglas aforesaid

(hereinafter referred to as "the Purchasers" which expression unless inconsistent with the

context shall include the said and the

survivor of them and the executors and administrators of such survivor their his or her

assigns) of the third part

WHEREAS:-

(1) The Vendor is well entitled unto seized and possessed in customary fee simple of

ALL and SINGULAR a certain parcel of land situate in the Borough of Douglas and Parish of

Braddan which is represented for identification purposes only on the Plan marked "A"

annexed to the DOLGE Conveyance therein defined by the portion delineated and edged pink

("hereinafter referred to as "the Estate")

(2) The Vendor has agreed to sell to the Purchasers the hereditaments more particularly

described and set forth in the First Schedule hereto upon the terms and conditions hereinafter

appearing and the Department is a party hereto by reason of the financial assistance it is

G9; 08 1i C:15 Mai E.7:88.55

152 giving to the Purchasers under the House Purchase Assistance Scheme 1999 (as amended modified or superseded)

WITNESSETH that the Vendor in consideration of the sum of SEVENTY NINE

THOUSAND POUNDS (£19,000.00) to the Vendor now paid by the Purchasers (the receipt whereof is hereby acknowledged) DOTH HEREBY grant bargain and for ever absolutely sell and convey unto the Purchasers ALL and SINGULAR the hereditaments and premises set forth and described in the Schedule hereto (hereinafter referred to as "the Scheduled

Property") TOGETHER WITH all ways waters watercourses easements liberties rights members privileges and appurtenances thereto belonging or in anywise appertaining or reputed or known as part or parcel thereof or appurtenant thereto AND IN PARTICULAR

TOGETHER with the benefit of the rights contained and referred to in the Second Schedule hereto and those more particularly referred to in a Deed of Conveyance dated the 13th day of

December 2000 from the Department of Local Government and the Environment to the

Vendor ("the DOLGE Conveyance") EXCEPTING AND RESERVING unto the Vendor and the owner or owners from time to time of the land intended to be beneficial thereof the rights specified in the Third Schedule hereto TO HAVE and TO HOLD the same unto the

Purchasers in fee simple as joint tenants and not as tenants in common from the day of the date hereof absolutely and for ever BUT SUBJECT NEVERTHELESS to and with the benefit of all covenants conditions restrictions provisoes and agreements affecting the

Scheduled Property and contained or referred to in any Deed of Conveyance or other instrument of title thereof prior in date hereto and duly recorded AND IN PARTICULAR those contained or referred to in the DOLGE Conveyance and in particular the Second

Schedule Part I so far forth as the same are now validly subsisting and capable of being enforced AND SUBJECT ALSO to all easements legally existing thereover AND IN

153 PARTICULAR the rights and easements therein reserved contained or referred to in the

DOLGE Conveyance

1. For the benefit and protection of the land comprised in the Estate or any part or parts

thereof other than the Scheduled Property and so as to bind so far as may be the Scheduled

Property into whosoever hands the same may come the Purchasers DO HEREBY

COVENANT with the Vendor and as a separate covenant with the Department that the

Purchasers and those deriving title will at all times hereafter observe and perform the

stipulations set out in the Fourth Schedule hereto di 2. The Vendor PROVIDED THAT it obtains the prior written consent of the Department

HEREBY reserves the right to modify waive or release any restrictions or stipulations

relating to the Scheduled Property or to adjoining or neighbouring land whether imposed or

entered into before or at the same time as or after the date hereof and whether they are the

same as the restrictions and stipulations in the Fourth Schedule hereto or not and

notwithstanding that such adjoining or neighbouring land forms part of the Estate including

any restrictions and stipulations which may become binding on the Vendor by virtue of this

Deed and the right to modify waive or release hereby reserved shall be exercisable by the I. Vendor and those deriving title under it to the Estate or any part or parts thereof except that in the case of those so deriving title by conveyance on sale the said right shall be exercised only

by those to whom it is expressly assigned and nothing in this Deed contained shall create or

be deemed to create a building scheme affecting the whole or any part of the Estate

3. The Vendor DOTH HEREBY covenant with the Purchasers that the Vendor will at its

own expense and as soon as it is reasonably practicable so to do (I) level form metal make

and complete the roads the footpaths and any pedestrian walks or ways connecting with the

roads and the footpaths to a state fit for carts carriages and motor cars and other vehicles and

the footpaths and pedestrian walks and ways fit for pedestrian traffic thereon in each case to

154 the standard required by the appropriate authority for the taking over thereof as a public highway and walks and with such sewers and drains thereunder and with such verges incorporated therein as the competent authority shall require to be made and that the Vendor will at its own expense until the roads and the said walks and ways are taken over by the

Local or Public Authority maintain and repair the same and will pay all charges levied in connection with such maintenance repair and taking over and (2) make up and landscape the common areas of the Estate not to be made up as the road the footpaths or laid out as building plots in accordance with the existing planning approval in respect of the Estate granted by the

Planning Committee of the Department of Local Government and the Environment and at its own expense maintain and repair the same as is reasonably necessary from time to time until such time as the same are adopted by conveyance to the relevant statutory body (3) nothing contained in the preceding paragraph 2 hereof shall affect or modify or be deemed to refer in any way to the Vendor's covenant in this clause contained

4. The Purchasers (with the object and intention of affording to the Vendor a full and sufficient indemnity in respect of the prior covenants but not further or otherwise) DO

HEREBY covenant with the Vendor and as a separate covenant with the Department that the

Purchasers will at all times hereafter observe perform and be bound by the prior covenants and will keep the Vendor indemnified against all actions suits proceedings costs damages claims demands and liability in respect of any breach thereof arising after the date hereof

5. AND the Vendor DOTH HEREBY covenant with the Purchasers that the Vendor bath good right full power and lawful authority to grant and convey the Scheduled Property in manner aforesaid and that the Vendor shall and will warrant maintain uphold and defend the same unto the Purchasers FREE FROM ENCUMBRANCES and from and against the claim challenge and demand of all and every persons and person whomsoever...

155 IN WITNESS WHEREOF the Vendor hath executed these presents this the day month and year first before written...

FIRST SCHEDULE WITHIN REFERRED TO_

ALL AND SINGULAR a certain plot or parcel of land part of the Building Estate to be known as Harcroft Meadow situate in the Borough of Douglas and Parish of Braddan

TOGETHER WITH the dwelling house numbered "4" erected thereon and being shown (for identification purposes only) edged red on the plan marked Development Plan 02 annexed hereto and to which said plot or parcel of land (inter alia) the Vendor became entitled by

Deed of Conveyance bearing date the 13th day of December 2000 from the Department of

Local Government and the Environment

SECOND SCHEDULE

Rights Conveyed

I. The right to use for all normal purposes connected with the Scheduled Property in common with the Vendor and all other persons now or hereafter entitled to the like right the drains sewers pipes wires and cables on over or under the Estate with the right to enter thereon for the purpose of the repair and maintenance of the same subject to making good all damage caused thereby

2. A right of way for all purposes for the Purchasers and their successors in title in common with all other persons having a like right to pass and repass (with or without vehicles) over common roads the and on foot over the common footpaths of the Estate shown on the plan hereto annexed

THIRD SCHEDULE

Rights excepted and reserved

156 1. Any easement or right of light or air now subsisting or which might (but for this

exception) be acquired over any part of the Estate to the intent that the Vendor and its successors in title and those authorised by any of them may build or rebuild over the same in such manner as they think fit notwithstanding any interference with the access of light or air

to the Scheduled Property

2. The right of support necessary for the proper enjoyment of the remainder of the Estate

and any other adjoining and neighbouring lands and all buildings and boundary structures

erected thereon and the right of entry to the extent necessary for the purpose of maintaining

repairing and replacing any such buildings or boundary structures but making good any

damage done in the exercise of such right of entry

3. The right for the Vendor and those authorised by the Vendor to enter upon the

Scheduled Property at all reasonable times during the day to plant trees thereon in the

positions indicated by and to the satisfaction of the Department of Agriculture Fisheries and

Forestry and the Planning Committee of the Department of Local Government and the

Environment as required by the existing planning approval in respect of the Estate the Vendor

making good all damages occasioned by the exercise of such right

FOURTH SCHEDULE

Covenants and Restrictions on the part of the Purchasers

In this Schedule each of the following expressions shall have the meaning ascribed to it

unless the context otherwise requires:-

"the Purchasers" - the Purchasers from the Company of each of the Dwelling Houses

comprising the Scheduled Property as defined in the recitals to this Deed

"the Scheduled Property" - each such individual plot

1. There shall not be erected on the Scheduled Property any building other than one

dwelling house

157 2. No alteration or addition shall be made to any building erected on the Scheduled

Property which shall not be in accordance with an elevation plan to be approved by the

Department and no further buildings or structures shall be erected on the Scheduled Property

without the prior approval of the Department

3. Nothing shall be erected on that portion of the Scheduled Property which lies between

the said dwelling house shown on the said Development Plan 02 and that portion of the

footpath or the road on which the Scheduled Property abuts save and except an ornamental

dwarf fence not exceeding one foot in height and except as aforesaid such portion of the 6 Scheduled Property shall be used for no purpose other than as an ornamental garden including a driveway and footpath

4. The Purchasers shall maintain all Buildings on the Scheduled Property in good

condition and all such boundary hedges walls and fences as exist on the Scheduled Property

at the date hereof provided that any such boundary hedge wall or fence dividing the

Scheduled Property from an adjoining plot on the Estate shall be a party hedge wall or fence

5. The Scheduled Property shall not be used for any purpose other than as a private

dwelling house and no trade or business whatsoever shall be carried on thereon or on any part

I thereof 6. The Purchasers shall insure and keep insured the Scheduled Property to its full re-

instatement value and against fire and all other risks as the Department shall require with an

insurance company of repute in the joint names of the Purchasers and the Department and

shall provide evidence of such insurance and the last premium receipt therefore to the

Department on demand

7. No act or thing shall be done or suffered upon the Scheduled Property or any part

thereof which shall be a nuisance or annoyance to the owner or occupiers of neighbouring or

158 adjacent properties or of any of the lands forming part of the Department's adjoining land or the Estate

8. No part of the Scheduled Property shall be used as an advertising station

9. Neither the Scheduled Property nor any part thereof shall be used as a public house or for the sale of alcoholic liquors

10. No building or structure shall be erected on the Scheduled Property without the prior consent or permission of the Planning Authority and any such building or structure must comply with all Town and Country Planning legislation and Building Control Regulations

11. No building or structure shall be erected nor shall any tree or shrub be planted or allowed to grow over the sewer laid or to be laid within the Scheduled Property or within such a distance thereof as would impede access thereto by the Department or other the competent authority in which the sewer may for the time being be vested for the purpose of the repair renewal and maintenance of the same

12. No caravan or house on wheels or other moveable dwelling or structure designed or adapted for the purpose of human habitation shall be erected parked placed or allowed to remain or be used upon any part of the Scheduled Property and in no circumstances whatsoever shall any caravan house on wheels or other moveable dwelling or structure or any other temporary building or any kind whatsoever be used for human habitation on any part of the Scheduled Property

13. Except for domestic pets no poultry pigeons rabbits or any other animals whatsoever shall at any time be kept or allowed to remain on the Scheduled Property

14. Not to erect or permit any external radio mast or any other receiving apparatus on the

Scheduled Property

15. No structures buildings or erections whatsoever shall be constructed on that part of the

Scheduled Property which lies between the said dwelling house and that portion of the

159

footpath or the road on which the Scheduled Property abuts as shown on the said

Development Plan 02 save and except a path and driveway for the purpose of access to and egress from the said estate road

16. The Purchasers shall not grant any lease or tenancy of the Scheduled Property or any part thereof nor part with possession of nor confer upon any person whatsoever any licence right or interest to occupy the Scheduled Property or any part thereof

17. The Scheduled Property or any part thereof shall not be used for any purpose other than that of a private dwelling for the personal occupation of the Purchasers and their family and in accordance with the Scheme without the consent in writing of the Department first obtained

18. The Purchasers hereby covenant with the Vendor that the Purchasers and their successors in title will not at any time hereafter erect or construct any building wall or fence or plant any tree or shrub on the strip of land marked as a service verge on the said

Development Plan 02 nor do suffer to be done therein or thereon any act matter or thing whereby the cover of soil over or the support of the pipes wires and/or cables laid or to be laid in the said strip of land shall be altered or which may render access thereto more difficult or expensive and shall understand that the highway authority and statutory undertakings have unencumbered right of access to the said strip of land

19. The Purchasers shall not sell or otherwise dispose of the Scheduled Property other than by way of mortgage or charge without first giving two calendar months written notice by

Recorded Delivery to the Chief Executive of the Department of the desire of the Purchasers to sell or otherwise dispose of the Scheduled Property and if the Department shall within such two calendar months give written notice (hereinafter called "the option notice") to the

Purchasers of its desire to purchase the Scheduled Property then the following terms shall take effect:-

160 (a) The Purchasers shall sell and convey the Scheduled Property to the

Department for an estate in unencumbered customary fee simple absolute in

possession for a price (hereinafter called "the purchase price") to be

determined as hereinafter provided

(b) The purchase price shall be either -

(i) for the period of Five (5) years from the date of completion of the first

purchase by the original Purchasers from the Company of the

Scheduled Property such sum as shall be equal to the consideration

paid by the Purchasers for the plot and the building thereon erected

together with an additional sum equal to the cost of all extras as agreed

between the Vendor and the Purchasers and any improvements (other

than normal maintenance decoration and repairs) supported by invoices

or other satisfactory evidence of such cost made to the Scheduled

Property by the Purchasers or

(ii) Seventy Percent (70%) of the value of the Scheduled Property in the

open market and with vacant possession at the time of receipt by the

Chief Executive of the Department of the option notice such value to

be determined by the Government Valuer

whichever is the lesser sum

option notice at the office of H.M. Attorney Genera] at which time and place

the Department paying the purchase price as hereinbefore determined shall

receive from the Purchasers a properly executed Conveyance of the Scheduled

Property whereupon vacant possession of the Scheduled Property shall be

given to the Department

161 (d) The Department may inspect the Scheduled Property at any time following the

said written notice from the Purchasers to the Department of their desire to sell

the Scheduled Property as referred to above

(e) The Scheduled Property shall be at the risk of the Department with regard to

fire arid in all respects from the date of the service of the option notice

(f) For all purposes connected with the exercise of this right of pre-emption time

shall be of the essence

20. If the Purchasers wish to sell or otherwise dispose of the Scheduled Property and the IWO Department has not exercised its option to purchase the Scheduled Property as referred to in paragraph 19 above then the Purchasers shall on completion of the sale repay the financial

assistance granted to the Purchasers under the Scheme and the Department shall at the

expense of the Purchasers prepare and execute a Release in respect of the Scheduled Property

PROVIDED THAT if such sale is completed following the expiration of five (5) years from

the date of the Purchasers' purchase of the Scheduled Property the Department shall have the

discretion to reduce the amount of the financial assistance repayable by the Purchasers in

accordance with the Scheme...

EXECUTED by the Vendor in the presence of:-

162 EXECUTED on behalf of the Department by the Minister or by a person duly authorised by the Minister for Local Government and the Environment in the presence of:

SIGNED and DELIVERED by the Purchasers in the presence of:-

DC:14;Si. crf COnViSet3ftr4.; C!Cri<

163 APPENDIX C Department of Local Government and the Environment Rheynn Reiltys Ynnydagh as y Chymmjiltaght

Estates and Housing Directorate Murray House, Mount Havelock, Douglas, Isle of Man, 1M1 2SF. Tel: (01624) 685955 Fax: (01624) 685943

Please contact Mr. L.V. Crellin

Our Ref: LVC/SMK Your Ref

23"I May 2001

Name< Add l< Add 2< Add 3 <

Dear

First Time Buyer Homes: Springfield/Harcroft

I am pleased to inform you that you have been allocated a plot on the Springfield/Harcroft Development at New Castletown Road, Douglas, subject to confirmation of your eligibility for assistance under the House Purchase Assistance Scheme. At this stage your property will be allocated in Phases 2 and 3 of the development, due to commence in July 2001 and October 2001 respectively. It is important that you read the following carefully and respond where requested.

1. Before proceeding you should carefully consider the implications of home ownership, and the financial obligations which will affect you.

2. At this stage no specific properties have been allocated and will not be until the phases have commenced construction. The developer (J.G. Kelly Ltd.) will contact you when a property has been allocated, which is likely to be several months. Please do not make an application for a mortgage or a grant under the House Purchase Assistance Scheme, until you have been contacted by the developer.

N 'LGARCH1TS11ARED•.OId Filing Systern\Corresp\DI.GE1F1131.C14M,DOC

164 3. You will need to let us know if you are eligible for assistance under the House Purchase Assistance Scheme. Having been accepted on to the waiting list, the information provided shows that you should be eligible, however if there have been any significant changes to your circumstances since you applied to go on to the first time buyers register, you should let us know immediately. An increase in salary, for instance, may affect the level of grant available to you.

4. The final price of the properties has not yet been determined but will not exceed £85,000. Prices are likely to be in the region of £80,000 for a three bed property and £75,000 for a two bed property. You should be aware that the maximum grant is £16,500 at an approved income of £18,000 and less per annum. You may wish to make enquiries at this stage as to the level of mortgage that you are likely to obtain later so that your mortgage and any savings will make up the difference between the grant and purchase price.

6. Any offer of a property is subject to you obtaining a mortgage from a mortgage provider, and being eligible for grant assistance to supplement the shortfall between the mortgage and purchase price. The Department does not give any undertaking that the allocation of a plot guarantees the purchase of a property. The subsequent purchase will be subject to you obtaining a mortgage and House Purchase Assistance Scheme grant.

7. If you wish to proceed please complete the tear off slip and return to this office.

I must emphasise that this letter is to inform you that you have been allocated a plot at Springfield/Harcroft. Please do not visit the site, or seek a mortgage at this stage, until you are contacted by J.G. Kelly Ltd. when the phases commence and your actual plot number has been allocated.

If you have any particular queries please direct them to this office. In the meantime I look forward to receiving your acceptance slip.

Yours sincerely

L.V. Crellin, Housing Policy Manager

INIA_GARCHTT\SHARED‘Old Filing System\Corresp\DLGETTBLC14M.DOC

165 Department of Local Government and the Environment Rheynn Reiltys Ynnvdagh as y Chynzmyltaght

Estates and Housing Directorate Murray House, Mount Havelock, Douglas, Isle of Man, IM I 2SF. Tel: (01624) 685955 Fax: (01624) 6S5943

Please complete and return to: Mr. L.V. Crellin Housing Policy Manager Estates and Housing Directorate Department of Local Government and the Environment Murray House Mount Havelock Douglas 1M1 2SF

Name Name

Address

(Spouse or Joint Applicant if applicable)

YES NO

I/We accept the offer of a plot at Springfield/Harcroft T

I/We understand that the purchase of a property is subject to obtaining — — a mortgage from an approved mortgage provider and a grant under the House Purchase Assistance Scheme 1999

I/We have read Section 4 and will have sufficient savings and mortgage

N \I_GARCHITSHARISDkOld Filing System'CorrespOLGET1BLC 14M DOC

166 APPENDIX D Department of Local Government and the Environment Rheynn Reiltys Ynndagh as y Chymmhag& Estates and Housing Section Murray House Mount Havelock DOUGLAS Isle ot- Man iM1 2SG Tel: (01624) 685865 Fax: (01624) 686250 e mail:-architects@dlge gov.im Please reply Housing Office

Our ref: EH/DSG

22nd November 2000

Dear , First Time Buyer Homes

As promised when we acknowledged your registration of interest in a First Time Buyer home, earlier this year, I am writing to update you on the current position.

You will be aware from the local press and radio that Government has a schedule of projects to be undertaken over the next five years for the construction of not less than 400 First Time Buyer units on sites throughout the Island.

The first of these projects on the Springfield/Harcroft site on the New Castletown Road, Douglas, is now underway. A copy of the site plan is attached for your information.

This development which is being undertaken by J. G. Kelly Ltd, in conjunction with the Department of Local Government and the Environment, will result in 55 First Time Buyer homes being constructed on a phased basis. It is anticipated that the first phase of 15 houses will be completed in May 2001 with other phases being completed at various times between May 2001 and the end of 2002. I feel sure that you will appreciate that, as with any building works, we are unable, at this time, to guarantee these dates.

In anticipation of the first homes becoming available we have been planning the allocation process, bearing in mind that demand is anticipated to exceed the number of houses which will become available in this development.

We are now seeking specific applications from those wishing to be considered for a house on the Springfield/Harcroft development_ I am therefore enclosing an Application Form which, if you wish to be considered for one of these properties you should complete and return to this office to be received here no later than 4.30 p.m. on Monday Ilth December 2000.

In order to qualify for one of these houses you must be eligible for assistance under the House Purchase Assistance Scheme and I enclose details of that scheme for your information and guidance.

If we do not receive your completed application by the 11th December 2000 we will assume that you are not interested in a house on the Springfield/Harcroft site. Your name will be retained on the Register and we will write to you concerning future developments on other sites.

The submission of an application, and its acceptance by the Department, in no way constitutes an offer of a property. The Department does not to give any undertaking that an offer will be made when the allocation process has been completed.

167 Contd/

Once your application has been received it will be allocated points in accordance with certain criteria including Manx origin, period of residence in the locality, the family situation and the level of income. The number of points scored will be confidential to the Department.

The Department will then determine, in line with the number of points scored, the successful applicants, if necessary by drawing lots, and offer letters will be posted during the week commencing 18th December 2000.

Any such offer will be in respect of a specified property in the development, which will not be open to negotiation and the Department's decision will be final.

Unsuccessful applicants will be advised at the same time. Their names will remain on the Register and they will be able to apply for future houses, on other developments, as they become available.

The final price of the properties, which are a mix of two and three bedrooms, will not exceed £85,000 and will be advised in offer letters.

There is no need for you to make application for a mortgage at this stage as time will be given, if you are allocated a property, for you to make arrangements before responding to the offer letter.

We have however been speaking with mortgage providers and the price will be set out so that mortgages can be made available to those within the income ranges set out in the House Purchase Assistance Scheme, provided that they meet the mortgage providers criteria. We are of course unable to give any commitment in respect of individual mortgage applications which will be determined by the providers having regard, amongst other factors, to the applicant overall financial position.

Before proceedings you should carefully consider the implications of home ownership and the obligations, financial and otherwise, which this will take place upon you.

To summarise then you should now take the following action:-

. Decide if you wish to be considered for a SpringfieldIHarcroft home; 2. If you decide you do not wish to be considered take no further action; 3. If you decide you would like to be considered read carefully the enclosed leaflet on the House Purchase Assistance Scheme; 4. If you qualify for assistance under that scheme complete the application form - where the property is to be purchased by a married couple or established partners the application should be made in joint names. 5. Return the application form to reach us by I I th December 2000.

Should you have any queries or would like further information on the House Purchase Assistance Scheme or assistance with the application from please telephone the Housing Office on Douglas 685955.

Yours sincerely

168

APPENDIX E

• : 2 D • 2150 P. I

Tekl)hona• (01 ■ 143 tNEY GENERAL'S CHAMBERS Far (01 FAX rd FLOOR (NEW WING) - *-CRW\ S .rt VICTORY HOUSE Ptqa YYALIA-1 `rtilif6 DOUGLAS tAfAlY tooOT for„* kAAAAT ISLE OF MAN thill 3PP Our ref: WLIHO/FAR/PE/6/145 (D692) Your ref (PLEASE QUOTE REFERENCES ON ALL CORRESPONDENCE)

27 Nov ember, 2003

The Honourable D.C. Crctney, M:HK, Legislative Buildings, Isle of Man, LNit 3PW

Dear Minister,

re• Harcroft Meadow— Eirst Time Buyers Developmerg

Thank you for your letter dated 20th November 2003.

T can confirm that the documentation in respect of the development and sale of properties at Harcroft Meadow was drawn up by a legal officer in Chambers .

With regard to the Department's pre-emption rights, the Estates and Housing Directorate has confirmed that an offer letter was seat to each prospective purchaser of a property at Hareroft Meadow clearly stating that the properties were subsidised to enable the purchase price to be affordable for first time buyers. Rather, if a purchaser wished to sell a property within 5 years of the purchase they would be required to offer it back to the Department at 70% of the then market value, or at the purchase price, whichever was the lower. After the 5 year period a purchaser would be required to offer the property hack to the Department at 70% of the open market value at the time. There are also explanatory notes with regard to repayments issued by the Department I have attached a copy of an offer letter and the appropriate part of the explanatory notes for ease of reference

The legal documentation drafted by the legal officer in Chambers reflected the above provisions in the conveyance from the Department to the Developer and it was a condition of that sale that such provisions were also contained in each conveyance from the Developer to a first time buyer.

Accordingly, the Deed of Conveyance from the Developer to each first time buyer contained provisions in the Fourth Schedule to the Deed stating that if a first time buyer

169 LIEC. :003 1!:2 4 Ne.2151) P, 2

wished to sell a property the first time buyer had to first inform the Department, which then had an option to purchase the property at a purchase price determined as follows:-

(1) For the period of 5 years from the date of completion of the first purchase by the original purchaser a sum equal to the consideration paid by the purchaser for the plot and building thereon together with an additional sum equal to the cost of all extras agreed between the vendor and the purchaser and any improvements (supported by invoices or other satisfactory evidence of such costs), or

(2) 70% of the value of the property in the open market with vacant possession (this would be at any time after the first purchase)

whichever is the lesser sum

Further if the Department did not exercise its option to purchase the property as referred to above then the purchasers could sell the property but would have to repay the financial assistance granted to the purchasers by the Department. After the expiry of 5 years from the date of the purchaser's purchase of the property the Department would have a discretion to reduce the amount of financial assistance repayable by the purchaser.

The advocates acting for the purchasers should have been well aware of the above provisions and should have explained them to their clients.

Chambers have received correspondence and have been in discussions with the Department with regard to this matter. Chambers have also received certain correspondence from a ft= of advocates who acted for the developer and several purchasers which indicates that the advocates did in fact inform their clients of the above provisions

I have enclosed a copy of a report on this matter by the legal officer in Chambers which has also been sent to A C. Duggan, IvIHK.

hope the above is of assistance.

Yours sincerely,

W.J.H. Corlett Attorney General

170 E.Nc..2N3 H:24 No.2150 F. 3

PEP° kr VE

HOUSES ATAARCROFT It -ESTATE, BRA.IPAN

1 The Land at flareroft Meadow developed for first time buyer houses was owned by DOLGE. A Development Agreement between DOLGE and a developer was completed, following the tender process, on 27th October 2000. The Development Agreement was to build first time buyer houses and houses to be sold on the open market. There was attached to the Development Agreement draft documents which had to be used in the sale of the first time buyer homes. The draft documents contained covenants and restrictions in relation to the sale of the first time buyer houses as detailed below.

2 DOLGE has confirmed that prospective purchasers of first time buyer houses at Harcroft Meadow were sent initial offer letters by DOLGE (copy example letter attached and marked I). The Department has return slips from residents in this respect confirming receipt of the letter.

3. As you will sec paragraph S of the said letter explains that the housing is subsidised, and if a purchaser requires to sell the property within the first 5 years of their purchase the purchaser must offer the property back to the Department at 70% of the then market value, or the purchase price whichever is lower. After the 5 year period the purchaser must offer the property back to the Department at 70% of the open market value.

4 There was also an explanatory leaflet available (attached and marked 2), in respect of the House Purchase and Assistance Scheme 1999 (as amended) which refers in paragraph 7 to repayment of financial assistance if the dwelling is disposed of, provided that if the dwelling is disposed of after the end of the fifth year following the date upon which assistance is given then the Department may, with Treasury approval, reduce the amount repayable by a proportionate sum.

171 ~:c• 2M 11::4 No.2150 p 4

5. The conveyance of the estate to the developer (attached extract Third Schedule paras 19 and 20 marked 3) included a covenant that all conveyances to first time buyers had to include a covenant that the first time buyers could not sell or otherwise dispose of their property without first offering the same to the Department, and if the Department wished to purchase the property then it could do so with the purchase price calculated as follows:.

(1) For the period of 5 years from the date of completion of the first purchase the consideration paid by the purchasers with an additional sum equal to the cost of any extras agreed between the vendor and the purchasers and any improvements, or

(2) at any time 70% of the value of the property on the open market with vacant possession

whichever was the lesser sum, or

(3) If the Department did not exercise its option to purchase the property then the purchasers could sell the property on the open market but would have to repay the financial assistance granted, provided that if the sale was after the expiry of 5 years from the date of the purchaser's purchase then the Department would have a discretion to reduce the amount of financial assistance repayable in accordance with the said Scheme.

This would of course be subject to the perpetuity period of 21 years under the Perpetuities and Accumulations Act 1968.

6. The draft documents attached to the Development Agreement between the Department and the developer inchided the conveyance from the developer to each purchaser which reflected the above covenants in the Fourth Schedule paragraphs 19 and 20.

7. Purchasers should certainly have been aware of the provisions in respect of the Department's right to buy back a property and/or repayment of the financial assistance if a

172 r. H:24 4 N0.2150 P. 5

property was sold to a third party Firstly, by virtue of the offer letter from the Department and explanatory notes. Secondly, by advice from their advocates at the time in particular in respect of the provisions of the Fourth Schedule of the conveyance from the developer to the purchaser.

8. There has been correspondence and discussions with DOLGE Housing in respect of this matter and Chambers has recently received a letter from a firm of advocates regarding the same which indicates that these covenants and restrictions were explained to their clients at the time of each purchase.

173 -dtlea 11:59 FROM: J,■ NLk , TO: 9629162 P; 1 Department of Local Government and the Environment Rheynn Reiltys Ynnydagh as y Chynnnyltaght

Estutet and Housing Directonge Murray House, Mount Havelock, Douglas, talc of Man, 1M1 2SF. Tel: (01624) 685955 Fax: (01624) 685943 Please contact Mr. L.V. Crellin

Our Ref LVC/SM K Your Ref: tro' x (271 ttro, It 13th June 2001

Dear Mr. and Mrs. xxxxxxxx

First Time Buyer Homes: SprIngfield/Harcroft

I am pleased to inform you that you have been allocated a plot on the Springfield/Harcroll Development at New Castletown Road, Douglas, subject to confirmation of your eligibility for assistance under the House Purchase Assistance Scheme. At this stage your property will be allocated in Phases 2 and 3 of the development, due to commence in July 2001 and October 2001 respectively. It is important that you read the following carefully and respond where requested.

1. Before proceeding you should carefully consider the implications of home ownership, and the financial obligations which will affect you.

L'IwINDOwS1 IIIMPNFTDLC 14 M .1:00C

174 11 1 :z,t4 : TO:9629162 P:2

3. You will need to let us know if you are eligible for assistance under the House Purchase Assistance Scheme. Having been accepted on to the waiting list, the information provided shows that you should be eligible, however if there have been any significant changes to your circumstances since you applied to go on to the first time buyers register, you should let us know immediately. An increase in salary, for instance, may affect the level of grant available to you,

5. The properties have been subsidised to enable the purchase price to be affordable to first time buyers. Under the sate agreement, if you wish to sell your property within five years of the purchase you will be required to offer it hack to the Department at 70% of the then market value, or at the purchase price, whichever is the lower. After five years you will be required to offer it back to the Department at 70"/o of the then valuation.

7. If you wish to proceed please complete the tear off slip and return to this office.

I must emphasise that this letter is to inform you that you have been allocated a plot at Springfield/Hareroft. Please do not visit the site, or seek a mortgage at this stage, until you arc contacted by LG. Kelly Ltd. when the phases commence and your actual plot number has been allocated.

If you have any particular queries please direct them to this office. In the meantime I look forward to receiving your acceptance slip.

Yours sincerely

I„V. Crellln, Housing Policy Manager

CWINIX)WS 1 LMI'V.TULCI4M.DOC

175 APPENDIX F

Appendix F — Comparison of Harcroft grant and pre-emption and current Shared Equity Purchase Assistance (First Home Fixed) Scheme 2014 (as amended)

Using an actual example of a property purchased at Harcroft on 2 August 2002, using changes in the median house price over the term to date to determine the value of the property and the prevailing Bank of England base rates to determine interest due for SEPA, a comparison with the current First Home Fixed Scheme is shown below

PROFIT available to assisted person (not including equity gain by reduction in mortgage) as at each year end if property were to be sold Market value 0/0 SEPA First (increased (B) change in (A) Home Fixed year on year Year median HARCROFT Scheme (FHF) - by 0/0 change (C) SEPA First Home Fixed house NO REPAYMENT in median (Purchase Price (Equity loan (E23,793) repaid price (30% equity loan @ house price ) £79,310; by Year 10) £23,793; 36.8% £16,500 grant) equity share inc. half of discount) £120,000 2003 14.80% £137,760 0 2004 6.80% £147,128 0 2005 5.40% £155,073 0 -£237.93 4237,93 2006 4.10% £161,431 0 4713,79 4713,79 2007 13.10% 0.82,578 0 41,427.58 41,427.58 2008 5.40% £192,437 £58,696.01 £16,137.99 £21,337.99 repayment of £5,000 2009 — -2.00% £188,588 £56,001.89 £12,506.93 £22,869.23 2010 0.00% £188,588 £56,001.89 £11498.32 £30,275.61 repayment of £8,000 2011 0.00% £188,588 £56,001.89 £9,889.70 £37,791.30 2012 -4.00% £181,045 £50,721.42 £3,813.57 £43,296.28 repayment of £10.793 2013 0.00% £181,045 £54,021.42 £2,504.96 £54 158.98 --4 2014 2.08% £184,811 £56,657,43 £3,576.28 £57,024.70 2015 0.00% £184,811 £56,657.43 £2,267.67 £57,024.70

(A) (green column) represents Harcroft - the Department's interest expires completely after 21 years; (B) and (C) (blue columns) provide two scenarios for the current First Home Fixed shared equity Scheme using the same parameters for purchase price etc. (B) is where no repayments of the equity loan are made - the DOI retains a 36.8% equity share of the property and by 2015 E11,429.64 of interest will have been paid in respect of the equity loan (the available profit reflects this); (C) Is where the original equity loan has been repaid by 3 separate payments totalling 1'23,793 by year 10, By 2015 Interest of f4,306.18 will have been paid and the DOI will still own 23,9% of the equity (as the equity calculation also includes 50% of the original property discount). In (B) and (C) the Department's interest remains in place for the lifetime of the person's ownership of the property unless they buy the Department out.

176 APPENDIX G

Harcroft Meadow New Caslielown Road Douglas isle of Man IM2 1JT

Department of Local Government & Environment Estates & Housing Deparimnet Murray House Mount Havelock Douglas isle of Man IM1 2SF Y, •

2 4 ,SEP 2.009

k:Ar (:tik , 22 September 2009 '17

Dear Sirs,

First Thu Swore Scheme -111Harcroft _Meadow

As we approach the completion date for the sale/buyback of the above-mentioned property, I could not let it pass without comment, how grateful I am for having been part of the First Time Buyers Scheme.

The scheme has been subject to much criticism by other residents both on the Harcioft development; however, my husband and I believe that this Is due to people not fully understanding the mechanics behind the scheme itself, which is not the fault of DOLGE, but down to the individuals legal advisors who may have failed to explain to them comprehensively, in the first Instance, the terms and conditions of the scheme.

Any criticism also appears, I feet, to be borne out of an element of greed by certain residents who, in misunderstanding the terms of the scheme, have tried to add value to their property by building extensions, not realising that a percentage of that value then automatically belongs to the Government Whilst I am not against the idea of adding value to a property, I do not believe that this follows the proper purpose for which a first time buyer dwelling Is intended, which is, In my opinion, to provided starter homes to those struggling to reach that increasingly elusive first step on the property ladder. The properties are not intended, as I understand it, to be used as a long term investment.

The First Time Buyer scheme has worked 100% for me personally. It has provided me with a comfortable, affordable home for the last 7 years and has now enabled me to lake the next step on the property ladder, Independently from the scheme, and furthermore will now enable another first lime buyer the opportunity to purchase what has been a warm and welcoming first home.

So all that remains is for me to say thank youl I only hope the next residents of No.fei enjoy living there as much as I have.

Yours faithfully,

Eciu,S1-( 1-ti,cr."3.e 6 (NA ..ScLks- f(4 s 0 0

177 178 179 180

Appendix 20: Submission dated 4th January 2016 from

Mr Nick Black, Chief Executive, Department of Infrastructure

181 __-...-- __. infrastructure bun-troggalys isle of Man Govenuncnt Office of the Minister Rrtflys Ellin Vann, and Chief Executive Contact: Telephone: Mr 3 King Fax: Deputy Clerk of Tynwald and Email: Clerk of Legislative Council Our Ref: NB/cw Date: 4"' January 2016 Legislative Buildings Douglas IM1 3PW

Dear Jonathan

FIRST TIME BUYER SCHEME: FOLLOW UP QUERIES FROM SELECT COMMITTEE

Thank you for your e mail dated 14th December 2015 concerning the above. Taking each of the items in turn, as contained within your e mail:

(1) At paragraphs 34 and 39 of your paper you refer to 22 houses having been sold The Select Committee would like to know please when each of these sales was completed and what terms of the legal agreements applied in each case?

The table below summarises the activity by year in relation to the 22 sales of properties to the Department under the terms of the legal agreement

Year No. sold Term of agreement applied

Sold within 5 ears of purchase 2003/04 1 Properties bought back at equivalent of purchase price (as 2006/07 1 prescribed by the terms of the legal agreement)

Sold after 5 years since purchase 2006/07 2 2007/08 5 2008/09 1 2009/10 4 Properties bought back by Department at 70% of the 2010/11 1 prevailing market value as determined by Government 2011/12 3 Valuer (as prescribed in the legal agreement) 2012/13 1 2013/14 2 2014/15 1

Department of182 Infrastructure Sea Terminal Building, Douglas, Isle of Man, IM1 2RF (2) In the Attorney General's letter of 27th November 2003 at Appendix E of your submission, on the second page, in describing the terms of the Deed of Conveyance, the Attorney General writes: 'After the expiry of 5 years from the date of the purchaser's purchase of the property the Department would have a discretion to reduce the amount of the financial assistance repayable by the purchaser." The Select Committee would like to know please if the Department has ever exercised the discretion referred to here; if so, when and to what extent; and if not why not?

The Attorney General's letter of 27th November 2003 refers to the financial assistance (to a maximum of £16,500 subject to assessment of income) given in the form of a grant to purchasers as provided for under s6 "Maximum Assistance" of the House Purchase Assistance Scheme 1999 (as amended). Assistance is expressly defined as "assistance [available] under this Scheme". In terms of the financial (grant) assistance the Scheme provides, at "Assistance" s.5 (3) & (4), that

"(3) At the expiry of each r year from the date of the provision of assistance, the Department may, at its discretion and having regard to whatever criteria it may, with the approval of the Treasury, consider appropriate, by notice to the assisted person reduce the amount repayable by such proportion as is specified in the notice. (4) The proportion by which the amount repayable may be reduced under sub-paragraph (3) shall not on any occasion exceed 20 per cent of the original amount of assistance"

As a matter of course the Department allows a 20% reduction of the original grant sum every five years in accordance with the above provisions for this Scheme and all subsequent HPA Schemes which have provided grant assistance. The remaining original Harcroft purchasers, who are predominantly those included on the current petition, have had over £166,000 in grants provided from the public purse written off to date under this provision. For many there will be a further 20% reduction of grant in 2016/17 as it will be 15 years since their purchase.

The clauses referred to above are what the Attorney General refers to in the aforementioned letter. As indicated in the Department's earlier submission of November 2015 at point 7, the House Purchase Assistance Scheme does not provide for the additional shared equity "assistance in kind" realised by purchasers at Harcroft, the terms of these provisions being captured in the separate pre-emption agreement attached to each property as referred to in the Attorney General's letter. The terms of the pre-emption period state that the Department will buy the property back at either the original purchase price, if within the first five years of ownership, or after this initial five year period at 70% of the prevailing market value.

(3) The petitioners say in their petition that 'the agreement ties them in to repaying 30 per cent of the sale price of their houses to the Government if they sell within 21 years'. You refer to this 21 year period at paragraph 10 of your paper. The Select Committee would like to know if it would be possible to implement a concession under which the petitioners could sell their homes now and the Government could claim a 15% share instead of the 30% share to which it is entitled under the letter of the scheme? What steps would be needed to put such a concession in place and what legal and financial risks would be associated with this course of action?

As set out in in the Department's response of November 2015 (at points 10 and 37 (2) as referred to in your question) the legal agreement requires, after the initial 5 year period following purchase has expired arid for the remainder of the term, that the owner sells the property to the Department at 70% of the prevailing market value as determined by the Government Valuer. To be clear, the owner does not have an option to sell the property independently and pay the Department 30% of the sale price

183 2 The Department and Treasury originally intended the silent shared equity arrangement to be lifetime (as with the current Schemes) in order to recover Government's investment at some point in the future (having received no monies from the purchaser from the original property sale). However, because the pre-emption period was not explicitly defined as "lifetime" it unintentionally fell under the provisions of the Perpetuities and Accumulations Act 1968, which limited the term to 21 years. Purchasers have already effectively been released early from the agreement and because of the fact that they paid in most cases, when taking the grant funding also into account, only approximately 50% of the original property value they have made significant financial gains even with the purchase provisions applied as per the agreement. The benefit accrued by those at Harcroft is significantly greater than applicants being assisted under current Schemes. From the Department's perspective there would appear to be no justification for not collecting on funds/properties potentially due for the reinvestment in affordable housing.

As a shared equity scheme currently exists it would be possible to convert by negotiation the Department's 30% equity share of the prevailing value to reflect current provisions, however as this would be more onerous for the Harcroft owners than the current Harcroft arrangements given that all liabilities to Government will cease, with the exception of any residual grant, very shortly (at the end of the 21 year period), there is unlikely to be any take up of this option.

Twenty two purchasers have fully complied with the agreement which was properly executed and is legally binding. Any legal agreement may be varied by mutual consent. Undoubtedly if a variation was to be negotiated then the 22 purchasers who disposed of their properties in good faith in accordance with the terms of the legal agreement would seek compensation, not necessarily just for financial loss but also for example other damages in respect of costs or other social/personal impacts on their families associated with having to move or relocate when perhaps if the terms had released them earlier they would have chosen to stay.

As already indicated the terms of subsequent Schemes have been less favourable in many respects than the Harcroft development arrangements. Varying the terms of the Harcroft agreement would provide a precedent upon which others could also seek to have their contracts varied retrospectively. So, for example those who are currently purchasing properties under the Shared Equity House Purchase Assistance Schemes may decide in 5 or 10 years that they no longer find the terms of the Government investment in their property favourable to them and wish to petition to have them amended. It may also be considered a precedent for Government contracts more generally. The Department has already received a complaint following the publicity generated by the petition from a purchaser who bought on less favourable terms (Appendix A).

In conclusion, whilst the Department could vary the terms of its contracts, it would have to be confident that doing so represented a proper use of tax payers resources. Treasury concurrence is obtained for the purchase and resale of properties subject to the scheme and the Department is not able to advise if such concurrence would be granted in a situation where significant amounts of money were proposed to be uncollected.

Yours sincerely

N 7 Black Chief Executive

1843

Appendix 21: Submission dated 18th January 2016 from

Mr Nick Black, Chief Executive, Department of Infrastructure

185 infrastructure bun-troggalys isle of Man Govtrnment Office of the Minister and Chief Executive Contact: Mr J King Telephone: Fax: Deputy Clerk of Tynwald and Clerk of the Legislative Council Email: Legislative Buildings Our Ref: Douglas Date: leJanuary 2016 Isle of Man IM1 3PW

Dear Mr King

Thank you for your email of 14th January regarding the First Time Buyers Scheme. Please find below the answers to your questions that you have raised.

The Select Committee on the First Time Buyers Scheme has noted that the petitioners Mrs Grogan and others appear to have used the same legal advisors as the developer, G Kelly, for the purchase of the properties. The Select Committee would like to know if such an arrangement would still be possible today?

Yes, it is still possible for the same legal practice to represent the developer and the purchaser. As far as the Department is aware some developers, from time to time, offer discounted legal services as part of their sales package when selling their developments to the general public. However, in all cases, the purchaser is free to select their own legal advisor and they take full responsibility for the selection of their advocate with whom they enter into a formal contractual arrangement to act on their behalf. Advocates have professional responsibilities independent of their Chambers /employer and are individually bound by their Code of Professional Conduct to act in accordance with the law and not to behave in any way that would conflict with the professional standards required of them.

The Select Committee would also like to know who actually drew up the Scheme itself?

The Scheme purpose, content and terms of operation were agreed jointly between Treasury and the Department of Local Government and the Environment (DOLGE). Initial drafting would have taken place within DOLGE (generally based on earlier schemes which often share a similar basic structure and provisions) and then the draft would be referred to the Attorney Generals Chambers for legal concurrence and drafting advice/amendment prior to seeking Tynwald approval.

As per my earlier correspondence, I would again stress for the purpose of clarity that the House Purchase Assistance Scheme 1999, which provided the grant assistance to Harcroft purchasers, does not refer to, and indeed is completely separate to, the pre-emption agreement. This separate legal agreement was attached to the Harcroft properties as a condition of the disposal terms for the land which was in public ownership, and which having been conveyed to the developer at a nominal cost provided a benefit in kind in terms of the land value to the Harcroft purchasers who, as a consequence, paid a much reduced price for their property. The Attorney General's Chambers drafted the legal agreement on instruction from DLGE (after the terms were agreed with Treasury as indicated above).

Yours sincerel

N 7 Black Chief Executive

Department of Infrastructure Sea Terminal Building, Douglas,186 Isle of Man, IM1 2RF

Appendix 22: Submission dated 29th January 2016 from Mr Nick Black, Chief Executive, Department of Infrastructure

187 infrastructure bun-troggalys isle of Man Government Office of the Minister RetItys Elfan Vann.. and Chief Executive Contact:

Mr J King Deputy Clerk of Tynwald and Clerk of the Date: 29th January 2016 Legislative Council Legislative Buildings Douglas Isle of Man

Dear Mr King

Thank you for your email of 26th January, regarding the above, which I respond to as follows:

As the approved First Time Buyer developments have completed over a 15 year timeframe from 2001 to the present day in a variety of locations, and range in size from just 1 unit to 116 units, with some developments comprising solely of apartments, some of mixed house types and some solely of family houses, it is not possible to provide a direct comparison of activity. However, the attached spreadsheet shows the turnover of buybacks by development, the length of ownership and the difference between original purchase price and the buyback price. Some properties have been sold on to new First Time Buyers more than once.

The table below compares developments of a similar type and similar age to Harcroft over the initial 10 year period. [ No.of units

Harcroft 55 36.7% turnover

All Saints Park 14 0.0% turnover

-1 i Larivane Meadows 14 0.0% turnover

Cronk Grianagh 38 7.9% turnover

Y Vaarney Yiarg 29 27.6% turnover

Department of Infrastructure Sea Terminal Building, Douglas,188 Isle of Man, IM1 2RF The 10 year pre-emption period has now expired for the early 2002 Scheme developments - 16 properties have now been sold on the open market outside of the pre-emption terms with the Department receiving the following receipts from the assisted persons in respect of repayment of financial assistance and interest.

Development Property Original Purchase Assistance and Interest Type Price Repaid to Department Erin Way 2 Bed House £125,000 £43,936 Erin Way 2 Bed House £125,000 £54,509 Larivane Meadows 3 Bed House £126,500 £57,344 Larivane Meadows 3 Bed House £126,500 £10,800 Larivane Meadows 3 Bed House £126,500 £50,706 Y Vaarney Yiarg 2 Bed House £120,000 £25,540 Y Vaarney Yiarg 2 Bed House £118,000 £44,459 Birch Drive 3 Bed House £126,800 £56,269 Birch Drive 3 Bed House £126,000 £28,962 All Saints Park 2 Bed House £120,000 £55,677 Cronk Grianagh 3 Bed House £128,000 £51,234 Cronk Grianagh 2 Bed House £120,000 £51,525 Cronk Grianagh 3 Bed House £128,000 £58,210 Cronk Grianagh 2 Bed House £120,000 £52,523 Cronk Grianagh 3 Bed House £128,500 £57,450 Cronk Grianagh 3 Bed House £127,000 £48,273

Data on private sector housing activity (sales) is published by Treasury each year but is not broken down by location, household or property types so there is no way of determining from data available on the Island what the turnover of first time buyer properties in particular is in the general open market. Island mortgage providers also do not publish statistics on first time buyer activity.

Whilst the Department is able to quantify the number of first time buyers who have received grant assistance under the schemes to purchase in the open market (666 to date), once the grant has been repaid the Department has no further interest in the property as the properties were purchased in the open market at full market value. As some assisted open market first time buyers choose to repay their grant early, regardless of whether or not they are disposing of their property (as they are released of the conditions and restrictions the Department applies whilst assistance is outstanding), there is no way of determining what they plan to do with the property once the financial interest is discharged.

Yours sincere

N Black Chief Executive

189 190 191 192 193 194 195 196 no.of units Harcroft 55 36.7% turnover All Saints Park 14 0.0% turnover Larivane Meadows 14 0.0% turnover Cronk Grianagh 38 7.9% turnover Y Vaarney Yiarg 29 27.6% turnover

197 198

Appendix 23: Submission dated 8th February 2016 from

Mr Nick Black, Chief Executive, Department of Infrastructure

199

Contact: Christine Wilson Mr R Phillips Telephone:

Clerk of Tynwald Date: 8th February 2015 Legislative Buildings Douglas, Isle of Man

Dear Mr Phillips

Select Committee : Harcroft Meadows Further to my attendance with Mrs Deborah Reeve, Director of Housing, at the Select Committee on the First Time Buyer Scheme and the request to find out how many “slips” were returned from prospective purchasers at Harcroft, I am able to advise that 32 slips are held on file. The Department would add that without an acceptance no property would have been allocated.

It remains the Department’s position that each purchaser was made aware of the pre-emption arrangements before agreeing to the purchase of a property at Harcroft Meadow. Whilst the Department can understand why the Committee may wish to seek a compromise in respect of the issues raised by the petitioners, it is clear from the evidence identified to date that both the scheme terms and conditions and the Harcroft Meadows pre-emption terms have been reviewed on several occasions since its inception. In particular the review by the Department of Local Government and the Environment in late 2006 concluded that the existing terms of the purchase agreement should not be amended; subsequent Departments have adhered to this decision for the last ten years.

Without sufficient factual evidence to warrant the overturn of that decision, the offer of a compromise to the current petitioners provides them with a pecuniary advantage compared to the previous owners at Harcroft who were not afforded such an opportunity, and may therefore be of the opinion that they have been financially compromised. This carries a significant risk of a formal challenge and potential claims for financial redress and/or compensation by those individuals and sets a difficult precedent for the interpretation of other legally binding agreements and any potential future challenges to these. In addition, the Department is concerned that it would appear from the wording of the compromise solution regarding in respect of having no time limit to the valuation offer that this approach could place it in breach of Financial Regulations.

As a consequence, the Department is not minded to support this course of action.

If I can assist further please feel free to contact me.

Yours sincerely

N J Black Chief Executive

Department of Infrastructure Sea Terminal Building, Douglas, Isle of Man, IM1 2RF 200

Appendix 24: Submission dated 15th February 2016 from Mr Nick Black, Chief Executive, Department of Infrastructure

201 „_./..-.-- infrastructure bun-troggalys isle of Man Government Office of the Minister Real., t IIIIS Vt11111111 and Chief Executive Contact: Mr .3 King

Deputy Clerk of Tynwald and Clerk of the Legislative Council Date: 15th February 2016 Legislative Buildings Douglas, Isle of Man IM1 3PW

Dear Mr King

First Time Buyers Committee

Thank you for your email of the 9th February. The contractual information is formally held against the property in the form of the legal charge and the pre-emption agreement. There is no requirement for the Department to retain information on file for this length of time and it is therefore fortunate in the context of your queries that some of this information is still available. The Housing Division has moved locations several times and there has been some rationalisation of older files as part of this process.

In response to your query, 14 of the acceptance slips relate to the people who are still on the estate with 12 being petitioners. In addition, where acceptance of offer slips are not present, signed responses to the preceding invitation for applications letter from the Department (which also set out the terms of purchase on page 2 - attached) are on file for a further 13 people who are still on the estate, 11 of these being petitioners. Therefore, in total, 23 of the petitioners are accounted for. In addition to the above, 2 further petitioners, where there are no acceptance of offer slips or applications in response to the letter of invitation to apply on file, make reference to receipt of the letter in subsequent correspondence with the Department.

Twelve of the signed slips relate to people who have since moved on with the remaining 6 relating to people who initially accepted and then subsequently withdrew from the offer for a variety of reasons. The letters were sent using mail merge and on some files only the mail merge template offer letter is filed.

As confirmed by the attached letter of 12 June 2001 to Mr Cretney from Mr Crellin, the responsible officer at that time, which is broadly contemporaneous to the allocations, all applicants received the offer letters as part of the standard offer process — the acceptance slip was the process trigger for notifying the developer and the Attorney General's Chambers to progress the sale and the purchase could not have proceeded without confirmation of acceptance from the purchaser.

I would again stress that the contract of sale contains the formal details of the terms and conditions of sale, and the advocate engaged by the purchaser to scrutinise the legal agreement on their behalf as part of the conveyancing process was expressly responsible for ensuring that the purchaser understood the terms of contract.

Yours sincere]

Black Chief Executive

Department of Infrastructure Sea Terminal Building, Douglas,202 Isle of Man, IM1 2RF Department of Local Government and the Environment Rheynn Reiltys Ynnydagh as y Chymmyltaght

Estates and Housing Murray House Mount Havelock Douglas, Isle of Man 1M1 2SF Telephone (01624) 686320 Fax (01624) 686250 12 June 2001 lvIr.L.V.Crellin, Housing Policy Manager e-mail: l Hon. D. Cretney MHK Legislative Buildings Your ref • DOUGLAS Our ref : HPM5/LVC Isle of Man IM1 3PW

Dear Mr. Cretney,

Springfield /Harcroft Development

I refer to your letter addressed to the Chief Executive which has been referred to me for response. I am enclosing a copy of a letter which was circulated to all those allocated a property on the Springfield / Harcroft Development, section 5 of which explains the provisions of the sale agreement.

Those provisions apply to all properties , whether two bedroomed or three, and have not altered since the first phase of allocations. The remaining plots have now been allocated prior to commencement of construction to enable those potential purchasers to make forward plans and assess their financial circumstances.

The letter sent to each clearly sets out the provisions which require the property to be sold back to the Department at 70% of the then market value or the purchase price (whichever is the lower) if sold within five years of purchase, or at 70% of the then market value if sold after five years. The Department could then make that property available to another first time buyer.

It may be helpful if I show an example of how the provisions might apply in the event of an early sale.

In the current market a two bedroomed property at Springfield/ Harcroft is likely to have a market value of ci120,000.

203 The purchase price taking account of subsidy will be c£75,000 for which the purchaser may qualify for a grant of £16,500 and only require a mortgage of £58,500. if the property is sold within five years, the property would be offered back to the Department at the lower of 70% of market value (i.e. 70% x £120,000 = £84,000) or purchase price (£75,000). Grants are repayable in full in the first five years and reduce by 20% after each successive five year period. After five years the sale price would be at 70% of market value (currently equating to £84,000) with the grant having been reduced by 20%. The property owner would have the benefit of the equity remaining after consideration of repayment of outstanding mortgage and reduced grant.

The purpose of the Scheme is to provide affordable homes to those who would otherwise be unable to get on to the property ladder. The provisions of the sale agreement provide a disincentive to those seeking to make a profit and sell on in the early years. However, where the purchaser may subsequently need a larger property, the House Purchase Assistance Scheme does currently provide grant support of up to £25,000 for a second time buyer to purchase a property not exceeding £110,000.

I hope that this provides a suitable explanation. If any of your constituents have any particular concerns , or would like to some advice on the grant scheme relative to their own circumstances, I would be pleased to meet with them for discussion.

Yours sincerely,

L.V.Crellin Housing Policy Manager

204

Department of Local Government and the Environment Rheynn Reiltys Ynnydagh as y Chymmyltaght

Estates and Housing Directorate Murray House, Mount Havelock, Douglas, Isle of Man, 1M1 2SF. Tel: (01624) 685955 Fax: (01624) 685943

Please complete and return to: Mr. L.V. Crellin Housing Policy Manager Estates and Housing Directorate Department of Local Government and the Environment Murray House Mount Havelock Douglas IM1 2SF

Name Name

Address

(Spouse or Joint Applicant if applicable)

YES NO

1/We accept the offer of a plot at SpringfieldfHarcroft n I/We understand that the purchase of a property is subject to obtaining a mortgage from an approved mortgage provider and a grant under n the House Purchase Assistance Scheme 1999

I/We have read Section 4 and will have sufficient savings and mortgage

N \1.GARCHIT\SHARED\CORRESMD1.GETTBLCI4M IX)C

205 111"/-1f.:Ndi X D Department of Local Government and the Environment Rheynn Re lire hmdagh as v Chymniltaght U-SlatCS and llouun$ Swum MUM) I lou‘e Mount llat.clod 1X/1101 AS ISk tit Man 1M1 Id t()162.1t Ea\ (01624)(4625(, t m.il -architects@ dlgt: Iii Maw itply Housing Office

Our ref:

22nd November 2000

Dear , First Time Buyer Homes

As promised when we acknowledged your registration of interest in a First Time Buyer home, earlier this year. I am venting to update you on the current position.

The first of these projects on the Springfield/Harcroft site on the New Castletown Road, Douglas, is now, underway. A copy of the site plan is attached for your information.

We are now seeking specific applications from those wishing to be considered for a house on the Springfield/Harcroft development. I am therefore enclosing an Application Form which, if you wish to be considered for one of these properties you should complete and return to this office to be received here no later than 4.30 p.m. on Monday 1 1 al December 2000.

In order to qualify for one of these houses you must be eligible for assistance under the House Purchase Assistance Scheme and I enclose details of that scheme for your information and guidance.

If we do not receive your completed application by the I lth December 2000 we will assume that you are not interested in a house on the Springfield/Hai-croft site. Your name will he retained on the Register and we will write to you concerning future developments on other sites.

206 Contdf..

-2-

Once your application has been received it will be allocated points in accordance with certain criteria including Manx origin. period of residence in the locality. the family situation and the level of income The number of points scored will he confidential to the Department

The Department will then determine, in line with the number of points scored, the successful applicants. if necessary by drawing lots. and offer letters will be posted during the week commencing I Sth December 2000

Any such offer will be in respect of a specified property in the development, which will not he open in negotiation and the Department's decision will be final

I Insuccessful applicants will be advised at the same time. Their names will remain on the Register and thev %sill be able to apply for future houses, on other developments, as they become available.

The final price of the properties, which are a mix of two and three bedrooms, will not exceed £85,000 and will be advised in offer letters. l tnder the sale agreement purchasers who wish to sell their property within 5 years of the purchase date will be required to offer the property back to the Department at the lower of 70% of the then market value, or the purchase price. Any purchaser wishing to sell at any time after the five years has expired will he required to offer the property to the Department at 70% of the then market value.

There is no need for you to make application for a mortgage at this stage as time will be given, if you are allocated a property. for you to make arrangements before responding to the offer letter.

Before proceedings you should carefully consider the implications of home ownership and the obligations, financial and otherwise, which this will take place upon you.

"To summarise then you should now lake the following action-

I . Decide if you wish to be considered for a SpringfieldlHarcroft home; 2. If you decide you do not wish to be considered take no further action; 3. if you decide you would like to he considered read carefully the enclosed leaflet on the House Purchase Assistance Scheme; 4. If you qualify for assistance under that scheme complete the application form - where the property is to be purchased by a married couple or established partners the application should be made in joint names 5 Return the application form to reach us by 111h December 2000.

Should you have any queries or would like further information on the House Purchase Assistance Scheme or assistance with the application from please telephone the Housing Office on Douglas 685955.

\'ours sincerely

207 208

Appendix 25: Submission dated 26th February 2016 from Mr Nick Black, Chief Executive, Department of Infrastructure

209 210 211 212

Appendix 26: Council of Ministers paper dated

21st July 2003

213 214 215 216

Appendix 27: Council of Ministers minute dated 4th September 2003

217 218

Appendix 28: Letter dated 19th February 2016 from the Committee to Gough and Co

219 220 221 222

Appendix 29: Submission dated 26th February 2016 from Mr Paul Kerruish, Kerruish Law

223 Your Ref: Reply: Paul Kerruish KERRUISH

Our Ref: EPK/AD273/ajt L A W

26 February 2016

Mr Jonathan King Clerk of the Select Committee on the First Time Buyer Scheme Deputy Clerk of Tynwald Legislative Buildings Douglas Isle of Man IM1 3PW

Dear Mr King

RE: SELECT COMMITTEE ON THE FIRST TIME BUYER SCHEME (PETITION FOR REDRESS)

I write further to your letter of the 19th February 2016 addressed to Gough and Co of 4th Floor, Anglo International House, which as a result was delivered to the firm trading from that office of Gough Law, being one of the successor practices to Gough Advocates Limited which in turn one of the successor practices to Gough and Co.

I am writing to you as my present Practice is also a successor practice to that of Gough Advocates Limited and whilst upon a brief review of the bundle you enclosed with your letter, it is clear that the material Fee Earners at the time were no longer in the employment of certainly my firm, or any of that of Gough Law, I am probably the most relevantly connected person to give some feedback to you in respect of the matters raised.

As I am sure you will appreciate, the timelines involved mean that I am essentially going to be very reliant in what documentation you provide me with in respect of this matter and subject for checking archives, I anticipate any files relevant to the matters have long since been destroyed in accordance with good housekeeping.

I was obviously surprised to see this Petition of Redress has been brought now so long after the material events but. I will endeavour to review the various papers enclosed and at least provide my comments on the same. Unfortunately, the timing of receipt of this letter is not very good, in as I am just about to leave the Island on a family vacation and not returning until Monday r March 2016.

Registered Office: 5th Floor I Anglo International House Bank Hill I North Quay I Douglas Isle of Man j IM1 4QE

0erthrt Let re oh Law Motet tegal practice In the Otto of Man tetch carneanl number of its director tr. mertabte tor insPection as ti 224 KERRUISH• L A W

This being the case, I will not be in a position to dedicate a detailed client review of these documents until I return from vacation and it will then obviously take me some time to review and digest the same before being able to provide a meaningful response. I will also want to review any archived records we have (if any) to see if they can be of assistance although, as I have stated, I am a little sceptical having regard for how long ago the material events occurred.

Your letter does not actually state whether or not there is a particular timescale running, but if there is a particular date within which you would like me to try and work in providing a substantive response to the queries raised, then can you please let me know.

Yours sin erely 1

a l-Kerruish Kerruish Law

- 2 -

225 226

Appendix 30: Letter dated 16th March 2016 from the Committee to Mr Paul Kerruish, Kerruish Law

227 228

Appendix 31: Submission dated 23rd March 2016 from Mr Paul Kerruish, Kerruish Law

229 230

Parliamentary Copyright available from:

The Tynwald Library Legislative Buildings DOUGLAS Isle of Man, IM1 3PW British Isles April 2016 Tel: 01624 685520 Fax: 01624 685522 e-mail: [email protected] Price: £23.65