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Section three
Grant administration procedures
Making applications for grant funding
3.1 Registered social landlords wishing to develop New Supply Shared Equity properties should provide details of individual project proposals in their annual Strategy and Development Funding Plan submission. In line with existing procedures, registered social landlords will receive confirmation of the projects which can be supported in the form of a Programme Agreement letter from the grant provider.
3.2 New Supply Shared Equity projects specified in a registered social landlord's Programme Agreement letter should be progressed using the existing procedures for steering projects through the HAG application and approval process, as set out in the HAG Procedures Guide published in August 1997. Normally therefore, registered social landlords should submit progress reports or detailed funding applications at acquisition, cost plan and tender stages, depending on the funding route selected. Registered social landlords are encouraged to agree with the grant provider the most streamlined route possible.
Appraisal of grant applications
3.3 Where progress reports are submitted, these will contain a series of certifications by the registered social landlord. In line with existing procedures, provided that the certifications are in order and that the project programme and expenditure profile are compatible with the registered social landlord's Programme Agreement and can be accommodated within the resources available to the grant provider, there will be no detailed appraisal of acquisition, cost plan and tender stage progress reports. Instead, the grant provider's consideration of progress reports will be limited to the simple administrative checks described in Part 2 of the HAG Procedures Guide and, for Acquisition Reports only, to examining the registered social landlord's proposed grant requirement for the New Supply Shared Equity project.
3.4 Where detailed funding applications are submitted, the grant provider will carry out a full value for money appraisal of the project based on the appraisal model described in Part 2 of the HAG Procedures Guide. Even where a full appraisal is required, the grant provider will aim to minimise the level of technical appraisal where possible, with detailed cost appraisals held in reserve for projects which require more grant than that agreed at acquisition stage, or in any subsequent approval issued by the grant provider.
3.5 Regardless of whether progress reports or detailed funding applications are submitted, the proposed grant requirement for Type 1, Type 2 and Type 3 projects should be calculated using the methodology set out in Annexe D. This Annexe:
- shows that the level of grant funding awarded to any project will not be greater than the gap between the eligible development costs and the anticipated sales income that the properties will generate; and
- provides detail on the allowances that will be available when developing projects.
3.6 Where significant numbers of 'stand alone' projects are envisaged, grant providers are encouraged to develop and publish guidelines locally on acceptable overall development costs. These would then be used in the same way as HAG subsidy targets to promote streamlining.
Third party warranties
3.7 Third party warranty premiums will be eligible for grant funding. Third party warranties are a mandatory grant requirement for Type 1, Type 2 and Type 3 projects.
3.8 The grant provider will accept NHBC Buildmark, Zurich and Premier Guarantee third party warranty schemes cover; or such other third party warranty scheme as may be acceptable in terms of the Council of Mortgage Lenders' Handbook for Scotland.
3.9 In situations where the registered social landlord owns the land which is to be developed for New Supply Shared Equity, NHBC Buildmark and Zurich each require the land owner and builder to be registered under their respective warranty so that effectively a double registration premium is required. A second registration premium will be eligible for grant funding only where it can be demonstrated that this provides value for money.
Approval of grant by the grant provider
3.10 The grant provider will generally issue offers of grant at three stages for the development of a Type 1 or Type 3 project. The stages at which grant offers will be issued are:
- on receipt of a HAG/Acquisition Report or following approval of a HAG/Acquisition Application, the existing standard style of acquisition grant offer will be issued for acquisition and related costs (for example legal fees, allowances and, if applicable, site appraisal/ feasibility study costs);
- on receipt of a HAG/Cost Plan Report or a HAG/Cost Plan Application, the acquisition grant offer will be revised to include all pre-tender professional fees; and
- on receipt of a HAG/Tender Report or following approval of a HAG/Tender Application, the offer of grant at Annexe E will be issued based on the total grant required for a project, to enable a works contract to be entered into.
3.11 For a Type 2 project, the first grant offer, in the style set out in Annexe E, will generally be issued at tender approval stage.
Grant payments
3.12 Grant payments will be made after an offer of grant has been unconditionally accepted by the registered social landlord. Registered social landlords should follow the HAG payment procedures set out in Part 4 of the HAG Procedures Guide when making claims for grant.
Post-completion procedures
3.13 Part 5.2 of the HAG Procedures Guide describes the post completion procedures for HAG funded projects. These procedures also apply to the administration of New Supply Shared Equity projects.
3.14 Registered social landlords should therefore make a Form HAG/Completion submission to the grant provider within one month of the date of sale of the last house in the project or within three months of practical completion (as defined in sections 3.15 and 3.16 below), whichever is the earlier.
3.15 Type 1 and Type 3 projects reach practical completion when:
- the properties are certified as such by the project architect/ supervising officer; and
- they have been approved by the local authority for occupation.
3.16 For Type 2 projects, practical completion is the date on which grant was paid by the grant provider.
3.17 Where property sales have not been completed within these timescales, the Form HAG/Completion submitted three months after practical completion will be treated as an interim submission. Updated HAG/Completion forms should be submitted at three monthly intervals thereafter until all properties have been sold.
3.18 There are four scenarios where a reassessment of grant may be required at completion stage. These are:
- where unavoidable and unforeseen increases in capital costs have occurred;
- where the housing or tenure mix has changed since tender submission or approval;
- where for justifiable reason sales receipts differ from projected levels; and
- where a substantial reduction in capital costs has occurred.
3.19 Detailed guidance on the reassessment of grant as a result of such circumstances is provided in Part 5.1 of the HAG Procedures Guide. HAG/Completion stage will be used for all projects to assess whether any of these circumstances apply and whether, as a result, any reassessment of the grant limit calculated at tender stage is needed. If this is the case, the information contained in the HAG/Completion form will be used to determine the revised grant limit.
3.20 Annexe D (example 4) illustrates how a re-assessment of grant at completion stage could work in practice for a Type 1 property. In this example, less grant was required at completion stage than had been approved at tender stage. The difference between these two sums must therefore be returned to the grant provider. The principles set out in this example would apply equally to a Type 2 or Type 3 project.
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