Affordable housing - discount market sale scheme customer information guide

Discount Market Sale housing is a type of affordable housing which is sold at a discount of at least 20% below local market value. A similar product called "First Homes" offers a minimum of 30% discount below market value for properties purchased in Stockton.  

Purchasing a Discount Market Sale home can be done either directly from the House Builder, through a Registered Provider (sometimes referred to as Housing Associations), or through the re-sale of an existing Discount Market Sale property through an Estate Agent. Discount Market Sale properties available for purchase are usually advertised through on-site sales offices, marketing boards on site, through the websites of House Builders and Registered Providers and Estate Agents.   

Purchasers own 100% of the property but pay a discounted price on purchase. The discount applied remains for the life of the property and the discount must be passed on to each successive qualifying purchaser. This discount is referred to as "discount in perpetuity". The owner of a Discount for Market Sale dwelling has the same responsibilities as any other property owner including responsibility for all repairs and maintenance costs. The property cannot be sublet; it must be the purchaser's main residence.  

Any purchaser of a Discount Market Sale Scheme dwelling is subject to specific legal requirements which ensure their home is discounted in perpetuity and therefore each subsequent resale is subject to the same percentage discount. The discount at time of re-sale is based on a revised and updated valuation which needs to be submitted for approval to strategichousing@stockton.gov.uk prior to any forward sale being agreed. Any prospective new purchaser within the twelve week notice period also needs to meet the eligibility criteria as outlined in this Customer Guide.

To request a PDF copy of the guide please email strategichousing@stockton.gov.uk.

Discount Market Sale properties represent a developers' contribution to affordable housing through a planning obligation. This is controlled through a Section 106 agreement (s106 of the Town and Country Planning Act, 1990) which is a legal agreement signed as part of a planning permission and places particular conditions on the property or the land. The Section 106 agreement is binding in perpetuity upon the owner of any Discount Market Sale property, and upon any other party with an interest in the land such as a mortgagee. 

A Section 106 is registered as a local land charge. This means that when a proposed purchaser undertakes a local search on the property the purchaser will become aware of the agreement.  

It is recommended that you read the Section 106 agreement for the site you are wanting to purchase on, or which is related to a re-sale, so you are aware of the eligibility criteria that must be followed and the discount value which should be applied. The discount is generally 20% but it can vary.   

A Discount Market Sale home can also be protected by a restriction on the land registry property title.  

There may also be occasions where Discount Market Sale homes are controlled through planning condition and affordable housing statements produced by House Builders which are agreed with Stockton-on-Tees Borough Council. They can set out specific details including eligibility criteria and discounts applied. 

To purchase a Discount Market Sale property, you must meet the eligibility criteria listed in this guide. Discount Market Sale properties can be sold either directly from the House Builder, a Registered Provider, or an Estate Agent. Enquiries should be made through the House Builder, Registered Provider, or Estate Agent who are marketing the property. If you are considering purchasing a new build Discount Market Sale property, the House Builder's sales office will advise you if the eligibility criteria applies to the sale as this is dictated by the length of time the property has been marketed for sale. If you are considering purchasing a re-sale Discount Market Sale property, the eligibility criteria is applicable during the twelve week notice period. If you have any questions about eligibility, please email strategichousing@stockton.gov.uk 

The discount is provided by the house builder for all initial purchases and by the existing property owner for resales. Stockton-on-Tees Borough Council determine the level of discount from open market value which needs to apply to each Discount for Market Sale dwelling. Details of the local discount applied will be contained within the property title deeds and part of the s106 planning conditions applied to the location of the Discount for Market Sale dwelling(s). Your solicitor should be able to advise you of any payments you need to make in completing the conveyancing and purchase of your new home. 

There are several new build developments in the Borough of Stockton-on-Tees. You should contact the House Builder, Registered Provider or Estate Agent through the sales office on site, or by telephone to discuss which properties are available as part of the Discount Market Sale Scheme.  

Sales of existing homes will be made by the current owner who may choose an Estate Agent to market the property. 

When purchasing through a House Builder, the sales office is required to contact the Strategic Housing Team to gain approval for the sale. When purchasing a re-sale property, the seller's solicitor is required to gain approval for the sale from Stockton-on-Tees Borough Council by emailing strategichousing@stockton.gov.uk   

We strongly recommend you obtain independent financial and legal advice prior to entering an agreement of sale. Stockton-on-Tees Borough Council are unable to provide or recommend details of independent financial or legal representatives.

To keep houses affordable, when you sell your Discount Market Sale home you must pass your discount on to the next purchaser. The Section 106 agreement attached to a Discount Market Sale property will normally provide the information needed to sell your house. It will set out the discount which should be applied and who can buy the property (eligibility criteria). Whilst the discount is in perpetuity the eligibility criteria is time restricted. The agreement can be found in the Land Registry documents relating to your property.  

The Strategic Housing Team does not hold a register of prospective purchasers. You can freely market your property with an estate agent of your choice, however during the twelve week notice period the eligibility criteria listed within this guide is applicable to all future purchases. Upon the expiry of the twelve week notice period any person will become eligible to purchase a Discount Market Sale property. Each time the Affordable Home is sold, it must be sold with the same discount from open market value to ensure that it remains an affordable Discount Market Value property.  

Before marketing a discounted property, the owner must notify the Local Authority of their intention to sell. Please email strategichousing@stockton.gov.uk stating your intention to sell the property and Strategic Housing will aim to confirm receipt of your email within two working days. The twelve week notice period will start on receipt of Strategic Housing's confirmation. During this notice period all eligibility criteria stated within this guide is applicable to future purchasers. Within your confirmation email Strategic Housing will advise you of the next steps you need to take and the expiry date of the notice period.  

Before approaching an estate agent to market the property a sale price needs to be agreed by Stockton-on-Tees Borough Council's Land and Property team. The valuation must state both the open market and discounted market sale figures and must be dated within the three months of the date it is reviewed by Stockton-on-Tees Borough Council. You are responsible for the cost of this valuation. Once the valuation report has been produced a copy needs to be emailed to strategichousing@stockton.gov.uk for review.  

When Stockton-on-Tees Borough Council confirm that they accept the valuation, a maximum sale price will be agreed, ensuring that the correct discount is applied. The marketing publicity must stipulate that the property is an affordable home, subject to a Section 106 agreement and that buyers must meet local eligibility criteria (during the notice period) and be approved by Stockton-on-Tees Borough Council.  

Existing Discount for Market sale property owners may find themselves in a position of "negative equity". If pursuing the discount from open market value condition would cause severe financial hardship, Stockton-on-Tees Borough Council will, on presentation of all supporting documentation, consider if they would be willing to reduce or remove the discount from open market value applied to their property. Should any discount from open market value be removed, any additional capital receipt over and above the original discounted maximum sale value after deducting "reasonable sale costs" will be repayable to Stockton-on-Tees Borough Council. Supporting documentation includes confirmation of any outstanding mortgage balance on the Discount for Market Sale property, the completion of an income and expenditure form, and revised RICS valuation. 

The purchaser of a Discount Market Sale home owns the property outright. No other party has a share of the equity, although a mortgage lender will still have their rights. The owner is responsible for all repairs and maintenance costs. They are also entitled to undertake any home improvements they wish, for example adding a conservatory or extending the property (subject to securing planning permission where needed). 

If a current Discount for Market sale property owner is seeking to sell their property and have increased the square footage of the property for example, the footprint area of their dwelling, the discount from open market value will only be applied to the original property footprint. The existing property owner is entitled to recover the full (undiscounted) value of the extension without the discount from open market value being applied and any RICS (Royal Institution of Chartered Surveyors) valuation upon resale should reflect this condition. For properties with an increased footprint, the revised RICS valuation should include 100% value of the extended footprint and 80% of open market value of the original property footprint to set the maximum resale sale price. Existing property owners can elect to sell their homes for less than the maximum resale sale price provided the incoming purchaser during the notice period meets the local eligibility criteria. 

Discount Market Sale scheme conditions may vary in each Local Authority. It is important to be aware of the eligibility criteria in Stockton-on-Tees.  

During the twelve week notice period applicants must meet the following criteria: 

• applicants must be aged over 18 and employed or self-employed (unless cash only purchase) 
• applicants must have a combined household income of under £80,000 per annum, be unable to purchase a property outright, and able to access a mortgage 
• applicants must be either living in the area and have a housing need such as being relocated as part of a regeneration scheme or homeless
• have a local connection through previous residency, family connections, being a care provider, employment or training, relocation due to fleeing domestic or other violence, or other safeguarding reasons 

Housing need is assessed on household size compared to the size of the property available. For example, a co-habiting couple will be expected to share the largest main double bedroom and the requirements of other household members considered separately. 

Generally, households will qualify for one more bedroom than they require. For example, a couple or single applicant would qualify for a two-bedroom property. A couple with one child would qualify for a three-bedroom property. 

In exceptional medical circumstances where an extra room is required to accommodate medical equipment at home this will be considered over and above any housing need required based on the household size. Equally, if a purchaser requires three days or more per week "live in" support, they will be entitled to an additional bedroom. No additional bedrooms are considered for home working arrangements. 

Applicants will be ineligible under the following circumstances:  

• they have an outstanding County Court Judgement 
• they are bankrupt 
• they have or have had rent arrears (unless this is an outcome of a confirmed domestic violence coercive control relationship) 
• breached a tenancy agreement 
• they have a history of anti-social behaviour 
• they own or have a share in another property or have an existing mortgage (some exemptions apply) 

Conditions of Discount Market Sale applicable during the twelve week notice period: 

• potential purchasers will need to meet the eligibility criteria for Affordable Homeownership in Stockton-on-Tees 
• incoming purchasers are required to meet the local eligibility criteria as determined by Stockton-on-Tees Borough Council 

General conditions of Discount Market Sale applicable at all times: 

• independent financial advice should be sought prior to entering into any Section 106 agreement 
• consideration should be given to whether the property remains affordable to you if your circumstances change in the future 
• potential purchasers will need to have savings or funds to pay a deposit and other costs associated with buying a home, for example legal and surveyor costs 
• potential purchasers must be able to afford the property in their own right; guarantors are not acceptable 
• potential purchasers will need to arrange their own buildings and contents insurance. Sufficient buildings insurance will be a condition of your mortgage offer 
• homeowners are responsible for household bills, for example Mortgage, Council Tax, utilities, insurance 
• homeowners are not eligible for Housing Benefit  
• homeowners are responsible for maintenance and repairs of the property 
• Section 106 conditions may restrict access to mortgage products, it is recommended that you always seek independent financial advice from a qualified Independent Financial Advisor (IFA) when considering purchasing a property 
• the property cannot be sublet and must remain the purchaser's main residence during the discounted period 
• each developer will have their own terms and conditions for their sales process. Stockton-on-Tees Borough Council will not become involved in the sales process  
• the property must be sold with the same level of discount from open market value that was applied to the original purchase and remains in perpetuity. Please see the example in the next section 
• should a property owner wish to sell their home in the future, they will be required to finance a revised valuation of the property and have the maximum sale price agreed by Stockton-on-Tees Borough Council before a sale can proceed 
• the value of the property could potentially decrease as well as increase over time, depending on housing market fluctuations 

Initial purchase in 2024 example:  

Market value of property £100,000  

 Discount applied 20% £20,000 

 Purchase price £80,000  

Depreciation in 2026 example:  

 Market value of property £90,000  

Discount applied 20% £18,000 

Re-sale maximum price £72,000  

Appreciation in 2028 example:  

Market value of property £120,000  

Discount applied 20% £24,000 

Re-sale maximum price £96,000