HOUSING AND LOAN FUND THE CHURCH OF SCOTLAND HOUSING AND LOAN FUND FOR RETIRED MINISTERS AND WIDOWS AND WIDOWERS OF MINISTERS INTRODUCTION This Summary of the Fund’s Guidance Notes has been prepared as at February 2008 to inform Ministers, particularly those now nearing retiral, of the nature and extent of the help in the area of housing which, in their retirement, is available from the Housing and Loan Fund. Also, to advise and reassure Widows and Widowers of Ministers of the housing assistance which the Fund may be able to provide, especially for those requiring to leave a Manse following the death of a spouse. Ministers already in retirement, or their Widows or Widowers, may also be aided in moving to more suitable accommodation. The Trustees are prepared to consider applications from those who have managed to house themselves but are seeking smaller or larger or more convenient houses, or houses in a different locality. The Trustees are now able to consider offering assistance to separated and divorced spouses of both working and retired ministers whose marriage breakdown occurs after May 2004. In exceptional circumstances the Trustees may be prepared to consider those spouses whose marriage breakdown pre-dates May 2004. Additional Guidance Notes may be obtained from the Secretary which give full details of the provisions affecting separated and divorced spouses. The Trustees consider each individual application on its own merits. Following review of the financial circumstances of the applicant and, if married, his/her spouse they will determine what, if any, assistance will be offered. Broadly speaking, there are two ways in which the Trustees may be able to help. Either by making available a HOUSE TO RENT or by offering a HOUSING LOAN. APPLICATIONS Application Form A completed Application Form, which incorporates a statement of financial resources, must be submitted to the Secretary of the Fund by those wishing a house to rent or a housing loan. Timing of applications The procedure for processing applications varies and depends mainly upon the timing of their submission. There are three categories. 1. All those who have an immediate need and those who are to retire within one year. 2. Those who are within a period commencing five years before either (a) normal retiral age of 65 or (b) declared retirement date if earlier or later, but not yet within one year of retiral. 3. Those who expect to retire within the next ten years but do not intend to do so for at least five years. FORMAL AGREEMENTS AND PAYMENT OF RENT OR LOAN INTEREST Those offered a house to rent or a housing loan will be required to enter into a formal lease, or loan undertaking, embodying all the relevant conditions. Tenants and borrowers are asked to agree to an arrangement whereby rent or interest payments will be deducted from monthly or other sums which are payable to them by the Church of Scotland Pension Trustees. RENTAL HOUSING At the 31st December 2007, the Trustees owned 249 houses. Additional houses are regularly acquired for leasing at concessionary rents to retired Ministers and Widow(er)s of Ministers for whom the purchase of a house of their own, even with the aid of a loan, is not a realistic proposition. However, an application in no way commits the Trustees to providing a house to rent. Only within nine months of a Minister’s declared retirement date will a vacant house be identified, or the purchase of a house initiated for occupation after retirement. This house must be solely for private residential occupation after retirement. The Trustees may respond to a particular application by granting the tenancy of a house which has become available, perhaps following the end of a previous tenancy, or by making funds available up to stipulated limits, which will enable a successful applicant to seek a house of their own choice which the Fund will purchase. No applicant should however assume that a house will be immediately available and while he/she will be consulted as to any house to be offered for rent, applicants cannot insist on being offered any specific house. The final decision lies with the Trustees. Tenancy of a house is normally expected to continue during the lifetime of a Minister and of his/her surviving spouse. Except that surrender of a tenancy is required from a Minister’s surviving spouse upon remarriage. Special conditions apply where (a) a Minister is retiring early on the grounds of ill-health; (b) a surviving spouse is her/himself a Minister and (c) someone already leasing a Housing and Loan Fund property may wish to move to an alternative house; and these conditions are fully detailed in the Housing and Loan Fund’s Guidance Notes. The Fund will normally only acquire house rental stock up to a maximum cost, including any initial expenditure necessary, of £195,000. This figure is the maximum in exceptional circumstances to take account of the high level of house prices in some areas of Scotland. However prospective tenants are asked to look for a house costing no more than £175,000. Further details of the cost limitations of a house, concessionary rental levels, tenancy agreements etc. are contained in the Housing and Loan Fund’s Guidance Notes. Criteria relating to houses to rent are available from the Secretary. HOUSING LOANS The Fund may assist an applicant with the purchase of a house by granting a housing loan. The Trustees are also prepared to consider applications for loans from Ministers who, earlier in their ministry, obtained a Building Society or Bank mortgage and wish to apply now for a loan from the Trustees in order to repay the whole or part of this mortgage to enable them to enjoy the much lower rate of interest charged by the Trustees. Such circumstances must be made clear to the Trustees in the application. Ministers who acquired a house prior to or during retirement, using all or substantially the whole of their available resources, can be considered for a loan secured over their home. Widow(er) s in a similar situation may also apply. The Trustees do not bind themselves always to grant a loan in response to an application, nor do they commit themselves, when a loan is granted, to provide the maximum loan. Each application, which includes a statement of the financial resources available to the applicant, is judged on its merits and the loan, if any, is determined in the light of how much may be required to purchase a house. The Trustees do however recognise the need for successful applicants to retain a reasonable part of their resources as a capital reserve to provide some income and for future emergencies. They determine the loan accordingly. Loans will only be granted in relation to a dwelling house for the applicant’s private residential use and will be advanced only within one year prior to a Minister’s declared retirement date or thereafter. The Trustees do not normally expect repayment during the lifetime of either the borrower or the borrower’s surviving spouse. Except that repayment is required upon (a) the earlier event of the property being sold or otherwise alienated and (b) by a Minister’s surviving spouse upon remarriage. Special conditions apply where (a) a Minister is retiring early on the grounds of ill-health and (b) a surviving spouse is her/himself a Minister; and these conditions are fully detailed in the Housing and Loan Fund’s Guidance Notes. Loans are normally either Standard Loans or Shared Appreciation Loans. But also available are Short-Term Bridging Loans. The maximum limit for Standard Loans (SLs) is £ 25,000. For loans in excess of this sum, Shared Appreciation Loans (SALs) are available where the terms of repayment are linked to any increase in value of the related property over the whole period of the loan. A mixture of the two types of loan is not on offer. Short-term bridging loans (STLs), upon special application and in limited situations, may be granted in connection with house purchase. The period of such short-term finance depends on individual circumstances but normally STLs will be given only within the twenty four month period from one year prior to retirement to one year thereafter. STANDARD LOANS Standard Loans (SLs) are normal interest only housing loans. Maximum limits The maximum SL is £ 25,000 or, if lower, the loan is restricted to 70% of the actual purchase price of the house to be acquired (70% of the then current valuation of a house if it is already owned). Minimum loan The minimum loan is £ 5,000. Interest rates Interest rates are variable over the term of the loan but are kept advantageously lower than market rates. The rate for Widow(er)s is one-half the rate for Ministers. Where, however a surviving spouse is her/himself a Minister; then special conditions apply and these are fully detailed in the Housing and Loan Fund’s Guidance Notes. SHARED APPRECIATION LOANS Shared Appreciation Loans (SALs) are housing loans where any future increase in the value of the property concerned, which accrues within the life of a loan, will be shared with the Housing and Loan Fund. Borrowers are the owners of the houses involved but, as part of the loan conditions, they are required to accept certain maintenance and repair obligations including reasonable inspection rights to the Fund. Shared appreciation Upon repayment of a SAL, the total sum required by the Fund in full discharge will be the original loan appropriately enhanced by a proportionate share of any rise in value of the related house over the whole period of that loan (Loan Enhancement Amount). In the event of there being a drop in value of the property, or no growth therein, the amount of the original loan will fall to be repaid in full but without any enhancement. The proportion of any property value increase falling due to the Fund will be determined by applying to the appreciation which has accrued, a loan to house value percentage (Shared Appreciation Ratio). For example, a loan of 60% of a house price means appreciation is subsequently shared 60% to the Fund. The Shared Appreciation Ratio will be established at the outset of a loan as a percentage, to the nearest second decimal point, which the loan bears in relation to the house purchase price (excluding expenses and any payment therein for movable furnishings, fittings and equipment, etc. but including any costs of initial reconditioning); or which the loan bears to the market value of the house when applicable. Any sum expended by the borrower(s) on initial improvement or modernisation of the property, subject to certain specific conditions, will fall to be added to the purchase price for the purpose of determining the Shared Appreciation Ratio pertaining to the loan. Maximum limits The maximum SAL is normally £136,500 based on a house purchase cost of £195,000. Loans are restricted to a maximum of 70% of the actual purchase price of the house to be acquired if this is a lower figure (to 70% of the then current valuation of a house if it is already owned). Minimum loan The minimum loan is £ 25,000. Interest rates Interest rates are variable over the term of the loan but are kept advantageously lower than market rates and are presently 1½% per annum lower than the corresponding rate charged on SLs. The rate for Widow(er)s is one-half the rate for Ministers. Where, however a surviving spouse is her/himself a Minister; then special conditions apply and these are fully detailed in the Housing and Loan Fund’s Guidance Notes. FURTHER INFORMATION The Board of Trustees of the Housing and Loan Fund is a completely independent body which is answerable directly to the General Assembly. The Board comprises of eleven Trustees, made up of laypersons and Ministers, whose individual appointments are shared between the General Assembly itself, the Baird Trust and the Board of Ministry. Day-to-day management is undertaken by the Secretary of the Fund who is available to Ministers and their families for confidential interviews on matters relating to housing in retirement. Sympathetic and knowledgeable advice is willingly offered. Houses owned by the Fund and related matters such as initial surveys, leases, general maintenance requirements etc. are looked after by the Fund’s Property Manager. The above are some of the salient points from the Housing and Loan Fund’s Guidance Notes, and a copy of the full Guidance Notes together with an Application Form can be obtained by contacting The Secretary to whom all correspondence and enquiries should be addressed. Applications and all details supplied by enquirers and by applicants are dealt with by the Trustees and the Secretary in terms of the strictest confidence. 15