Telephone: 07772-345032

Email: dominic.sears@suttongate.com

Housing Scheme

October 6, 2020

Housing Scheme...

Approximately by how much would the GDV be discounted?

We discount 20% below the agreed GDV. This will be agreed between both parties.

Would the whole project be underwritten or would the underwriter insist on a phasing programme to limit their exposure?

We will provide an underwrite for schemes between 15-60 units. We can go below this level but it would be site

specific and is likely to be marginally below say 13 or 14 units. It is unlikely a developer will construct more than 60

units in a first phase. We would agree to underwrite the whole 1st phase which is typically a two - three-year build

programme. Anything longer than this the GDVs are likely to change or become harder to predict.

If the site is larger than 60 units or has a second phase, we will request the 2nd phase cannot commence without our consent. It maybe we then underwrite the 2nd phase or the developer no longer needs us. We would not agree to provide an underwrite on a scheme if different phases are competing with one another or if we were only underwriting part of the first phase.

What percentage of GDV is advanced as a deposit?

We will release the deposit monies to the developer provided the warranty provider is either, NHBC, Checkmate or

ICW. The deposit monies are calculated at 10% of the underwrite figure. For example, if a scheme had a GDV of

£10,000,000. We would provide an underwrite of £8,000,000. Therefore, we would pay a deposit of £800,000

which could then be released to the developer provided the warranty provider is either NHBC, Checkmate or

ICW. We can still provide the underwrite if you use other warranty providers, we would just not be able to release

the deposit monies.

Can these deposit funds be used by the developer towards land purchase?

In order for us to exchange contracts on the underwrite, the developer would need to own the site, have full

planning permission including a completed S106 agreement and have the funding in place. In theory, if everything

was done simultaneously this could be possible but it would depend on the funding position. We would also want

to ensure the developer has a stake in the development and their own cash invested. Otherwise they may not be

fully incentivised to complete the development, which would leave us at risk and would question the motivations

for the developer and their commitment to see it through properly.

Are contracts exchanged?

We will exchange contracts to underwrite the whole site or the first phase. We can then be called upon to

complete on the purchases at any point during the contract. If a lender had to step in, this contract will still be

valid and we would still have to complete on the units if the lender called upon us to complete.

Are there any set up fees?

No, each party are responsible for their own costs, which will typically be each parties’ individual legal costs. There

are no other set up costs involved with the underwrite.

Will the underwriter have a charge on the land or take any other security?

We don’t take a charge we just register the purchase contract against the title which doesn’t interfere with

finance.

Can the developer sell the properties on the open market?

Yes this is the key to our unique underwrite proposal. We are there if you need to call on us to complete. We

actively encourage the developer to market the properties at the agreed GDV levels. They could even try and sell

above this level. If they complete a sale above the agreed GDVs then the developer will benefit from this, as we

only charge fees based on the agreed GDVs. If they do better than they will benefit from the upside not us.

If the developer sells a house in the normal way,

How does the house be separated from the underwriting process and what fees have to be paid to the underwriter to release the house?

If the developer sells to a third party, the property is then released from the contract. Although the contract on

the remaining properties will remain in place. For each unit you sell on the open market we will take a fee based

on the agreed GDV. The fee bands are 7%, 5.5% and 3.5%. The fees are retroactive so which ever band you end up

in (7/5.5/3.5) is the cost so if you sell out, as expected, it will only cost 3.5%

Can the developer refinance to discharge the underwrite?

For example, if the developer wanted to keep some properties as an investment. The developer could in theory acquire the units off himself, however the underwrite fees will still apply and they would have to acquire at a value in excess of our underwrite figure.

If the project has a last few units yet to sell, what is the procedure to invoke the underwrite agreement?

The developer can call on us to complete at any point during the construction period and after an agreed period of

time post practical completion. There is a long stop date often 6 months post practical completion but this can be

agreed at the negotiation stage. The developer will serve notice to complete, the timescales will be agreed

within the contract. If we are called upon to complete and the units aren’t yet finished, we will complete upon

practical completion of the units.

How long does it take to get a decision?

We can provide you with an instant initial underwrite proposal using our engine which is available on a website.

Alternatively, please send over the relevant information, such as site address, unit numbers, sizes and proposed

GDVs and we can provide an initial proposal within 24 hours.

Provided the initial proposal is acceptable. We can move to undertaking further due diligence which can be completed within a few weeks. Heads of terms can be drawn up and agreed and solicitors instructed. On the assumption all the legal information is available, the legals can take 4-6 weeks or as quickly as the solicitors can progress matters, although timescales will be agreed at the heads of terms stage.

Provided both parties are in agreement, the developer has full ownership of the site, has full planning consent included a completed S106 agreement and funding in place, we can then exchange contracts.

How long does it take to set up the facility?

As per the above

< Older Post Newer Post >