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I purchased my new build home in the UK 5 years ago on a shared equity scheme provided by the developer. The loan company has a 20% equity share in my property. I'm now in the process of part exchanging for a new home and my shared equity loan will need to be paid off.

Here's the main issue: when negotiating the purchase of my new home, I managed to haggle an extra lump sum of money above market value from the new developer for my home, rather than discounting the new home which would have lowered the value in the eyes of the mortgage provider. All the wording at the time of the original purchase indicated that I would have to repay 20% of the market value of the loan. However, the loan provider is being awkward and asking how much we got for the new house.

Re-reading the original contract, there's some legal mumbo jumbo that I'm just not sure about. Here's the relevant parts of the solicitor's original letter:

What does the developer receive?
The basic position is that you will repay 20% of the market value of the property at the time of repayment shown above. The provisions of how market value is calculated are at Clause 6 of the Fixed Shared Equity Mortgage Deed.

Clause 6 states:

  1. The Disposal Value of the Property means:
    (a) if the Repayment Date falls to be ascertained under [transfer of the property from you] in relation to a disposition in good faith and at arms length with vacant possession the full consideration for such disposition provided that the consideration is not less than the true market value of the Property.

    (b) in any other case the value at the Repayment Date at which the Borrower's legal estate in the Property with vacant possession might be expected to be sold on the open market in good faith and at arms length such sum to be agreed between the parties or determined under clause 7.

and in any event after deduction being made for any increase in value of the Property caused by any improvement alteration or addition made by the Borrower.

My Question

Do I have to repay the developer:

  • 20% of the market value or;
  • 20% of the price I negotiated with the new developer?

I'm having difficulty understanding that Clause 6(a). I intend to seek proper legal advice, but it would be nice to have some opinions from here first. Could the negotiations I made count as "addition made by the Borrower"?

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You have to repay the developer:

20% of the market value or; 20% of the price I negotiated with the new developer

Whichever is the greater.

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