Buying your own home has always been a key aspiration for many in the UK. The housing market, however, can be a challenging and expensive landscape for first-time buyers and those on lower incomes. To address this, various schemes have been developed by local authorities to make homeownership more accessible. One such mechanism involves properties with restricted resale clauses, such as those governed by Section 106 of the Town and Country Planning Act 1990. While these homes can offer an affordable route onto the property ladder, they can also bring a host of complexities—and this includes securing a mortgage. Understanding how lenders view such properties and the obligations that come with them is vital for anyone considering this route to homeownership.

What Are Restricted Resale Clauses?

Restricted resale clauses, as the term suggests, are legal limitations placed on a property determining how and to whom it can be resold. Typically enforced by planning obligations under Section 106 agreements, these clauses form part of wider strategies by local councils to ensure long-term affordable housing stock within certain developments. They often apply to new-build properties and are negotiated between developers and planning authorities at the time of obtaining planning permission.

These clauses serve a social purpose—they prevent properties designated as “affordable” from being sold on the open market at full price, thus keeping them within reach for future buyers who meet specific eligibility criteria. These criteria can be based on income thresholds, residency status, or employment within a defined local area. The key point is this: buyers are limited not just in how they purchase the property, but also in how they can sell it, which has significant implications for financial planning and mortgage eligibility.

Why Are These Clauses Used?

At the heart of restricted resale clauses lies a desire to maintain socio-economic diversity and affordability within new developments, especially in areas where property prices are otherwise prohibitive. First-time buyers, essential workers, and people with strong local ties are typically the main beneficiaries. Through restricting resale, councils aim to ensure that these homes do not simply become stepping stones for market-rate resales but remain within an ‘affordable’ price bracket over time.

This initiative helps to prevent price inflation within the scheme itself and ensures that the public benefit originally envisaged by the planning authority continues long after the homes have been built. It’s worth noting that some Section 106 homes can be up to 20–30% cheaper than comparable properties in the same location without any restrictions.

How Do Mortgages Work for These Properties?

While the notion of an affordable property sounds appealing, the reality of financing one through a mortgage isn’t always straightforward. The existence of resale restrictions complicates the lending landscape, leading some lenders to view these homes as higher risk.

The complexity arises from the limited marketability of the property. Mortgage lenders are inherently concerned with resale value in the event of repossession, and a home that can only be sold to a limited pool of buyers—and at a capped price—holds less security from their perspective.

That said, some lenders are familiar with the nuances of Section 106 and similar provisions and are prepared to offer mortgages, albeit subject to stricter criteria or at reduced loan-to-value (LTV) ratios. The degree to which a restriction affects mortgageability can vary greatly depending on the precise wording of the clause. For example, some agreements simply require that a property is resold to someone with ‘local connections’—a relatively manageable stipulation from a lender’s perspective. Others mandate approval from the local authority or enforce a fixed price cap linked to local income levels, which can make securing a mortgage more challenging.

Eligibility Requirements and How They Affect Borrowers

When buying a property with a resale restriction, your eligibility will be scrutinised more than with standard purchases. Most often, you’ll need to demonstrate that you have a genuine connection to the area—such as current residence, employment, or familial ties. Additionally, income limits may be imposed to ensure that the intended buyers are indeed those who might otherwise struggle to afford a home.

This verification process usually takes place during the early stages of buying and is often mediated by a housing officer from the local council or housing association. It’s crucial that buyers go into this process with the right expectations and documentation to hand, including evidence of income, employment, and local residency.

Some sellers and estate agents offer pre-vetting to weed out ineligible applicants early on. It’s worth understanding, however, that even if you meet the criteria, you still need a lender willing to provide a mortgage on the same terms. This double threshold can delay or even derail purchases if not carefully managed.

How to Secure a Mortgage for a Restricted Property

Given the added complications involved, one of the most important first steps in purchasing a property with a resale clause is selecting a knowledgeable mortgage broker. These professionals will already know which lenders are amenable to such agreements and how to present your application in the most favourable light.

Start by requesting a full copy of the Section 106 agreement or other relevant documentation from the seller or the estate agent. A solicitor can help you review the precise implications of the document, including whether there’s a price cap, buyer restrictions, or conditional sale requirements.

Mortgage brokers will then look to match this specific scenario with suitable lenders. In some cases, it’s possible to negotiate the loosening of certain restrictions if both the seller and local authority agree. For instance, some councils may agree to remove or amend stipulations if the property has remained unsold for an extended period. Evidence of such flexibility can reassure some lenders and broaden your mortgage options.

Keep in mind that if a lender is willing to offer a mortgage, they might only do so at a reduced LTV. If you were hoping for a 90% mortgage, you might instead find yourself limited to 80% or even 75%, which means you’ll need a larger deposit.

Resale Considerations: Planning for the Future

One of the most significant implications of buying a home under such restrictions is the impact on future resale. If you were hoping to treat this home as a short-term step towards a larger, unrestricted home, proceed with caution. While it’s possible to sell restricted properties, the process is far more nuanced and typically slower than with unrestricted homes.

You will need to work through the local authority or other governing body to find a qualifying buyer. Some agreements even require that the property is marketed through a council-approved route for a set period—often 8 to 12 weeks—before being advertised more widely.

Price caps mean you won’t benefit from the full extent of house price inflation, especially in high-growth areas. While this protects affordability for others, it could stymie your own efforts to climb the property ladder unless you plan your finances carefully.

Bear in mind, too, that your buyer will face the same eligibility tests and mortgage issues that you did, which can reduce buyer demand and make the sales process more protracted.

Can Restricted Homes Be Made Unrestricted?

It’s not uncommon for homeowners to wonder whether they might eventually be able to remove the resale restriction from their property. In rare cases, this is possible, but it often involves a complex—and sometimes costly—process of negotiation with the local authority.

Requests for the removal or relaxation of Section 106 clauses are assessed on a case-by-case basis. Authorities may consider such a request more favourably if the affordable housing need in the area has changed, if the property has been on the market for an extended time without interest, or if the clause is deemed to be disproportionately hindering the usefulness of the asset.

Even if successful, you may be asked to pay a fee—often a percentage of the property’s uplifted value—to compensate for the loss of an affordable unit from local housing stock. This ‘clawback’ mechanism ensures that public value is preserved, even if a home rejoins the general housing market.

If you’re considering this option, consult with a solicitor experienced in property planning law. They can help you make representations to the council and weigh up whether the benefits of lifting the restriction outweigh the costs and time involved.

The Role of Legal Advice

With such nuanced documentation and long-term implications, engaging a solicitor who understands Section 106 agreements is more than desirable—it’s essential. Your conveyancer can ensure you fully understand the restrictions, validate any verbal claims made by developers or sellers, and guide you through communication with the local planning authority where necessary.

In cases where lenders request clarification or amendment of the agreement to approve a mortgage, your solicitor becomes the key liaison. A poor interpretation—or oversight—can result in declined mortgage applications, delays to your transaction, or even future difficulties selling the home.

Legal professionals can also advise on whether the restrictions are registered correctly with the Land Registry and if any previous modifications have been properly recorded. These details could heavily influence your position as a buyer and the potential for appreciation or resale further down the line.

Weighing the Pros and Cons

Entering into a home purchase tied to a resale restriction is a significant commitment, and like all property-related decisions, it comes with both strengths and challenges.

On the positive side, you are accessing a property at a discounted rate in a housing market where affordability is sorely lacking. You may also find yourself living in a newer development and benefiting from other positive planning conditions, such as good infrastructure, green spaces, and community facilities.

However, the flip side includes financing hurdles, limitations on profit-making, and a more complex resale process. A restricted property is unlikely to suit people looking for quick upward movement on the housing ladder or those unwilling to accept a stricter framework.

It’s also important to remember that these restrictions are contractual, not just advisory. Failure to meet any obligations or misrepresentations during the mortgage process can invite serious consequences, including financial penalties or even forced resales under adverse conditions.

Conclusion—Is It the Right Choice for You?

Buying a home with a resale restriction under Section 106 can offer a rare opportunity to enter the property market at a reduced price — especially in areas where homeownership might otherwise be out of reach. For many first-time buyers or key workers, this route provides a secure, long-term place to live in a community they know and value.

However, it’s not a one-size-fits-all solution. The legal, financial, and resale complexities require thoughtful consideration and careful planning. If you’re prepared for a longer purchase process, can work with specialist lenders, and understand the limitations that come with future resale, a restricted property may be a smart and affordable choice.

As always, seek early advice from experienced mortgage brokers, solicitors, and estate agents familiar with Section 106 homes. With the right guidance, these properties can be a powerful stepping stone — not just to homeownership, but to a more stable and rooted life.