The Scottish Federation of Housing Associations is right to focus attention on how Section 75 agreements are operating in practice. With research now underway into their effectiveness, there is an opportunity to consider not just delivery, but how these agreements interact with the funding model that underpins development in the sector.

This is particularly important in the current climate, with social sector completions down 25% in 2025 and starts falling to their lowest recorded level. Against that backdrop, a recurring drafting issue arises in practice which can have a direct impact on future delivery, particularly in the context of RSL lending and security transactions.

The issue: restrictions that affect value, not just use

Section 75 agreements are a key mechanism used by planning authorities to secure affordable housing as part of private development. They are effective because they bind successors in title and regulate ongoing use.

However, in some cases:

- the agreement imposes an affordable or social housing use restriction; and
- that restriction is not treated as satisfied when the units are transferred to an RSL.

As a result, the restriction continues to burden the title even after the planning objective has been achieved.

From a lending perspective, that can have unintended consequences. Where the restriction limits what a heritable creditor in possession can do on enforcement, it can influence valuation assumptions. In particular, the property may be assessed on an Existing Use Value for Social Housing (EUV-SH) basis rather than on a market-based approach.

Why it matters: impact on borrowing capacity

In simple terms:

1. RSLs rely on private finance to support development;
2. that borrowing is underpinned by asset value; and
3. lower valuations reduce available headroom.

Where Section 75 units carry restrictive drafting, they can dilute the value of the security pool and constrain future development funding.

Two straightforward drafting solutions

(a) Heritable creditor in possession carve-out

An express exception to the use restriction for a heritable creditor in possession (or receiver) should be included. This protects enforcement value, aligns with lender expectations, and does not undermine day-to-day operation.

(b) Treating the restriction as satisfied on transfer

The agreement can confirm the affordable housing requirement is satisfied once the developer transfers the units to an RSL. Continuing restrictive wording then becomes unnecessary.

Avoid duplication: Section 75 versus planning conditions

Planning conditions can sometimes replicate Section 75 restrictions. Where a Section 75 already regulates delivery, duplication can introduce uncertainty and weaken otherwise sensible drafting.

Planning contributions: a related practical issue

Section 75 agreements often include obligations to pay planning contributions. While typically a developer responsibility, they sit on title. In practice:

- RSLs must report on them in lending transactions
- confirming payment can be time-consuming
- outstanding sums may reduce value

A simple solution is to exclude RSLs from liability for wider site contributions.

A reality check on enforcement

The concept of a heritable creditor enforcing security against an RSL is, in practice, highly theoretical in Scotland. In cases of financial distress, RSLs typically engage early with funders to find solutions.

Such issues would also be notifiable to the Scottish Housing Regulator, which has a strong interest in financial health and tenant protection. In reality, outcomes have historically involved partnerships or transfers of engagements to other RSLs rather than lender-led enforcement.

Three pleas, and a practical way forward

1) Plea to planning authorities

Revisit drafting to ensure it supports borrowing capacity. Include carve-outs or confirm satisfaction on transfer, and avoid duplication with planning conditions.

2) Plea to RSLs

Engage early in Section 75 drafting where possible, or address risks at acquisition. Seek confirmation that obligations are satisfied on transfer, that use restrictions will not affect
funding, and that liability for wider contributions sits elsewhere. Do not acquire without these protections in place. Maintain clear records to support future lending and security work.

3) Plea to lenders

Take a reasonable, proportionate view. Recognise the practical and regulatory context and apply a balanced approach, particularly where documentation gaps relate to wider sites
beyond the RSL’s control.

The suggested changes are modest but meaningful. If we want more homes delivered, Section 75 drafting needs to support, not restrict, funding capacity.