A local housing authority receiving an application for assistance under this Part shall, if the applicant is eligible for assistance, determine as soon as reasonably practicable whether he is entitled to assistance by way of reinstatement grant or by way of repurchase.
If the authority are satisfied, on a claim by the applicant to that effect, that it would be unreasonable to expect him to secure or await the carrying out of the work required to reinstate the defective dwelling, the applicant is entitled to assistance by way of repurchase.
Subject to subsection (2), the applicant is entitled to assistance by way of reinstatement grant if the authority are satisfied that the conditions for such assistance set out in section 538 are met, and otherwise to assistance by way of repurchase.