What is the Right to Buy scheme?
Right to Buy allows most council tenants to be able to purchase their home with a discount of up to £116,200. You can apply to buy your council home for the following reasons:
· It’s your only home/your main home
· It’s self-contained
· You’ve had a public sector landlord for 3 years – not necessarily 3 years in a row
· You’re a secure tenant
The discount can be used as your deposit, and it could be possible to get a mortgage for the remaining amount. The only other costs you may need to come up with are costs for legal and survey fees which are likely to be approx. £2500.
Why would you want to purchase your council home?
Owning your home will give you the freedom to make any changes you desire, to make it really feel like your home. Locking in Equity or the discount means that after 5 years should you choose to sell the property the equity is yours. This can help you to potentially purchase a property in another area or a larger property for example.
If you are sharing the tenancy with someone else, then it’s possible to make a joint application. You could also make an application with up to 3 family members who have lived with you for the last 12 months, even if they don’t share your tenancy.
How much of a discount do you get from Right to Buy?
If you qualify for Right to Buy you can get a discount off the market value of the home that you live in. Across England, the biggest discount possible is £87,200. In London, the biggest discount possible is £116,200 but these discounts increase each April.
The discount you can get depends on a few factors, such as whether you live in a house or a flat, and how long you’ve been a public sector tenant.
Here’s how it could work for you if you…
Live in a house:
· If you’ve been a public sector tenant for three-five years – In this case, you’ll get a 35% discount off the market value of your property (up to a max £87,200 or £116,200). For example, if you live in a property worth £200,000, the Right to Buy discount could be worth £70,000 – which would mean you could buy the property close to £130,000.
· If you’ve been a public sector tenant for longer than five years – After 5 years, the discount will go up by 1% for every extra year that you’ve been a public sector tenant, up to a maximum of 70% or £87,200 across England and £116,200 in London – whichever one is lower.
Live in a flat:
· If you’ve been a public sector tenant for three-five years – In this situation, you’ll get a 50% discount off the market value of your property up to a max of £87,200 or £116,200. If you live in a property worth £120,000, then the Right to Buy discount could be worth £60,000 and you could purchase the property for a fee close to £60,000.
· If you’ve been a public sector tenant for longer than five years – After 5 years the discount will go up 2% for each extra year you’ve been a public sector tenant, up to a maximum of 70%, this is also capped at £87,200 or £116,200.
Your discount could be reduced due to your landlord spending money on either building or maintaining your home. There is a Right to Buy calculator on the GOV RIGHT TO BUY CALCULATOR website where you can find how big of a discount you may be due, the next step will be to contact the council and see if it’s possible.
You’ll need to apply for a mortgage too
Other than the discount you’ll be likely to receive you’ll want a mortgage for the remaining part potentially. We’ll need to look at your affordability, income and outgoings, credit score and term to make sure that it’s all plausible.
The whole mortgage process should take 2-4 weeks to get to mortgage offer but the legal process that runs alongside it usually takes 16-20 weeks depending on area.
How do I check if it’s even possible?
We’ll be more than happy to initially check it all out before you start the process of applying by estimating the price based on local comparables, the government discount website and any other factors we may need to consider. We’ll need to know more about your earnings and outgoings and can look at lenders' affordability and even give you an idea of how much the mortgage is likely to cost.
How can I apply for Right to Buy?
To purchase your council property under the Right to Buy scheme, there are 4 steps you need to take to apply.
1. Fill in an RTB1 application form – click the link to the form, this will give you all the information you’ll need to fill out the form and then send it to your landlord.
2. Send the application form to your landlord – Once you have filled out the online form, save it, print it out and sign it where it needs to be signed. You should then send the printed form to your landlord.
3. Get an answer from your landlord about whether they are willing to sell – Your landlord has to respond within 4 weeks (8 weeks if they’ve been your landlord for less than 3 years). If the answer is no, they should state their reasons for declining. You can only appeal a ‘no’ if the reason for your application being declined is that the property you want to buy is suitable for elderly people.
4. If your landlord agrees to sell, then they will send you an offer – This offer has to be sent within 8 weeks of them aggreging to the sale if you’re buying a freehold property, or 12 weeks if you are buying a leasehold. The offer will include details of the following:
· The price they believe you should pay for the property and how this price was worked out
· The discount you will get and how it was worked out
· A description of the property as well as any land included in the price
· Estimates of any service charges for the first 5 years
· Any known problems with the properties structure.
After you get the landlord's offer, you’ll have 12 weeks to tell them if you want to buy the property. After the time is up, they will send you a reminder, and if you don’t reply to that after 28 days the landlord could drop your application.
You can pull out of the sale and carry on renting at any time.
What do I do if I disagree with my landlord's offer?
If you disagree with your landlord's offer, you have to write to them within 3 months of getting your offer and ask for an independent valuation. A district valuer from HMRC will then come and visit your property to decide how much it’s worth.
You would then have 12 weeks to accept HMRC’s valuation or you can pull out of the sale.
What can I do if my landlord is delaying?
If the landlord doesn’t respond within the timeframes shown above, you may be able to get further reductions on the sale price of your home.
To get a reduction due to delay, fill in the ‘initial notice of delay’ form (RTB6) then send it to your landlord. Your landlord should then either move the sale along within one month or send you a ‘counter notice’. This will say that they have already replied or explain why they are unable to speed things up.
If they don’t respond within one month of getting the RTB6, you can then fill in the ‘Operative notice of delay’ form (RTB8). This will mean that any rent you pay while you’re waiting to hear back from your landlord can be taken off the sale price. This can be done every time your landlord is late getting back to you.
How to sell your Right to Buy home
It’s possible for you to sell your property, but it’s not just as easy as buying the property with a big discount and then selling it at full market value.
If you want to sell your property within 10 years of buying it through Right to Buy, then you’ll first have to offer it to either your old landlord or another social landlord in the same area. If the landlord wants to re-buy the property, then it should be sold at the full market price agreed between you and the landlord. If you can’t come to an agreement, then a district valuer will say how much your home is worth and will set the price.
The landlord will have up to 8 weeks to respond to your offer, and if they don’t get back to you within this timeframe, you are able to sell the property to anyone.
If you sell within 5 years, you must pay back the discount
If you decide to sell the property within the first 5 years of purchasing it, you’ll have to pay back some, or all, of the discount. After 5 years you don’t pay back any of the discount.
If you sell in the first year of ownership, you’ll have to pay back 100% of the discount. After that, the total amount you pay will reduce to the following:
· 80% of the discount in the second year
· 60% of the discount in the third year
· 40% of the discount in the fourth year
· 20% of the discount in the fifth year
The amount you have to pay back also will depend on the value of your home when you sell it. If your property has increased in value since you bought it, then this could impact how much you will need to repay.
Can I apply for Right to Buy if I live in an ex-council home?
If the home you are currently living in was a council home but was sold to another public sector landlord whilst you were still living there, you could be eligible for the Right to Buy scheme. This is known as ‘Preserved Right to Buy’, and you’ll still need to fulfil the normal eligibility criteria.
If you moved into a different property owned by the same landlord that bought your previous home that had been sold to the council, then you may also be eligible for preserved Right to Buy. However, you won’t be eligible if you moved into a property owned by a different landlord.
Speak to your landlord if you think that you may be eligible for Preserved Right to Buy.
What is Right to Acquire?
If you are unable to qualify for Right to Buy or preserved Right to Buy, then there is another scheme known as Right to Acquire. This allows most housing association tenants to purchase their home at a discount, but the discount will not be as large – up to £16,000.
The criteria is very similar to Right to Buy. For example, you’ll need to have had a public sector landlord for 3 years, the property must be self-contained, and it must be your only or main home.
Your property must either have been:
· Built/bought by a housing association after 31 March 1997
· Transferred from a local council to a housing association after 31 March 1997
Talk to your landlord if you think you may be eligible for Right to Acquire.
Feel free to talk to us if you have any other questions or queries…