Basic Facts about Right to Buy
- It is estimated that over 2 million homes have been sold under the Right to Buy Scheme since it began in 1980.
- Under the Right to Buy Scheme you purchase a property that you rent from your Landlord at the market value, less a ‘discount’.
- Within Greater London the maximum amount of the discount (2014) was £102,700. Outside of London the maximum discount is £77,000. The current rules are that the amount of the maximum discount will increase each year in line with inflation.
- The eligibility, terms and conditions of the Right to Buy Scheme are set out in the Housing Act 1985.
- In order to be eligible you must either be a Secure Tenant (this is generally Council Tenants) or you rent a Housing Association property which was transferred from a Local Authority during the time you lived there.
- If you resell a property purchased through the Right to Buy Scheme within the first 5 years you own it you must repay all or part of the discount.
Not all tenants are eligible to buy their home under the Right to Buy, and not all properties can be sold under the Right to Buy.
In order to be eligible:
1. You must hold a Secure Tenancy: Generally only Council Tenants hold Secure Tenancies. The only circumstance where someone when someone without a Secure Tenancy can purchase under the Right to Buy is if they had previous held a Secure Tenancy at the property under a Local Authority and the property was then transferred to another Landlord.
2.You must have been a Public Sector tenant for at least 5 years: This need not be at the property being purchased or for the same social landlord.
3.The property must be your main home: You cannot exercise the Right to Buy if you have another home.
4.You must not have legal problems with debts: Tenants facing bankruptcy proceedings, with undischarged bankruptcies, or who have enter into an Individual Voluntary Arrangement (IVA) are not eligible.
Property which cannot be purchased under the Right to Buy:
1. Property which is not self-contained: If there is a shared bathroom or kitchen it cannot be sold under the Right to Buy.
2. Properties due for Demolition: If notification that the building may be demolished has been given by the Landlord, a property cannot be sold under the Right to Buy
3. Properties suitable for the Elderly: If a property is particularly suitable for elderly people, or it had been previously let exclusively to the elderly, then a Landlord can refuse to sell the property under the Right to Buy.
4. Properties intended for the Mentally Disabled: If a property is part of group of properties intended for use by the Mentally Disabled then a Landlord can refuse to sell the property under the Right to Buy.
5. Rural Restrictions: In some rural areas there are legal restrictions on selling property under the Right to Buy.
Right to Buy Discounts
The amount of the discount under the Right to Buy is dependent on three things: the type of property being purchased; the length of time the purchaser has been a Public Sector Tenant; and where the property is located:
- Houses: The discount starts at 35% of the market value, and increases 1% (up to a maximum of 70%) for every year the purchaser has been a public sector tenant after the first 5 year period.
- Flats: The discount starts at 50% of the market value, and increases 2% (up to a maximum of 70%) for every year the purchaser has been a public sector tenant after the first 5 year period.
In addition to this there is an upper ceiling for how much discount can be given. For properties inside a London Borough the maximum discount in 2014 is £102,700, for all other properties the maximum amount is £77,000. The Law currently states that the maximum amount of the Discount will increase every year in line with inflation.
In order to apply a Tenant must apply by completing a Form called an RTB1 and sending it to their Landlord. It is normal for a Landlord to request supporting documentation such proof of identity and proof of residence in the form of Utility Bills.
Once the RTB1 Form has been sent to the Landlord the Law states that the following steps should occur with possible penalties against the Landlord if they fail to carry out certain steps within a given time-frame:
1.Landlord Must confirm Eligibility: Send the tenant a letter confirming the eligibility for the Right to Buy, or denying them the Right to Buy and giving reasons why. This step must occur within 4 weeks of a Landlord receiving an RTB1 or 8 weeks if the Landlord has owned the property for less than 5 years.
2. Landlord Must must make an Offer: Either 8 or 12 weeks, depending on whether the property is being sold freehold leasehold, after sending the tenant a letter confirming eligibility for the Right to Buy the Landlord must sent out an Offer Notice, known also as a Section 125 Notice. The Offer Notice will include:
- Market valuation
- Actual Purchase Price
- Information about the Lease or Freehold title which is being sold
- Estimate of annual amount of Service Charges for services and repairs in the first 5 years of ownership
- Estimate of annual amount of Service Charges for improvement work in the first 5 years of ownership
- An Energy Performance Certificate (EPC)
3. Tenant must decide whether to accept the Offer: Within 12 weeks of receiving an Offer, the tenant must decide whether to proceed with their purchase. If the tenant believes the market valuation is too high they can write to their Landlord asking for the valuation to be be checked by the District Valuer.
4. Tenant must find a Solicitor and Arrange a Mortgage: If the tenant wishes to proceed with the purchase of the property then they must find a solicitor to make checks and do the legal paperwork, and they must find a mortgage lender from whom to borrow the money to buy the property. The landlord has no legal obligation to assist the tenant in finding a solicitor or arranging a mortgage. A list of legal firms knowledgeable about service charges in particular is given in our Leasehold Lawyers Directory.