Right to Buy
Under the Right to Buy scheme, you can buy your home at a price lower than the full market value. This is because the length of time you have spent as a tenant entitles you to a discount.
These webpages describe the Right to Buy scheme as it works today. We have tried to make it easy to understand - but it is not a substitute for professional advice.
This webpage is a summary of the law relating to the Right to Buy. It is not intended to be comprehensive. If you wish to exercise your Right to Buy, it is recommended that you seek independent legal and financial advice about your individual circumstances and to help with the legal process of buying a home. You should also seek independent financial advice about the different types of mortgages that are available.
The Right to Buy is aimed at secure tenants of local authorities.
Buying your home is probably the biggest financial decision you will ever make. So take time to consider whether it is the right choice for you. If you exercise the Right to Buy you will become responsible for all the costs of maintaining your home, including routine repairs, major structural repairs and improvements to it. If you become a leaseholder by buying your flat, you will have to pay service charges each year and also meet the costs of major repairs and refurbishment.
As a tenant, you may be able to claim housing benefit to help with your rent. As an owner-occupier, you will not receive any housing benefit to help with your mortgage costs.
If you are elderly and own your home, its value may be taken into account in assessing whether you are eligible for financial help with the costs of residential care.
If you need advice on any aspect of the Right to Buy scheme, contact the Housing Department first. If you are approached by a person or company offering to help you buy your council home, check out what’s in it for them and talk to the Housing Department before signing up to any deal.
People sometimes claim that the Right to Buy scheme may be changed or ended. In fact the Government is totally committed to the principle of Right to Buy. But it is concerned that sales are affecting the availability of affordable housing in some areas, and that the rules are being exploited by companies. Be suspicious if anyone tries to tell you that the Right to Buy is going to be ended. They may be trying to persuade you to do something that benefits them rather than you.
Sometimes, tenants are asked to pay a lot of money for things that landlords will do for nothing – for example, Right to Buy application forms are available free from the Housing Department. Some companies offer tenants money up front in a deal under which the company ends up owning the property – this is known as a deferred resale agreement. This is good for the company, which can charge a higher rent than we could when it lets the property. But it is not always good for tenants, because the money they get may not be enough to buy another home. Some tenants have found themselves homeless after agreeing to such deals. Since 18 January 2005, entering into a deferred resale agreement triggers the repayment of discount at the time that the agreement is entered into, not the time at which the ownership of the property is transferred.
Before agreeing to any offer or deal, ask who the adviser works for, whether they sell mortgages or other financial services, and whether he or she gets a commission for selling you a particular product.
Before taking out a loan, be sure you understand what the deal means for you – in particular:
- Read the terms and conditions, including the small print – what exactly do they mean?
- What is the interest rate?
- What would happen if you missed any of the repayments due on your loan?
- What would happen and how much would it cost if you wanted to repay the loan early?
Even if you don’t need a mortgage yourself, it is worth checking if your local banks and building societies will lend on the type of house or flat you are buying.
You probably have the Right to Buy if you are a secure tenant of the Council.
If your secure tenancy was in existence before 18 January 2005, or you were a public sector tenant before 18 January 2005 (and you have been a public sector tenant continuously since that time), you do not have the Right to Buy until you have spent at least 2 years as a public sector tenant.
For anyone else, you do not have the Right to Buy until you have spent at least 5 years as a public sector tenant.
You will only be able to purchase under the scheme if your house or flat is your only or principal home.
You cannot buy your home if a court makes a possession order which says that you must leave your home. Neither can you buy your home if you are an un-discharged bankrupt, have a bankruptcy petition pending against you, or have made an arrangement with creditors (people you owe money to) and you still owe them money.
You may be able to exercise the Right to Buy jointly with members of your family who have lived with you for the past 12 months, or with someone who is a joint tenant with you.
The Right to Buy scheme gives tenants a discount on the market value of their homes. The longer you have been a tenant, the more discount you get, up to a maximum of £8,000.
Subject to these maximum limits, the amount of discount for which you are eligible depends on the time you have spent as a public sector tenant, with either your present landlord or another ‘Right to Buy landlord’
If you have spent 2 years as a public sector in order to qualify for the Right to Buy (see page 6 to see if that applies to you, the discount available after 2 years is 32% for houses and 44% for flats. If you are buying a house, you are eligible for 1% more discount for each extra year, up to a maximum limit of 60%. If you are buying a flat, you are eligible for 2% more discount for each extra year, up to a maximum limit of 70%.
If you have spent 5 years as a public sector tenant in order to qualify for the Right to Buy (see page 6 to see if that applies to you), the discount available to you after 5 years is 35% for houses and 50% for flats. If you are buying a house, you are eligible for 1% more discount for each extra year, up to a maximum of limit of 60%. If you are buying a flat, you are eligible for 2% more discount for each extra full year, up to a maximum limit of 70%. But, whatever percentage you are eligible for, your discount cannot be greater than the maximum discount of £8,000.
The qualifying period for discount can include time spent in different homes and with different landlords. This doesn’t have to be continuous, so long as it was a public sector tenancy. You may also be able to count a period when your husband or wife was a public sector tenant or lived in housing provided by the armed forces. If you lived with your parents after the age of 16 and you later became the tenant of the same house or flat, you may be able to count that time too.
Reduction of discount to take account of the cost of work carried out by your landlord on your home (cost floor)
Your discount may be reduced by a special rule called the cost floor. This may apply if your home has recently had money spent on it by the Council, in repairing or maintaining it. Under the cost floor, the discount you receive must not reduce the price you pay below what has been spent on repairing or maintaining it by the Council.
If the cost of works carried out over the 10-11 year period is greater than the market value of your home, you will not receive any discount.
Repayment of discount
If you have bought your home under the Right to Buy, you can sell it whenever you like. But if you wish to sell within the ‘discount repayment period’ specified below you will usually have to repay some or all of the discount. The amount you repay will depend on when you made the application to buy. The discount charge is registered as if it were a charge by way of legal mortgage.
If you applied for the Right to Buy before 18 January 2005 and sell within 3 years of buying your home.
If you sell within the first year after your purchase, the whole of the discount will have to be repaid. Two thirds must be repaid if you sell in the second year and one third in the third year. After 3 years, you can sell without repaying any discount. The discount is the sum you actually received when you purchased your home.
If you applied for the Right to Buy from 18 January 2005 onwards and sell within 5 years of buying your home.
If you sell within the first year of purchase, the whole discount will have to be repaid. Four fifths must be repaid if you sell in the second year, three fifths on the third year, two fifths in the fourth year and one fifth in the fifth year. After 5 years, you can sell without repaying any discount. In addition, the amount of discount to be repaid if you sell within 5 years of purchase will be a percentage of the resale value or the property, disregarding the increase of the amount attributable to any home improvements carried out by you since the date of your purchase.
For example, if your home was valued at £100,000 at the time you bought it from your landlord, and you received a discount of £20,000, that means that your discount was 20%.
If your home is valued at £150,000 when you wish to sell it and you want to sell within the second year of purchase, you will have to repay £150,000 x 20% discount x 4/5 i.e. £24,000.
Certain sales or transfers are exempt from the requirement to repay discount e.g. transfers between certain family members.
In addition, if you would face severe hardship by having to repay the discount, and your circumstances justify it, the Council can decide if requested, not to ask you to pay some or all of the discount that you owe.
From 18 January 2005, if in advance of your purchase, or within the ‘discount repayment period’ you enter into an agreement to transfer your property to a third party in the future, then this will trigger repayment of your discount. Discount repayment is triggered from the date that you enter into the agreement. So, for example, if you enter into such an agreement before you have bought the property or during the first year after buying, you will have to repay the full amount of discount you received.
What if I have purchased before?
If you have purchased under the Right to Buy scheme before, the amount of discount you received then will usually be deducted from your discount when you buy again.
If you purchase your home under the Right to Buy scheme on or after 18 January 2005, and you wish to resell or dispose of it within 10 years, you will be required to offer it back to either this Council or to another social landlord in this area at full market value. The market value must be agreed between the parties or, if they are unable to agree, will be determined by the District Valuer.
What are the differences from buying a house?
If you buy a house, you will purchase the freehold and will own the property outright. If you buy a flat or maisonette, you will usually purchase a long lease. This allows you and your successors to live it for a fixed time, usually 125 years. The block will still be owned by the Council, and we will be responsible for the upkeep of the building as a whole and of any communal areas and facilities.
As a leaseholder, you only have to pay the Council a nominal rent (known as a ‘ground rent’) of £10 a year. But you and other leaseholders will also have to pay the service charges. These can be perhaps several hundred pounds each year, or much more if the block needs major repairs or maintenance, such as a new roof, structural repairs, alterations and adaptations required by statute and improvements.
Leaseholders can sell their properties at any point during the lifetime of the lease. The person who buys it pays to take over the remainder of the lease.
Under your lease:
- Your Council will be responsible for repairing the structural and outside of your flat and the rest of the building. This includes routine repairs and maintenance, and also major maintenance and refurbishment works (for example, repairing the roof or replacing a lift), which can be very expensive.
- Your Council will usually provide services like communal lighting
- You will have to pay a reasonable share of the costs for these works and services. Your share is determined by the number of flats or maisonettes in the block.
- You will usually have to pay a charge towards the Council’s costs of managing the block – often calculated as a percentage of the charges for services and maintenance.
- You will also be responsible for keeping the inside of your flat in good repair.
There are two kinds of service charges: annual charges for day to day repairs/maintenance and ‘major works’ service charges (a lump sum, which can be £20,000 or even more) when a lot of repair or refurbishment work is needed.
If you decide you want to buy, your Council must tell you how much the property will cost and he must also give you an estimate of any service charge you will have to pay during the first 5 years of your lease. If the lease says you must pay some of the costs of improvement, the estimate must cover these too. Once we have given you an estimate, we are not allowed to charge you more than that figure during the first 5 years of your lease, except to take account of inflation.
There is no special limit on charges for repairs carried out after the first 5 years. You need to remember that you may have to pay ‘major work’’ service charges whenever your block is repaired. There are several schemes to help you with this – ask us about them.
Other points on service charges
- The estimate of service charges before you buy will also cover charges for building services such as caretaking. But charges of this kind can change, even during the first 5 years of a lease.
- You will also be told about any unknown structural defects affecting the building. If we require you to pay for work to put them right during the first 5 years, the estimate of service charges for repairs must cover this. But you may also have to pay for some of the costs of work done after the first 5 years.
- You may have the right to a loan from your landlord to help pay a service charge for repairs during the first 10 years of your lease. The service charge bill will say if a loan is available.
Buying your home is a major financial commitment. Apart from paying for it , you will then have to maintain it. As explained, if you buy a flat on a long lease, you will also have to pay service charges.
Unless you are going to buy your home with cash, you will need a mortgage. There are various kinds of mortgages which your bank or building society can tell you about. An independent advisor may also be able to help.
If you can’t keep up the repayments on your mortgage, the lender may go to court and ask that you be removed from your home. The council does not have to give you another tenancy if you lose your home in this way.
Other regular costs of home ownership
Council tax and water charges
If you buy your home, you will have to pay these separately, straight to the water services company and to the council.
When budgeting you must take into account the gas, electricity, telephone and personal bills that still have to be paid for when you own your property.
You will need to consider taking out insurance cover for your home and mortgage. There are four main types:
- Buildings insurance
This is essential. It is needed to cover the full cost of rebuilding your home if it were to be destroyed by fire or some other incident. In the case of flats, this insurance is often arranged for the whole block by us, and we will expect you to contribute towards the cost of the insurance premium. If you need a mortgage to help buy your home, the lender will insist that you have buildings insurance.
- Contents insurance -
As well as buildings insurance, you should insure the contents of your home against theft and other risks.
- Life insurance -
This is needed to pay off your mortgage if you die before the end of the mortgage period. It means that your family is not left with the heavy burden of mortgage debt.
- Mortgage payment protection insurance -
You need to think seriously about how you would meet your mortgage repayments if you lost your income, say through unemployment or ill-health. In many cases, mortgage payment protection will give you the security that you need.
You should shop around for policies that best suit your needs.
Repairs and maintenance
If your home is a house and you buy it, you will be responsible for the costs of all repairs and maintenance, regardless of the condition of the property when you bought it. If you are buying a flat on a long lease, you will have to pay the landlord’s service charges. It is your responsibility to get advice on the condition of your home before you complete the purchase.
One off costs of buying your home
You should employ a solicitor or a licensed conveyancer to look after the legal side of buying your home. Before employing anyone, always ask how much their advice will cost and amount of disbursements they will incur on your behalf in purchasing your home.
You should have a survey of your home done. You should consider one of these:
- A RICS Homes Buyers’ Survey and Valuation
This is a report and valuation in a standardised format, to tell the buyer of all the significant defects, but not minor ones. It is likely to be adequate for most properties and provides a guide to value.
- A Building Survey
This involves a detailed examination of all the visible parts of the property. It is a good idea to have such a survey done if the property is old, or obviously in need of repair, or if you are considering making alterations.
Your lender may be able to arrange for its valuer to carry out the survey, which could save you paying for a separate valuation.
You should get a survey done after you receive your section 125 notice You should ask how much it will cost before you ask anyone to go ahead with the survey.
When a sale is completed, you must pay the Land Registry to register you as the new owner.
You may have to pay Stamp Duty Land Tax, which is a tax that people pay when they become home owners. Stamp Duty Land taxis worked out as a percentage of the price you pay for a property that is worth more than £120,000.
This section aims to take you through each stage of the process of buying your home.
Step 1 – Applying to buy
Start by contacting the Council’s right to buy section or housing estate office and this can be done either in writing or by telephone requesting a Right to Buy claim form (Form RTB1). We must provide this free of charge.
Fill the form in carefully. It is used to decide:
- Whether you have the Right to Buy; and
- How much discount you will get.
When you have filled in the form, return it to the right to buy team.
Step 2 – The Council’s Response Notice
Having received your claim form, we will send you a notice (Form RTB2) telling you whether or not you have the Right to Buy. You should get this within 4 weeks from the date on which your landlord received your RTB1 form
If we determine that you don’t have the Right to Buy your home, we must explain why. The property may be one of the exceptions listed below. If you don’t agree with his explanation, you can get advice from a Citizens Advice Bureau or from a solicitor. If you are still not satisfied, you can write to the Welsh Assembly Government at the addresses given in this booklet.
Step 3 – Your landlord’s Section 125 Notice
If we agree to sell your home to you, we must send you a separate offer notice (known as the Section 125 Notice) which tells you the price you have to pay and the terms and conditions of the sale. He must send this within a further 8 weeks after you have received your RTB2 form if your home is a house and you are buying a freehold, or within 12 weeks if your home if a flat or maisonette.
The section 125 Notice is an important document and you should read it very carefully. It will tell you five main things:
- It will describe the property which you have the Right to Buy.
- It will tell you the price we think you should pay for it.
- It will give estimates of the service charges or improvement costs you will have to pay during the first 5 years after you buy your home, if it is a flat or maisonette.
- If will describe any structural defects that the landlord knows about.
- It will contain the terms and conditions that we feel should be attached to the sale. These may be set out either in the form of a draft of the legal document for you to sign, or as part of the notice, or on a separate sheet.
Step 4 – Appealing to the District Valuer
When you receive your Section 125 notice, you may feel that what we think is the full market value of your home is too high. If so, you have a right to obtain an independent valuation from the District Valuer. Before doing so, you have to tell us, within 3 months of receiving the Section 125 notice, that you want a ‘determination of value’ under Section 128 of the Housing Act 1985. You then have 4 weeks to put your case to the District Valuer. He will also need to inspect your home.
The District Valuer’s valuation will be the one that counts. Even if it is higher than our valuation, you will still have to accept it or withdraw your application to buy your home.
Step 5 – Getting a Survey
Before you finally decide to buy, you should get an independent survey form a qualified surveyor. When you apply for a mortgage, the bank or building society will have a survey done, but this is only to value your home. It may not uncover any structural problems that may exist..
Step 6 – Getting legal advice
Before deciding whether to buy, you could get legal advice, particularly if you have worries about the terms of the sale.
Step 7 – Telling us what you want to do next
The information contained in your Section 125 notice may not be straightforward and easy to understand. You will now have to decide if you want to:
- Buy your home outright for the full Right to Buy price, less any discount for which you are eligible;
- Forget about buying, withdraw your application and carry on paying rent.
When you have decided, you must tell us in writing. You must let him know your decision within 12 weeks of receiving your Section 125 notice. If you have asked to have your house valued by the District Valuer, you must tell us what you want to do within 12 weeks of getting that valuation.
If you do not let us know what you intend to do in time, we will send you a reminder. If you do not reply within 28 days, we will think you don’t want to buy and your application will not be dealt with any further.
Step 8 – Completing your purchase
If you are happy with our terms for selling your home to you, and you have arranged to raise the money, you are ready to go ahead and buy. You should tell us that you are ready and ask your solicitor for advice on the legal documents and making your payment
It is at this stage, when your acceptance is received by us that your file will be passed to the Council’s legal department to enable the documentation to be prepared and forwarded to your appointed legal representative. Attached to the document is a plan of your property and this will have been prepared after a site visit by an Officer from the Property Planning Department. The plan shows the area of land included in your tenancy and the boundary responsibility you will have once you have purchased.
If we don’t hear from you, you may get a warning notice. This will ask you either to complete the purchase within 8 weeks or to write and tell us that you disagree with the terms of the sale. If you don’t, we may send you a second notice asking you to complete your purchase. If you then don’t complete, your application will not be taken any further and it will be deemed withdrawn.
We cannot send you a warning notice until at least 3 months (or 12 months if you have applied for the Right to Buy before 18 January 2005) after your Section 125 notice.
Most sales go through quickly, but sometimes there are problems or delays. If we do not send your Form RTB2 (the notice telling you if you have the Right to Buy) or the Section 125 notice (offer notice) within the times mentioned in the step by step guide, or is otherwise delaying the sale, you may be allowed to get a reduction in the purchase price. To get this reduction, you first need to fill in an initial notice of delay (Form RTB 6) and send it to us. You must give us at least one month to take the next step in the sale process. We may send you a counter notice if we have already served you with a Response Notice or a Section 125 Notice, or if there is no action that can be taken by us to speed up the sale.
If we do not send you a counter notice within the time allowed, you can send us an operative notice of delay (Form RTB 8). The rent you pay while the delay goes on will then be taken off the price you have to pay for your home. If we delay the sale again, you can repeat this procedure.
You can get the forms mentioned above from us, or the Welsh Assembly Government.
Homes suitable for occupation by the elderly
We may refuse to let you buy on the grounds that your home is particularly suitable for occupation by elderly people (under paragraph 11 of Schedule 5 to the Housing Act 1985). If so, you can ask the National Assembly for Wales to decide if we are right. But you must ask them within 56 days after we have refused to sell your home. If you don’t ask in time, you lose this right of appeal.
You do not have the Right to Buy if your home:
- Is particularly suitable for occupation by elderly persons, taking into account its location size, design, heating system and other features;
- Was let to you or the previous tenant for occupation by a person aged 60 or over, whether they were the tenant of not; and
- Was first let (to you or someone else) before 1 January 1990.
When considering if your home is ‘particularly suitable’, we must ignore features that you have provided (for example, a central heating system).
How do you ask for a decision?
Write to the Welsh Assembly Government, Housing Directorate, Cathays Park, Cardiff, CF10 3NQ.
What happens next?
When both sides have had the chance to put their case and the facts have been established, the National Assembly for Wales will decide whether or not your home is excluded from the Right to Buy.
What effect will the decision have?
If the Welsh Assembly Government decides that your home does fall within the criteria set out in paragraph 11 of Schedule 5 to the Housing Act 1985, you will not have the right to buy.
If the decision is that paragraph 11 does not apply to your home, you will be able to go ahead with your purchase unless there is some other reason why you do not have the Right to Buy (we may have denied the Right to Buy for more than one reason).
On what basis will the decision be made?
The decision-maker will normally expect to be satisfied on the following points:
a) there should be easy access on foot to your home: access is unlikely to be regarded as easy if it is necessary to climb three or more steps (in addition to the threshold) and there is no handrail;
b) the accommodation should normally be on one level;
c) in the case of a flat above ground floor level, there should be easy access by lift;
d) there should be no more than two bedrooms
e) there should be heating arrangements which function reliably and provide heat to at least the living room and one bedroom;
f) your home should be located reasonably conveniently for shops and public transport, having regard to the nature of the area.
The Welsh Assembly Government will also take into account any other relevant features of your home which are drawn to their attention.
Homes due to be demolished
If we intend to demolish your home, we may serve on you an initial demolition notice, valid for up to 5 years. Such a notice suspends our obligation to complete a Right to Buy purchase. If you have already applied for the Right to Buy, you can still complete if demolition does not in fact take place. You can also make a new application while an initial demolition notice is in force, but we do not have to complete the sale under those circumstances.
However, if we serve a final demolition notice, then any existing Right to Buy claims are ended and no new applications can be made.
Other exceptions to the Right to Buy
There are other exceptions to the Right to Buy. A full list of these exceptions is available in the ODPM publication ‘Your Right to Buy Your Home’ booklet which can be obtained from your local housing estate office or Housing services in Ruthin Road, Wrexham
If your home is an area designated by the Secretary of State or Welsh Assembly Government as rural and you want to buy your home from the council under the Right to Buy, special rules apply.
When you buy, the sale will be on the condition that you may only resell it to someone who has been living or working in the area for 3 years. Alternatively, we may require you to offer your home back to us if you want to resell within 10 years of buying (see the section on the ‘Right of first refusal’ for further information). The landlord would then have to pay you the full value of the property.
You may find it difficult to get a mortgage for your home because of these restrictions on resale.
Certain types of houses and flats have been designated as defective under Part 16 of the Housing Act 1985, because:
- They are defective by reason of their design or construction; and
- Their value has been reduced substantially because their defects have become generally known.
If your home is one of these, we must tell you before you buy. Usually this is done by way of letter to you. You should then consider very carefully whether it is wise to buy. You might have difficulty in selling later, because anyone thinking of buying your home from you might be unable to get a mortgage. If you do decide to buy, it is very important to find out the structural condition of your home.