What is the Right to Buy Scheme?
Right to Buy was brought in under Margaret Thatcher, with the end goal being to allow more people to own property, including those who lived in council housing. The scheme allowed council housing tenants to buy the home they lived in at a reduced price.
Whilst the idea of enabling council tenants to buy property was popular, the downside has been that those social housing properties were not replaced, putting more strain on local councils who now struggle to house people in need. Adding further insult to injury, a lot of the tenants who bought those properties eventually sold them on to professional landlords, who now rent them back to the council, but for a higher price. So the council has not only sold off their stock at a loss, but they’re paying more to house people in private accommodation.
Whilst Right to Buy may be problematic overall, the opportunity to buy your council house can really revolutionise some tenants’ lives – they get a property they have lived in and loved at a discounted price. They have an opportunity build equity in their property, and move up the ladder if they wish.
It’s just a shame that the original property isn’t replaced.
How does Right to Buy work?
Right to Buy works by allowing long term tenants of a council property to buy it, with a significant discount on the market rate. Right to Buy is only available in England. The program has ended in both Wales and Scotland, and Northern Ireland has a slightly different system called the
House Sales Scheme.
What is the Right to Buy discount?
The discount depends on two things:
- What type of property you live in.
- How long you’ve lived there.
Council house discount
If you live in a
council house and have done for 3-5 years, you can get a 35% discount on the property price. If you’ve lived there for more than 5 years, you get an extra 1% per year you’ve lived there.
Example: if you’ve lived in a council property for 12 years, you’d get the 35% discount for the first 5 years, and then another 7% off, making it a 42% discount. If your property is worth £250,000, you would only pay £145,000.
Council flat discount
If you live in a
council flat and have done for 3-5 years, you can get a 50% discount. For every year on top of that, you get an extra 2% discount.
Example: if you lived in your property for 12 years, you’d get the 50% off and then an extra 14%, making it a 64% discount. If your flat was worth £150,000, you would pay £54,000.
There is a cap on the discount – it will only go up to 70% maximum, or £82,000 across England/£110,000 in London (whichever is lower).
Am I eligible for right to buy?
If you’ve had a public sector landlord for 3 years (including council,
housing association or NHS trust) then you can apply for Right to Buy on a council property. The 3 years do not all have to be in one go, and they do not all have to have been spent in your current property.
You will also need to be a secure tenant – this means you have been given a long term tenancy (usually after 12 months have passed).
You will need to be debt free – you can’t buy your property if you are bankrupt, have a bankruptcy petition against you, have made an Individual Voluntary Arrangement to pay back debts, or have obtained a debt relief order.
You can use Right to Buy with another person, or even multiple people. If you share a tenancy, you can apply together, or if you live with family members, you can club together with up to 3 of them to purchase the property together. They do not have to be on your tenancy. Wider family members or partners need to have lived in the property for at least 12 months to be included.
Preserved right to buy
If your property was owned by the council but was sold, perhaps to a housing association, you may still have access to Right to Buy. This is called ‘preserved right to buy’. Ask your landlord if this applies to your property.
Right to buy application
In order to apply, you just need to send an
application form to your landlord. They then have 4 weeks to come back to you with an answer. If they have been your landlord for fewer than 3 years, they have 8 weeks to come back to you.
If they say yes to your application, they will send you an offer. This will include the price of the property with the Right to Buy discount, how it’s been worked out, a description of the property and any service charges you may end up paying as an owner, as well as any known problems with the property.
You have 12 weeks to respond to the offer. After the 12 weeks passes, you’ll be sent a reminder and you’ll have 28 days to respond. If you don’t, your application could be dropped.
You can change your mind and continue renting at any
point before the purchase has gone through.
If you disagree with the landlord’s valuation of the property, you can write back and ask for an independent valuation. A valuer from HMRC will then visit the property and assess the value. You will then have 12 weeks to respond when the valuation is received to decide if you want to move forward with the
purchase.
If there are significant delays to the process because of your landlord,
you may be entitled to a discount.
You can also make use of the free
Right to Buy Agent Service who can advise on things like the process, eligibility and provide support throughout.
Issues with Right to Buy
In some cases your application might be rejected because your property is suitable for housing elderly people, and the council do not want to give it up. You can appeal against this decision at a tribunal, where both sides will be considered.
What happens when I sell?
If you decide to sell your property within 5 years of buying it, you will have to pay back a proportion of the discount you received. This is reduced incrementally, the longer you are in the property.
Selling first year – whole amount is paid back
Second year – 80% of the discount is paid back
Third year – 60% of the discount is paid back
Fourth year – 40% of the discount is paid back
Fifth year – 20% of the discount is paid back
Bear in mind you’ll be paying back the percentage on the sale, not the amount you originally received. So if you got a 40% discount on a £100,000 property, your discount was £40,000. But if you sold the property for £120,000, you would pay back £48,000.
If you decide to sell within 10 years of buying the property, you must offer the property to your old landlord or another social landlord in the area. The property would be sold at the full market price, agreed between you and the landlord as with any other free market sale. However if you can’t agree, you can get a valuer to set the price (free of charge).
If the landlord doesn’t agree to buy it within 8 weeks of being offered, you can sell it to anyone.
Issues with selling
There may be a situation where you are limited in who you can sell your home to. If your property is in a rural area like a national park, an area of outstanding beauty or qualifies as ‘rural right to buy’ you may need to sell to someone who has worked in the area for a certain number of years. This could also make getting a mortgage more difficult.
This will be made clear to you when you purchase the property.
Do I need a deposit with Right to Buy?
This depends on your mortgage lender. Many would require a 5-10% deposit in the same way they would if you were buying a property without a scheme. However, some lenders are happy to use the discount on the property price as a deposit, meaning you don’t have to pay anything upfront. Be sure to check this before you buy the property, and remember that even if you haven’t saved for a deposit, you will need to have saved a sizeable amount for other costs, like your
conveyancing.
Have a look at our
moving cost calculator
Right to buy mortgages
Right to buy mortgages work in much the same way as a regular mortgage, it’s just that they’re specifically for this scheme. Be sure to consider the same things you would with any mortgage – the rate of interest, how long the fixed rate is for and whether there are any set up fees. Compare and take your time talking to a mortgage broker to make sure you get the best deal.
Learn more in our
guide to mortgages
Housing association vs council housing
Right to Buy is only available for those living in council housing. It does not apply to those in housing association properties. A separate scheme called
Right to Acquire is available for housing association tenants, and it is very similar to Right to Buy.
A Right to Buy extension pilot scheme is currently running in the Midlands, to explore whether there is an appetite for Right to Buy for housing association tenants. This experiment will be assessed when it finishes in 2020 and further decisions may be made from the outcome.
How do I find a Right to Buy conveyancing solicitor?
You can use any conveyancing solicitor or licensed conveyancer that you like for your Right to Buy purchase. As long as your solicitor knows that you are using the Right to Buy scheme, they’ll be able to ensure it all goes smoothly.
You can
compare conveyancing solicitors and get up to 4 quotes from local solicitors easily on reallymoving. You simply select ‘Right to Buy’ on the form.