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Right to Buy allows council tenants to buy their homes at a reduced price.
You start to qualify for a discount after three years.
Councils can offer you a big discount if you qualify for the right to buy. In most cases, you will still need a mortgage to cover the difference. There are lenders who will accept the discount as your deposit, while others require you to put some money down as well.
Right to Buy is often an appealing option due to the discount. Your property may end up being worth much more than you paid for it. Moreover, since you already live there, you don’t have to worry about moving!
Who is eligible for Right to Buy?
You can check your eligibility via the Own Your Home website but the key criteria is listed below.
At least one applicant must be named on the tenancy agreement for the property. You can apply jointly with a spouse or civil partner, or with a family member who has lived in the property with you for the past twelve months, as long as it is their main home.
As mentioned above, you need to be a council tenant. You start to qualify for a discount after this has been your housing status for three years.
The scheme probably won’t apply to your property if it is sheltered housing or reserved for elderly or disabled residents.
You also can’t have any legal problems with debt, such as a bankruptcy or debt relief order. Furthermore, you can’t be the subject of a possession order that requires you to leave the property.
What discount could I get?
The maximum discount available is 70% of the property’s market valuation or the cash maximum, currently £87,200 (or £116,200 if you live in London). The amount you are entitled to depends on how long you have been a tenant and whether the property is a house or a flat.
Houses
Discounts start at 35% for three years’ tenancy. This remains at 35% until you reach five years’ tenancy. After five years add 1% for each extra year of tenancy up to 70% or the cash maximum, whichever is lower. (e.g. ten years’ tenancy = 40%, 20 years = 50%)
| Current house value | £120,000 |
| Years as a tenant | 10 years |
| Eligible discount (35% + 1% for each year over five years) | 40% |
| Discount value | £48,000 |
| Price you pay for house (£120,000 less £48,000) | £72,000 |
Discounts start at 50% for three years’ tenancy. This remains at 50% until you reach five years’ tenancy. After five years add 2% for each extra year of tenancy up to 70% or the cash maximum, whichever is lower. (e.g. 10 years’ tenancy = 60%, 15 years = 70%)
| Current flat value | £100,000 |
| Years as a tenant | 10 years |
| Eligible discount (50% + 2% for each year over five years) | 60% |
| Discount value | £60,000 |
| Price you pay for flat (£100,000 less £60,000) | £40,000 |
What is the process for Right to Buy?
When you decide you want to buy your property and have checked your eligibility, the first step is to complete a RTB1 form. It informs your landlord that you are interested in buying the property. The landlord has four weeks to confirm whether you have the right to buy. If you have been with your current landlord for less than three years, this time period increases to eight weeks.
If it is a house, your landlord has another eight weeks to issue an offer notice, whereas if it is a flat, your landlord has up to twelve weeks.
Once Right to Buy is confirmed, you’ll receive an offer notice confirming:
- their valuation of your property (if you’re not happy with the valuation you can appeal)
- your discount
- the price you’ll pay
- any structural problems they know about
- any terms and conditions
Your section 125 offer notice will also include an estimate of your service charges over the next five years if the property is leasehold.
After that, you have up to twelve weeks to decide whether to proceed. If you do, you need to arrange a mortgage and appoint a solicitor. You should speak to a mortgage advisor before committing to buying. Your advisor can help you find out what you can borrow and how much your mortgage will cost.
You should proceed and complete your purchase once you are satisfied with your landlord’s terms and have arranged how you will pay for your home.
Can I sell the house in the future?
Once you own the property you can sell whenever you like, but it may be subject to some restrictions.
If you sell within ten years of buying it, you first have to ask your former landlord if they want to buy your home back at market value. If they say ‘no’ then you can sell it on the open market.
In addition:
- if you sell within five years you will usually have to repay some or all of the Right to Buy discount. The amount depends on the price you sell at and how long you have been the owner. This also applies if you agree to transfer ownership to somebody else.
- if you live in a rural area you may only be allowed to sell your home to somebody who lives or works locally. Ask your landlord about this before purchasing.
Pros and cons of Right to Buy
Pros
- You don’t necessarily need your own deposit
- A generous discount makes buying the property more affordable
- Something to show for years of paying rent; can also be handed down to children
- No moving costs
Cons
- Effectively tied in to remaining in the property for at least five years, or otherwise have to pay back some of the discount if moving within that timeframe
- Ex-council properties can be harder to sell and may not increase in value as much as other properties
- Responsibility for maintenance and upkeep passes to you as the owner; the council is no longer liable
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