What is the new Right to Buy scheme?

A revamped Right to Buy scheme offers council tenants in England up to 77,900 (or 103,900 in London) off the market price of their council home. Here is what you need to know about the scheme.

Updated on 18 May 2015.

New home happy couple

In a bid to help thousands of people "achieve the dream of home ownership" David Cameron has regenerated the Right to Buy scheme first launched by Margaret Thatcher in the 80s.

Tenants across England can get up to 77,900 off the cost of buying their council home through the scheme, with the coalition government promising to replace each council property that is sold with new affordable social housing. The maximum discount in London is 103,900

We look at how the scheme has changed and explain how you can benefit from it if you are a council tenant.

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Who qualifies for a Right to Buy discount?

To be eligible for the Right to Buy discount scheme you will need to have been a public sector tenant for at least 5 years; this means your landlord would have to be a council, NHS trust or housing association. This does not have to be in one continuous period or just in the home you want to buy.

You cannot apply for a Right to Buy discount if any of the following apply:

  • the property is not your main home
  • the property is not self-contained (you share a kitchen or bathroom)
  • you have an introductory tenancy rather than a secure tenancy
  • there is a court order saying you must leave your home
  • you are an 'undischarged bankrupt'
  • you are being declared bankrupt
  • you owe money to creditors

Certain properties are also excluded from the Right to Buy scheme, usually if they are reserved for the elderly or for tenants who work in a specific public sector, such as firemen or the police. However, if you live in an ex-council house can that was sold to another landlord, a "Preserved Right to Buy" may still apply.

You can find out if you could buy your property through the scheme, using the Gov.uk website.

Can you buy with someone else?

You can apply jointly with someone you share your tenancy with or one to three family members who have lived with you in the past year.

How much is the Right to Buy discount?

The maximum discount available through the Right to Buy scheme has increased to 77,900 for properties across England (103,900 in London boroughs).

The exact amount you will get will depend on how long you have been a council tenant, whether you live in a flat or house and the value of the property you want to buy on the open market.

The maximum discount for a council flat is 70% of the market value, but the discount starts at 50% for those who have been council tenants for 5 years and increases by 2% for each additional year of council tenancy.

The maximum discount for a council house through the right to buy scheme is 60% of the market value starting at 35% and increasing by 1% for every year you have been a council tenant.

Regardless of how long you have lived in your home, or how much it is worth on the open market, the maximum discount on offer through the Right to Buy scheme is 77,900 (103,900 in London). The maximum amounts increase with the consumer price index in April each year.

The Cost Floor Rule

The amount of money that will be deducted from your property could be capped by the Cost Floor rule.

This rule allows your landlord, in most cases your local council, to claim back money they have spent on repairing and maintaining your property over the past 15 years from your Right to Buy discount - even if you have not lived there the entire time.

How do you apply?

If you want to benefit from the Right to Buy discount increase and are a qualifying tenant you can start your application by downloading and completing the RTB1 application form.

You will then need to send your application to your landlord who will have four weeks to tell you if you can buy your home (eight weeks if they have been your landlord for five years or less).

If your landlord is happy to sell you your home they will then send you an offer through a Section 125 notice.

This will contain a formal valuation of your property including the price you will be expected to pay.

It will also set out details of the property, any known problems, the new right to buy discount rates and estimates of any charges that will be deducted from your discount.

Once you receive your Section 125 notice you will have 12 weeks to accept the offer or reject it and continue renting your home.

What if you disagree with the offer?

You can ask for an independent valuation from HM Revenue & Customs if you feel the property value has been set too high. To do this, you will need to write to your landlord within 3 months of receiving the offer to explain why you think it is too high.

Will you need a mortgage?

Purchasing your home through the council Right to Buy scheme is very similar to buying a property on the open market, except the home owner (in most cases the council) is able to offer a substantial discount on the price you have to pay.

However, this does mean that you will need to apply for a mortgage and put down a deposit unless you have the cash to purchase the property outright.

Many lenders will offer mortgages specifically tailored to Right to Buy applicants, although you should carefully consider all you different options when looking for the best mortgage.

For more help read this guide to finding the right mortgage or compare mortgages using our Right to Buy comparison. You could also complete our mortgage broker form to speak to an independent mortgage broker in your area.

Can you use your Right to Buy discount as a deposit?

Many mortgage lenders will let you use your Right to Buy discount as your deposit, meaning you will not need to save a deposit yourself. However, some lenders may still expect you to put down a deposit as well.

Can you sell your ex-council home later?

If you purchase your home through the Right to Buy housing association you may have to repay some or all of your discount if you sell it again within five years.

The amount you would have to pay back would depend on how long you had owned the property when you sell:

  • Less than a year = all of the Right to Buy discount
  • 1-2 years = 80% of the discount
  • 2-3 years = 60% of the discount
  • 3-4 years = 40% of the discount
  • 4-5 years = 20% of the discount
  • 5+ years = 0% of the discount

The market value of your home when you sell will also affect the amount you would have to pay back; this applies whether your property has increased or decreased in value. For example, if your home was worth 100,000 and you got a discount of 40,000 only to sell it for 110,000 the discount would be calculated as 44,000. So if you sold it 30 months after purchase you would repay 60% of 44,000.

You must also have to give your original landlord first refusal on the property if you sell it within 10 years.

RTB in Scotland, Wales & Northern Ireland

Control over social housing is a devolved issue, meaning that the governments of Scotland, Wales and Northern Ireland have control over the Right to Buy schemes in these countries.

The maximum discount you can get is:

  • 15,000 in Scotland
  • 16,000 in Wales
  • 24,000 in Northern Ireland

Scotland

The Right to Buy scheme was closed to new social tenants in Scotland on 1st March, 2011.

This means that if you took up your tenancy for the first time after the 1st of March, 2011 that you will not be eligible to apply for a Right to Buy discount.

If you left social housing and returned to become a social tenant after the 1st March, 2011 it is unlikely that you will qualify for the Right to Buy scheme either.

However, although the Right to Buy scheme has been withdrawn to new social tenants in Scotland, if you took up your tenancy before 1st March, 2011 you may still qualify for the scheme and be eligible to receive a discount on purchasing your home.

The Scottish parliament will withdraw the scheme entirely in Scotland by August 2016.

You can find more information , on the Right to Buy scheme in Scotland or read this short Right to Buy Scotland guide.

Wales

To a large extent the rules governing Right to Buy discounts are the same in Wales as they are in England, however the maximum discount available in Wales is much lower at 16,000.

Additionally the Welsh Assembly has given powers to local authorities to suspend the Right to Buy programme in areas where they are short of social housing.

This means that you may not be able to purchase your home if your local area has suspended the programme.

For more information on the Right to Buy Wales scheme, visit the Welsh Government website.

Northern Ireland

While the Northern Ireland Right to Buy scheme allows Housing Executive and housing association tenants to purchase their home at a discount, the maximum discount available in Northern Ireland is 24,000.

Most of the other rules and regulations regarding the scheme are the same as in England, with tenants having to have been a tenant for a minimum of 5 years to qualify.

For more information and details of how to apply, visit the Housing Rights Service website.

Written by at money.co.uk

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