Right To Buy - Discount Increased!
With effect from 2 April 2012 the maximum right to buy discount for council tenants has been increased to £75,000.
This constitutes a considerable change in policy by the present government. Previously, right to buy had become unattractive , by capping the amount of discounts according to location. In most of greater London for example the maximum discount was only £16,000.
The right to buy discount available depends on the amount of time the tenant has occupied the property. For freehold houses, the discount starts at 35% and increases at 1% per year to 60%. For leasehold flats the starting figure is 50%, rising to 70% at 2% per annum. For example, if you wanted to buy a flat worth £200,000 and had been a public sector tenant for ten years, you would qualify for a 60 per cent discount (£120,000). However, the maximum discount is £75,000. This means that if the flat was worth £200,000, you could buy it for £125,000. It is also important to realise that if the property is sold within 5 years of the right to buy then some of the discount will have to be repaid. More information on eligibility and discounts can be found on the Direct Gov website.
Any tenant wanting to exercise their right to buy must first submit a Right to Buy Claim form which can be downloaded from the internet. The relevant council must then respond, admitting or disputing the claim, and follow up with an offer notice, setting out the terms of the of sale. In some circumstances the council may decide that certain properties are planned to be demolished. Should the property be expected to be demolished within 7 years the council has to issue a Demolition Notice to the tenant and the right to buy that particular property is removed. Other exceptions may also apply and more information can be found here.
Once the terms are settled the transaction will follow a standard conveyancing process but with some significant differences. For example, although provisions for the repayment of the discount will be secured against the property, mortgage lenders are given priority, meaning that in the event of a forced sale, they will be able to sell free of the discount requirement. The council will then seek to recoup its loss from any resulting surplus after the prior mortgage has been paid off. However, transferring the property to other family members may be exempt form the recoup of any discount. For right to buy leaseholders, new measures have now been put in place making sure that service charges for the first 5 years are established. Beyond 5 years terms can be negotiated to avoid punitive service charges.
For all these reasons it is vital that anyone seeking the right to buy, obtains professional legal advice from a qualified property lawyer who is experienced in this area. They will be able to provide potential buyers with;
- Assistance with the application process
- Negotiating suitable terms
- Making sure that the final contract covers the service charge aspects
- A full explanation of your rights under the contract
Angie Newnham at Newnham & Jordan Solicitors is a fully qualified, experienced property lawyer who can assist you with your right to buy.
Contact her on: 0845 680 7831