Many people up and down the UK currently live in a council property. A form of affordable housing where the residents pay rent to the local authority or a housing association. However, over the past 40 years, more and more of these tenants have managed to successfully buy the property they have been renting and as a result, get a foot on the property ladder. With the properties available at a hugely discounted rate, it is a scheme that has helped many families since its inception.
Over recent years the scheme, known as right to buy has been taken out of use in Scotland and Wales and is gradually being reduced in Northern Ireland, in England though it still operates, and has continually proved popular.
This is a scheme that is not open to everyone, but most council house tenants will find that they are eligible. Those in housing association properties will instead find something called right to acquire an option open to them. They are very different schemes so it is worth noting.
Buying a council house new rules
To be eligible to buy your council house at a discount you must fit certain criteria, some of which are relatively easy to meet. You can apply to buy your council house if:
- It is your only, or main, home
- You hold a secure tenancy
- The house is self-contained
- You have had a public sector landlord for at least 3 years. (this period does not have to run concurrently)
- You hold no debt that has resulted in legal action against you
What is the discount for buying a council house?
The level of discount available to tenants is quite an appealing incentive to investigate how viable purchasing the property may be. The discount varies on a few things and can make the difference between a good saving and a great saving on the property price.
The discount applied to the property will be worked out based on whether the property is a house or flat, your location and how long you have been living there. At present, the highest value of the discount is £87,200 or £116,200 if you live in London. This is scheduled to change in April though.
If you live in a house:
If you have lived in a house as a council/housing association tenant for between three and five years, you will receive a discount of 35% off the market value of the property up to the current maximum discount value.
If you have been a tenant in a property like this for more than five years you will be eligible for a discount of a further 1% for every extra year you have lived there, up to a maximum of 70% or the current maximum cash value. Whichever is the lower.
If you live in a flat:
The discount on flats is somewhat different to that on houses. In fact, it is higher. If you have lived in a council or housing association property for between three and five years, you will get a 50% reduction on the market value up to the current maximum monetary value.
If you have lived there for five years or more the discount increases by 2% each year up to a maximum of 70% or the maximum monetary level, whichever is lowest.
How to buy a council house
If you have decided that purchasing the house is a route you would like to take, then you must follow a few steps to apply to buy your council house.
They are all relatively simple and it is only after completing them that the hard work begins.
Firstly, complete a form known as RTB1. This is your application to join the right-to-buy scheme. Once completed, you should send the form to your landlord. Make sure it is signed and to ensure it is received, send via special delivery. From here, it is a bit of a waiting game. The landlord has up to eight weeks (four weeks if you have been a tenant for more than three years) in which to reply to you with news of whether they wish to sell the house.
If they decide they do not wish to sell, you must be informed of the reasons why in their reply. If they do agree to sell, they will send an offer. If you live in a freehold, this must be down within eight weeks, or twelve weeks if a leasehold.
Within the offer, you will find a price, a level of discount, a full property description, details of any known property problems and estimates for any potential service charges over the coming five years.
Once the offer has been received, you have twelve weeks in which to accept, however, if you decide this is no longer an avenue for you, you can stop the process and continue renting the property.
Do I need a deposit to buy my council house?
If you have accepted the offer from the landlord, or appealed their offer and had a new one proposed that you have now accepted, you will need to begin looking at the financing of your property. Now that you are on your way to becoming a homeowner, you will need to look at the mortgage options open to you. You will also need to consider the deposit you will want to put down. Luckily, many lenders will accept the discount that is applied to the property as a deposit. This cannot be said for all though so it is worth investigating this when making your initial mortgage enquiries.
What costs should I consider when buying a council house?
Aside from the mortgage and potential deposit, you will need to remember that you will now be responsible for all costs at the property. Repairs that would have previously been covered by the landlord are now your responsibility. Furthermore, stamp duty will also be applicable when you purchase the home.
Do I have to pay back the council house discount?
Whilst you are living at the property, you do not have to pay back any of the discount that was applied to your purchase. However, if you decide to sell, you may find yourself needing to pay back a significant portion of it.
If you sell within the first year of ownership, the full level of discount will need to be repaid. From year two onwards the amount you must repay will typically fall within the amounts shown below. Landlords do have the right to ask for the full amount though.
|If you sell within:||% of discount to repay|
|2nd year||80% of discount|
|3rd year||60% of discount|
|4th year||40% of discount|
|5th year||20% of discount|
Once you have lived in the property for more than 5 years you will not need to pay back any of the discount. Something worth noting is that the amount of cash you are required to pay back will be determined by the house value when you sell it. Not from when you bought it.
So, if you bought a house that was valued at £200,000 and received a 40% discount on it. You would have saved £80,000 and paid £120,000 for it. Now 3 years later the house is worth £250,000 making your 40% worth £100,000. With you being in year 3, you would pay back £60,000.
One other important point is that if you aim to sell the property within ten years of buying it through this scheme, you will be obliged to offer it to the original landlord or another social housing landlord in the area.
The landlord then has eight weeks to respond, if they do not, you are welcome to sell the property to anyone.
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