Understanding the Right to Buy Scheme

The Right to Buy scheme is a government initiative in England and Northern Ireland designed to help secure tenants of council properties and housing association homes purchase their home at a significantly discounted rate. This scheme, similar to the Help to Buy scheme can help those struggling to get onto the property market.

 

Are You Eligible?

Eligibility for the Right to Buy scheme is not automatic; certain criteria must be met to qualify.

  • Council Tenant or Transferred Tenant: To qualify, you must either be a current council tenant or have been one when the property was transferred to the current landlord, which is usually a housing association.
  • Public Sector Tenant for at Least 3 Years: You must have been a public sector tenant for at least three years, although these years do not have to be consecutive. This time can include periods spent in different public sector properties.
  • Secure Tenant: Being a secure tenant is another essential condition. This means that your tenancy is long-term, and you have considerable protection from eviction.
  • Exclusions for Sheltered Housing: If you live in sheltered housing or other housing particularly suitable for elderly or disabled people, you are not eligible for the scheme.
  • Home Due for Demolition: There must be no plans or works in motion to demolish the property in question. If the council plans to demolish your home, they will likely refuse your application.
  • Good Financial Standing: You must not have any significant legal issues with debt, such as bankruptcy, and should not have any outstanding possession orders, which are typically issued due to unpaid rent.
  • No Anti-Social Behaviour Issues: If you have been involved in anti-social behaviour that has led to legal action or warnings from the council, your eligibility could be affected.

 

The Discount Available

The discount you receive under the Right to Buy scheme depends on two main factors: how long you have been a tenant and whether your property is a house or a flat. This will help you in understanding the right to buy scheme and whether this is something you could afford.

The maximum discount is £102,000 and for London properties this increases to £136,000.

For a House

If you live in a house, you can receive a 35% discount on the market value if you have been a public sector tenant for 3 to 5 years. For every additional year after the first five, you can gain an extra 1% discount, up to a maximum of 70%, or £96,010 across England, whichever is lower.

Example: Let’s say your house is valued at £120,000, and you have been a tenant for 10 years.

You would be eligible for a 40% discount (35% for the first five years plus an additional 5% for the extra five years).

This discount would reduce the purchase price to £72,000, the amount you would have to pay yourself and through a mortgage loan.

For a Flat

For flats, the initial discount is more substantial. You can receive a 50% discount if you have been a tenant for 3 to 5 years. After that, the discount increases by 2% for each additional year of tenancy, with the same overall maximum of 70%, or £96,010 across England, whichever is lower.

Example: If you have lived in your flat for 10 years, and it’s valued at £100,000, you could receive a 60% discount, bringing the purchase price down to £40,000.

 

Limitations of the Right to Buy Scheme

While the Right to Buy scheme offers substantial discounts and a pathway to homeownership, it’s important to be aware of its limitations and responsibilities before applying;

  • Mortgage Payments:

One of the critical considerations is your ability to manage mortgage payments. Owning a home comes with significant financial obligations, and failure to meet mortgage payments can lead to repossession by the lender.

  • Public Sector Property Requirement:

The scheme is only available to those living in public sector housing. If you live in private or non-qualifying housing, you are not eligible.

  • Consequences of Repossession:

If your home is repossessed due to missed mortgage payments, the council or housing association is not obligated to rehouse you, which could result in losing both your home and your right to a secure tenancy.

 

This scheme is a valued method for many trying to get onto the property market for the first time offering significant financial benefits. It is crucial to fully understand how the scheme works as well as the financial responsibilities you will have to take on if you are approved.