A guide to the Right to Buy Scheme

If you’re a council house or housing association tenant, you might be able to buy your home from your landlord at a discounted price. We take a look.

 

If you’re a council house or housing association tenant, you might be able to buy your home from your landlord at a discounted price. We take a look.

 

Mark Gordon
From the Mortgages team
12
minute read
Do you know someone who could benefit from this article?
Posted 24 MAY 2021

What is Right to Buy?

Right to Buy is a government scheme that helps council and housing association tenants in England and Northern Ireland buy their home outright, by offering discounts of up to £84,600 (or £112,800 in London).

How much discount could I be eligible for?

It depends on where you live, how long you’ve been a tenant and whether you live in a house or a flat. The maximum discount from 6 April 2021 is as follows:

  • £112,800 – London
  • £84,600 – elsewhere in England
  • £24,000 – Northern Ireland

The longer you’ve been a tenant, the bigger your discount could be, as it increases each year in line with inflation. In Northern Ireland, you can only qualify for the scheme if you’ve been a tenant for at least five years.

There are also different discount levels for houses and flats, depending on how long you’ve been a tenant:

House

  • 3-5 years – 35% discount
  • 6 years+ – an increase of 1% per year, up to a maximum of 70% or the cash maximum available, whichever is lower

Flat

  • 3-5 years – 50% discount
  • 6 years+ – an increase of 2% per year, up to a maximum of 70% or the cash maximum available, whichever is lower

Is Right to Buy available throughout the UK?

The full Right to Buy scheme is only available in England. It’s no longer available in Scotland or Wales.

There’s still a similar scheme in Northern Ireland.

Did you know?

The money raised from the sale of properties under the Right to Buy Scheme goes towards building new council housing for rent.

Do I qualify for Right to Buy?

You could qualify for Right to Buy if:

  • You’ve been a council or public-sector tenant for three years in England or five years in Northern Ireland. Your landlord must be the council, a housing association, NHS trust or another public-sector body.
  • You intend to use your home as your main residence.
  • The property isn’t shared with others – in other words, it’s self-contained.

When might I not qualify for Right to Buy?

You might not qualify for Right to Buy if:

  • You have large debts or have been declared bankrupt
  • You’ve been threatened with eviction
  • Your home is reserved for older or disabled people
  • There’s a shortage of housing in your area

Did you know?

The qualifying period of three years doesn’t need to be continuously in the same house with the same landlord. You may still qualify if you’ve spent time in different homes with different landlords, as long as it was a public sector tenancy.

How do I find out if I’m eligible for Right to Buy?

If you’re not sure whether you’d be eligible for the Right to Buy scheme, you can complete the government’s Right to Buy eligibility quiz.

If you prefer, you could also talk to an official Right to Buy adviser, who can take you through the quiz and answer any questions about eligibility, discounts and the application process.

Just be aware that your eligibility needs to be confirmed by your landlord.

Can I make a joint application?

You might be able to make a joint application for Right to Buy with:

  • someone who shares your tenancy
  • a spouse or civil partner
  • up to three family members, but you’ll need to have lived together for at least a year

If you’re buying with someone else, you count the years of whoever’s been a public sector tenant the longest to work out the discount you may be entitled to.

Do I have a Right to Buy if I’m a housing association tenant?

If you live in an ex-council home and the council sold the property to a public-sector landlord while you were living there, you could still qualify under what’s known as a Preserved Right to Buy. This means you’ll have the same discounts as Right to Buy council tenants.

If you don’t have a Preserved Right to Buy, you may still be able to buy your property under the Right to Acquire scheme, but the discounts offered are much lower.

Under the Right to Acquire scheme, the discounts vary from £9,000 to £16,000, depending on where you live. For example, in Brighton and Cambridge it’s £16,000 – whereas in Norfolk or Tyne and Wear it’s £9,000.

To find out what it would be for where you live, see a list of Right to Acquire discounts by location.

How do I know if I’m eligible for Right to Acquire?

In order to be eligible, you must have been a housing association tenant or had another public sector landlord, such as the armed services or NHS, for three years. Plus, the property has to be eligible too.

Your home must be:

  • built or bought by a housing association after 31 March 1997 (and funded through a social housing grant provided by the Housing Corporation or local council)
  • transferred from a local council to a housing association after 31 March 1997
  • self-contained
  • your main or only home

If you’re not sure about either of the first two, check with your housing association. They should be able to help.

What is Voluntary Right to Buy?

Currently, only council tenants have a statutory Right to Buy. However, there are plans to extend Right to Buy to housing-association tenants on a voluntary basis (VRTB).

The voluntary scheme means that millions of housing association tenants in England could benefit from the same discounts as Right to Buy council tenants. The difference would be that, under certain circumstances, the housing association doesn’t have to sell them the house they’re living in. In these cases, tenants would be offered a portable discount to buy another property owned by the housing association.

But we’ve yet to see when this will happen. The Voluntary Right to Buy pilot scheme, launched in the Midlands in 2018, is still being evaluated because of delays caused by the COVID-19 pandemic. If you’re a housing association tenant, it might be worth waiting to see if you could qualify for the larger Right to Buy discounts.

Check out the government’s website for updates on Right to Buy changes that could affect you.

How do I apply for Right to Buy?

You’ll need to fill in an RTB1 Right to Buy application form and send it to your landlord.

Your landlord must reply within four weeks. If they refuse to let you buy, they must explain their decision.

If the answer is ‘yes,’ they’ll then need to send you an offer letter called a Section 125 Notice. This will set out the terms and conditions of the sale and will include:

  • A description of the property
  • The purchase price after discount
  • An estimate of service charges for the first five years if you’re buying a flat or leasehold house
  • Any structural defects the landlord knows about

If you’d like to challenge the valuation, you can get an independent view from the Valuation Office Agency from HM Revenue & Customs.

You’ll have 12 weeks to decide whether to go ahead and buy your home, or not. Alternatively, you can pull out of buying the property and carry on renting.

Why might my landlord refuse to sell?

Your landlord might refuse to sell you your home under certain circumstances, for example:

  • If your home has a design, location and features particularly suitable for occupation by elderly people.
  • Your landlord has served notice that your home is due to be demolished.
  • If it’s sheltered housing for elderly or disabled people.
  • If it’s a house or flat on land that’s been bought for development and is being used temporarily until the land is developed.
  • If it’s in a rural area in a designated National Park or Area of Outstanding Natural Beauty.
  • If it’s considered a ‘defective dwelling’.

If your landlord refuses to sell, you can make an appeal to the Residential Property Tribunal. You must do this within 56 days after your landlord’s refusal, otherwise you might lose the right to appeal.

Getting a mortgage

If you’re happy with the purchase price and decide to go ahead with the sale, you’ll need to let your landlord know in writing within 12 weeks of receiving your Section 125 Notice.

At this point, you can start looking for a mortgage, if you need one.

Buying a home and taking on a mortgage is a big financial commitment, so you need to consider all the costs involved, not just your mortgage repayments. You’ll no longer be a tenant, so all costs for maintaining your home will be your responsibility.

As a tenant, you might have been claiming housing benefit to help with the rent. You won’t be able to claim this for help repaying your mortgage. However, you might be eligible for Support for Mortgage Interest (SMI) – a government loan that’s designed to help you pay just the interest on your mortgage, not the amount you borrowed.

Find out if you’re eligible for Support Mortgage Interest.

If your circumstances change and you can’t keep up with your mortgage repayments, you could lose your home. If this happens, the council doesn’t have to give you another tenancy.

Applying for a mortgage is a big decision and there’s a lot to consider, so it’s a good idea to get independent financial advice before you go ahead.

How much would I need to borrow?

The amount you’ll need to borrow depends on the purchase price of your home, less the discount, less the mortgage deposit - although some mortgage providers will accept the discount as a form of deposit. 

Use our mortgage calculator to help you work out how much you could afford to borrow. 

What other costs are involved with buying my home?

There are several costs involved with buying a home. You may need to consider:

  • Arrangement fees if you’re taking out a mortgage
  • A deposit – depending on the lender. Some may accept the discount as a deposit
  • Mortgage booking fee
  • Solicitor’s fees
  • Valuation fee
  • Survey fees
  • Land Registry fee to register you as the new owner
  • Depending on the price you pay for your property, you may also have to pay Stamp Duty

You’ll also need to think about your ongoing costs once the sale goes through:

  • Mortgage repayments – use our mortgage calculator to work out how much you could borrow and your monthly repayments, based on the interest rate and mortgage term length.
  • Upkeep costs – if you buy a leasehold flat you’ll need to factor in ground rent and a service charge for the upkeep of the property.
  • Home insurance – mortgage lenders typically insist you have buildings insurance in place as part of the mortgage agreement. if you buy your council house as a freehold, you’ll be responsible for taking out adequate cover. If the property is leasehold, the council will arrange buildings insurance that will be included in your annual service charge. If you want protection for the items in your home, you’ll also need contents insurance.
  • Mortgage protection insurance – this could give you the peace of mind that your mortgage repayments would be covered if you lost your job or became ill.
  • Life insurance – would cover the cost of your mortgage and provide financial security for your family if you died. Some mortgage lenders will insist you have life insurance before they’ll offer you a mortgage. 

Remember: your home may be repossessed if you do not keep up repayments on your mortgage.

Will I get the full Right to Buy discount?

You should be aware that you might not get the full discount. This is because of a special rule called the ‘cost floor’. If the home you’re buying has been recently purchased or built by your landlord, or they’ve spent money on repairing or maintaining it, your discount will be reduced to factor in these costs.

What’s more, if the cost of repairs and maintenance works carried out over a 10-year period is more than the market value of your home, you won’t get a discount at all.

If you don’t agree with the cost floor, the size of your discount or anything else in the Section 125 Notice, you should contact your landlord. If you can’t come to an agreement, you have the right to take your complaint to the County Court. Just bear in mind that this can be very expensive, so make sure you get legal advice first.

Also, if you’ve previously bought another council property under Right to Buy, the discount you got then will usually be deducted from the discount you’re getting to buy again.

Can I sell my home?

Yes, you can sell your home at any time. However, if you sell within the first five years of purchase you may have to pay back some or all of the discount.

If you sell within the first year, you’ll have to pay back the whole discount. The proportion you’ll pay back decreases each year after that, up to five years:

  • In the second year – 80% of discount
  • In the third year – 60%
  • In the fourth year – 40%
  • In the fifth year – 20%

The amount you’ll have to pay back also depends on the value of your home when you sell it – not how much you bought it for. So, for example:

If you buy a home worth £120,000 with a discount of £48,000, then your discount will be 40%. Three years later you decide to sell your home for £160,000. So, 40% of the sale price of £160,000 is £64,000. As you’re in the third year from purchase, you’d have to pay back 60% of £64,000 – in other words £38,400.

If you sell your Right to Buy property after five years, you won’t have to pay any of the discount back. So, in the case above, it would make sense to wait a couple more years before selling.

However, if you do sell within the first 10 years, you have to offer your property to your landlord or another council in the area at the full market value. If they don’t accept your offer within eight weeks, you can put your home on the open market.

Compare mortgages 

If you decide to go ahead with the Right to Buy scheme, then it’s likely you’ll need a mortgage to pay for your home. Our mortgage calculator is a simple-to-use tool that can help you work out how much you could borrow.

Looking for mortgage advice?

Our partners, London & Country Mortgages Ltd (L&C)** provide fee-free expert advice on Right to Buy mortgages. Get in touch with one of their advisers here:

Go the L&C Mortgages

About London & Country Mortgages Ltd (L&C)
**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002). L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

Looking for a mortgage?

Compare mortgages in minutes to see if you can save

Compare now
Compare mortgages in minutes to see if you can save Start comparing