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COUNCIL RIGHT TO BUY: Your Right to Buy your home

Warning – things to consider before deciding to buy your home

Buying your home is probably the biggest financial decision you will ever make. So take time to consider whether it is the right choice for you.

For example, if you exercise the Right to Buy you will become responsible for all the costs of maintaining your home, including routine repairs, major structural repairs, and improvements to it. If you become a leaseholder by buying your flat, you will have to pay service charges each year, and also meet the costs of major repairs and refurbishment.

As a tenant, you may be able to claim housing benefit to help with your rent. As an owner-occupier, you will not receive any housing benefit to help with your mortgage costs. You may be entitled to income support to assist with housing costs, but this is not usually payable for 39 weeks after you first claim it.

If you are elderly and own your home, its value may be taken into account in assessing whether you are eligible for financial help with the costs of residential care.

If you need advice on any aspect of the Right to Buy scheme, contact your landlord (the organisation you pay rent to or have a tenancy agreement with – for example, your council or housing association) first. If you are approached by a person or company offering to help you buy your council home, check out what’s in it for them and talk to your landlord before signing up to any deal.

People sometimes claim that the Right to Buy scheme may be changed or ended. In fact the Government is totally committed to the principle of Right to Buy. But it is concerned that sales are affecting the availability of affordable housing in some areas, and that the rules are being exploited by companies. So in March 2003 it reduced the maximum discount available to tenants in 41 local authority areas.

The Housing Act 2004 makes further changes to the Right to Buy rules. On 18 January 2005:

• the initial qualification period was extended from 2 years to 5 years for new tenants;

• the discount repayment period was extended from 3 years to 5 years;

• the amount of discount to be repaid if a property is resold within 5 years is now a percentage of the market value of the property when it is resold;

• the Right to Buy is suspended where an initial demolition notice has been served and ends where a final demolition notice is served;

• tenants who agree to sell their home to a third party during the discount repayment period must repay some or all of their discount as if they had actually sold their home at the time of the agreement;

• owners who wish to resell their home within 10 years of it having been sold under the Right to Buy must first offer it at market value to their former landlord or to another body prescribed by the Secretary of State;

• landlords can serve a notice after 3 months requiring a tenant to complete their Right to Buy purchase instead of after 12 months;

• tenants will no longer be able to choose to exercise the Right to Buy on Rent to Mortgage terms after 17 July 2005;

• landlords must give their tenants information on the costs and responsibilities of home ownership.

The Government does not rule out further changes to the rules in the future, but any such changes would first have to be approved by Parliament.

Be suspicious if anyone tries to tell you that the Right to Buy is going to be ended. They may be trying to persuade you to do something that benefits them rather than you. Tenants do not always receive good advice from private companies and individuals offering to help them buy their homes.

Sometimes, tenants are asked to pay a lot of money for things that landlords will do for nothing – for example, Right to Buy application forms are available free from landlords. Some companies offer tenants money up front in a deal under which the company ends up owning the property – this is known as a deferred resale agreement. This is good for the company, which can charge a higher rent than the local authority could when it let the property. But it is not always good for tenants, because the money they get may not be enough to buy another home. Some tenants have found themselves homeless after agreeing to such deals. Also, since 18 January 2005, entering into a deferred resale agreement triggers the repayment of discount at the time that the agreement is entered into, not the time at which the ownership of the property is transferred.

Before borrowing money to buy your home, take time to consider all the costs involved and the choices available. Compare the loan deals on offer before making up your mind. Get independent information by reading publications such as What Mortgage? or Your Mortgage, useful guides such as How to buy your home (available from the Council of Mortgage Lenders tel 020 7437 0075) or the FSA guide to mortgages (available from the Financial Services Authority tel 0845 606 1234). Housing and money advice centres can also help.

Before agreeing to any offer or deal, ask who the adviser works for, whether they sell mortgages or other financial services, and whether he or she gets a commission for selling you a particular product.

Before taking out a loan, be sure you understand what the deal means for you – in particular:

• read the terms and conditions, including the small print – what exactly do they mean?

• what is the interest rate?

• what would happen if you missed any of the repayments due on your loan?

• what would happen and how much would it cost if you wanted to repay the loan early?

Resist any pressure to agree on the spot. Go away and think before signing anything. Can you afford the loan, and the other costs of buying and looking after your home? What would happen if you lost your job, or fell ill? If you are buying a flat or maisonette, consider the service charges you will have to pay as a leaseholder (these are explained later in this booklet), which could be substantial.

Even if you don’t need a mortgage yourself, it is worth checking if your local banks and building societies will lend on the type of house or flat you are buying. Some banks and building societies don’t like giving mortgages on (for example) flats in high-rise blocks or in blocks of non-traditional construction, or properties on large or run-down estates. You might find it difficult to move on later if people wanting to buy your home cannot get a mortgage

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© Crown Copyright (Correct at time of writing January 2005. Please check with your financial services provider for any changes.)