In the early 1980s, the “right to buy was introduced by the conservative government under the Thatcher years. The Right To Buy scheme allowed council housing tenants the opportunity to invest in their houses under the scheme and was, for the most part, a roaring success as tenants scrambled to invest in a piece of property of their very own for the first time. For the most part, this was the opening of the property markets to the general “working-class family” and the chance was too good to miss for many.
The application process gives tenants in England and Wales who have a minimum of 5 years social tenancy the opportunity for homeownership and to buy their council property from the state. Typically, this 5-year tenancy does not need to be consecutive i.e. it could be 2 years as a council tenant, 2 years as a private tenant and then another 3 years as a council tenant. It just needs a total of 5 years or more to work.
The “Right to Buy” policy gives council tenants in England and Wales the opportunity to simplify the buying process in the bargain and is available to most tenants even if they do not have a deposit at the time. The government still offers discounts on the standard market value of a property, which most mortgage lenders view as the equivalent of a deposit. These discounts can, of course, vary depending on property type, the location, and the number of years as a council tenant in every individual case.
The current maximum (in most areas) of England and Wales are set at GBP 75,000 or 60% of the properties valuation (whichever is lower). This amount can increase to 70% for flats and the maximum discount in London is typically in the region of £100,000. For example, if the standard market value of the property is £200.000 the maximum discount (which is equivalent to a deposit) would be £100.00 making the actual purchase price £100.000
Additionally, there is the option for extra borrowing which can be used to renovate and improve the property for many reasons from increasing the value or badly needed
improvements if the correct criteria are applied properly. If the purchasers sell the property within 5 years, as a rule, they will then be required to repay a pro-rata amount of the discount. In this kind of situation, the discount was £100.00 and the ex-tenant sells the property one full year after the purchase they would then be required to repay 80% of the discount meaning that if they sell after two years the amount would then drop to 60% or 3/5 of the discount.
To explain the process in more detail the very first step will be to contact your specialist mortgage broker such as CLIENT DETAIL…. who will look into your specific requirement and help you to decide which kind of package would be best for you to purchase and just how best to proceed while contacting your local council to make the required arrangement on your behalf. In most cases, the council normally takes approximately 4 weeks to review your documentation before they move to the next step of getting a local surveyor to value the property.
The surveyor will then give you a valuation and relay this to the council who would then produce a “right to buy” policy which normally takes another 4 weeks and then the tenant has another 12 weeks from the date of the offer to either accept or review it. If this offer is not accepted at the correct time the opportunity may be lost so the process may have to start all over again so this should be taken into consideration. It should be noted the council has a limit on the options for “right to buy” packages for various reasons so if you don’t take up the offer or indeed the future opportunity.
Nearly two million households have taken full advantage of this opportunity since it was introduced with its high discounts and low mortgage rates as many tenants end up paying less per month on payments than they were on the rents they used to pay ensuring a much better future at a lower cost overall. As part of the tenancy agreement the tenant can still be given the notice to leave the property following the purchase but provided the payments are up to date as needed by the lender, an ex-tenant can never be evicted once the process is complete under these rules.
Any improvements made to the property will give the tenant the benefit of the value increase attained to the tenant and not to the local council from this point on as the owner. The property is then also an asset that can be left to children in the future so is a wise investment for their futures in the bargain.
The opportunity has given rise to increased property values on most housing estates and typically has taken the onus off the local councils in the bargain so as a rule is of benefit all round to all parties. The added personal financial stake in their “own property” has resulted in better caretaking and personal financial gains while transforming these areas into flourishing sections of housing for all.
It should also be noted some people see the right to buy option as a negative as this has led to longer waiting lists on the council housing system and large numbers of council houses are being sold off. Some people also see the option as one of the root causes of the 90’s property bubble and it has now made the possibility of purchasing for first-time buyers much harder as a rule and see the right to buy option as unfair. The scheme has forced first time buyers into a position where they have to save for many years to attain the deposits required to get onto the property ladder for the first time.
