Frequently Asked QuestionsRight To Buy

Are there any restrictions I need to be aware of?

By October 26, 2017 No Comments

System Built Dwellings

A small proportion of Association homes are what is known as “system built”. These include Airey, Hawthorne Leslie, Llewellyn, Tru-steel 3M, Wimpey, and Open System Building Housing. Some system built housing has known defects or weaknesses, which can become problematic in some circumstances. As a result of this lenders will not usually (although there are some who will) give a mortgage unless costly works have been carried out to put things right.

Tenants of these properties may still exercise the right to buy. They will receive a letter telling them that their dwelling is system built. The letter will say if any remedial works have been carried out and that the market value may be affected. If you live in a system built home you must carefully consider the structural condition of the property and the resale implications when deciding whether to buy.

Sale Restriction

If you buy your home under the Right to Buy you may sell it at anytime. However if you sell within the first ten years you must offer to sell the property back to us or another social landlord in the area at full market value. This will be included in your Deeds as a covenant, along with the repayment of discount (see below). This measure came into effect on 18 January 2005 as a result of the Housing Act 2004.

Discount Repayment

If you sell within the first five years of buying you will have to repay discount. A sale in the first year will result in 100% discount being repayable. This reduces by 20% for each complete year of ownership so that a sale in year five means that only 20% discount is repayable. The discount repayable is based on a percentage of open market value of the property at the time you sell it. Any improvements you make to it are disregarded. For example, if you buy a property valued at £90,000 and receive discount of £24,000 your discount in percentage terms is 26.67%.

Therefore if you sell it in the first year of ownership 26.67% of the market value of the property must be paid to the Association. If you sell it in the fifth year of ownership 20% of 26.67% of the property’s open market value must be repaid. See below:

  • Sale of house in fifth year of ownership market value: £150,000
  • Market value on original sale: £90,000
  • Discount on original sale: £24,000
  • Discount on original sale as a percentage of open market value: 26.67%

Repayable Discount:

Market value £150,000   Discount on original sale 26.67% (£40,005)    Repayable in year 520%     Repayable Discount £8,001

This measure was introduced on 18 January 2005 by the Housing Act 2004. Prior to that discount was only repayable if a sale took place in the first three years of ownership and was based on a percentage of the actual discount given in cash terms.