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Preserved Right to Buy

All you need to know about Preserved Right to Buy

Qualifying Period

You must have been a public sector tenant for at least 3 years in order to qualify for the Preserved Right to Buy.

Which properties can be bought?

Most properties built or purchased with public funds may be purchased. However there are exemptions to this rule, for example, properties provided specifically for the elderly, sheltered housing properties and properties held by Futures Housing Group for non-housing or for employment purposes.

How much will it cost?

Your home will be valued at market value by Futures Housing Group. The value of any improvements which you have made will be disregarded. If you disagree with the valuation you may appeal to the District Valuer, whose decision will be final.

You will be entitled to a discount on the market value of your home. This amount will depend on how long you or your partner have held a public sector tenancy and on the type of property you wish to buy.

If the property is a house, the minimum discount will be 35% for three, four or five tenancy years. This increases by 1% per annum after the first five years, to a maximum of 70% after forty years.

If the property is a flat, the minimum discount will be 50% for three, four or five tenancy years. This increases by 2% per annum after the first five years to a maximum of 70% after 15 years.

The maximum capped discount for England (excluding London Boroughs) is £78,600 for applications received on or after 6 April 2017. Applications made prior to this date will be on a maximum capped discount of £77,900.

This will increase each year in April if the consumer price index (CPI) increases. If the CPI does not increase, the discount will remain the same.

If you have previously had a discount to help you buy a home, this may be deducted from your Preserved Right to Buy discount.

Calculating your discount

Account will be taken of all public sector tenancies you have held. Examples of public sector tenancies are:

  • Housing Associations,
  • Government departments,
  • Local Authorities,
  • gas, water, electricity boards and other public bodies

Your discount may also be reduced by a special rule called the cost floor. Under this rule the discount you receive must not reduce the price you pay below what has been spent on building, buying, repairing and maintaining the property.

Repayment of Discount

If you have bought your home under this scheme, you can sell it whenever you like. If you wish to sell within the first five years from purchase, then you will usually have to pay some or all of the discount.

The discount repayable is on a sliding scale over the five year period.

In addition to the amount of discount to be repaid, if you sell within five years of purchase, you may have to repay a percentage of the resale value of the property disregarding improvements.

Example:

At the time Mr Smith purchased, his home was valued at £100,000. He received a discount of £35,000. Then, at the time of sale, the property is sold at a resale value of £150,000. At the time of the sale Mr Smith is within the second year of purchase.

Sum:

Firstly we work out the discount percentage you received at the time of purchase (this percentage will be used in the resale calculation).

Discount ÷ valuation x 100% = Discount Percentage Received

In Our Example:

£35,000 ÷ £100,000 x 100% = 35%

Resale Calculation:

Resale value x discount percentage received x repayment period = Discount repayment

In Our Example:

Mr Smith sold his property at £150,000 and within the second year of purchase. He will therefore have to repay four fifths (80%).

£150,000 x 35% x 4/5 = £42,000 discount repayment

Right of First Refusal

If you wish to resell or dispose of your home within 10 years from the date you purchased it, you will be required to offer it to back to us at full market value. The market value must be agreed by both parties. If we are unable to agree the market value this will be determined by the District Valuer. If your offer has not been accepted within 8 weeks then you will be free to sell your home on the open market.

Expenses involved in buying

There are certain costs that you may need to pay on top of your purchase price. These are:

  • Stamp Duty Land Tax: If the purchase price is more than £125,000 the Stamp Duty Land Tax is between 2% and 12% of the purchase price, on a sliding scale.
  • Solicitors fees: The solicitors acting on your behalf will charge you a fee. This is not a set fee but one that will vary, so it is advisable to shop around.
  • Mortgage lender fees: Your mortgage lender will usually charge you an administration fee and a valuation fee.
  • Surveys: We recommend that you have a full building and asbestos survey before you decide to go ahead with the purchase.

Your mortgage lender will want you to take steps to safeguard your property purchase. This could include:

  • Buildings insurance.
  • Life insurance.
  • Mortgage payment protection insurance.
  • Contents insurance.

Your responsibilities as a home owner

When you buy your own home all maintenance and repairs costs previously undertaken by your landlord will become your responsibility, for example:

  • Routine repairs.
  • Improvements.
  • Major structural repairs.

Once you have purchased your home you will not get housing benefit to help with your mortgage costs.

If you do not maintain your mortgage payments regularly you could lose your home.

If you buy the lease of a flat or maisonette Futures Housing Group will normally be responsible for carrying out external structural repairs and for the repair and maintenance of shared areas such as grounds, entrance halls and car parks. In most cases you will have to pay a service charge towards these costs. The service charge may also include a contribution towards the costs of:

  • Improving the flat or the land where it is situated.
  • Providing caretaking.
  • Insurance.
  • Management fees.

If I decide to buy, what do I do?

First of all, fill in an Application Form. These can also be obtained from our office or by contacting us.

We will then let you know whether or not you qualify to buy. If you do, your home will be valued and you will be sent an offer stating the price and the discount available to you.

You are advised to have the property surveyed and you must arrange and pay for this yourself. You will also need a solicitor or conveyancer to act for you.

Should you have any queries or questions regarding the Preserved Right to Buy, please contact us.

For more information on preserved right to buy, please visit the Government’s right to buy website.

  • Last updated: 13/05/2016

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