by Helen Lisney, Legal Officer
When a property is on the open market the seller’s interest ceases upon completion of the sale. However, when a property is sold under the right to buy scheme then the selling local authority will retain rights in relation to the property for a period of 10 years from the date of completion.
When a property is purchased under the right to buy scheme pursuant to Part V of the Housing Act 1985, the purchasing tenant is entitled to a percentage discount, dependant on the length of time spent as a public sector tenant. If they have been in a public sector tenancy for 3-5 years they are entitled to a 35% discount, which increases by 1 % for every additional year after the first 5 up to a maximum discount of 70 %. The maximum discount available is currently capped at £87,200 (£116,200 in London) and this increases on an annual basis.
Repayment of Discount
Section 155 of the Housing Act 1985 deals with the repayment of discount on early disposal of the property.
If the property is sold within 5 years of purchase there is a requirement that a proportion of the discount is repaid to the Council. If the property is sold within a year of purchase then the full discount is repayable, and this reduces by one fifth for each complete year.
The amount of discount repayable is calculated as a percentage of the price the property is being sold for rather than the original purchase price. The amount of discount repayable can be reduced to take into account any of the purchase price which is attributable to home improvements carried out by the owner since the date of purchase. This amount can be agreed between the parties or determined by the district valuer.
The discount is only repayable on a relevant transfer and certain transfers are exempted. For example, a transfer from joint to sole ownership of one of the original purchasers; the vesting under a will or on intestacy, it is required under an order of the court in family proceedings. If there is any such exempted disposal the requirement to repay the discount will remain until the end of the five year period.
When the property is purchased a charge is registered at the Land Registry to protect the Council’s interest.
Right of First Refusal
Section 156A of the Act deals with the right of first refusal.
Whilst the repayment of the discount only subsists for a period of 5 years, if the purchaser wishes to sell within 10 years of the original purchase they must first offer the Council the right to repurchase the property.
The owner must serve a notice on the Council advising them of the proposed sale and offering the right of first refusal. The Council can then choose either to buy back the property, nominate another social housing provider to buy the property or allow the property to be sold on the open market.
The Council must acknowledge the receipt of such notice as soon as reasonable practical and must within 8 weeks notify the seller if it wishes to accept the offer for itself, or nominate another housing provider to accept the offer. If it wants to reject the offer it must do so as soon as the decision has been made.
The property should be purchased at market value. If the parties cannot agree the value then the district valuer can be appointed to determine the value of the property.
If the Council wishes to repurchase the property it must enter into a binding contract within 12 weeks of the acceptance notice being served, or within 4 weeks of the date of receipt of a notice from the owner that he is ready to complete, whichever is later. (Any period waiting for the district valuer’s report is excluded from this calculation).
The Council’s right to first refusal is protected by a caution registered against the title to the property.
If the Council does not wish to purchase the property and the owner is permitted to sell on the open market then the Council will need to provide a certificate confirming that the provisions have been complied with to enable the transfer to be registered.