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INFORMATION TO TENANTS: THINKING OF BUYING YOUR COUNCIL HOME ? An outline of the main features of the right to buy scheme together with information on the responsibilities and consequences of home ownership This document can also be found on the Babergh website at www.babergh-south-suffolk.gov.uk in the Housing and Rents Section or alternatively in the A to Z of Services section under Right to Buy
The information in this leaflet is intended as guidance only, do not use it as an alternative to getting professional legal and financial advice.
CONTENTS
Introduction
THE TERMS OF THE RIGHT TO BUY SCHEME Who qualifies? HOW TO APPLY
Who can I contact regarding Right to Buy at the Council?
Resale of property 8 Restrictions 8 THE COSTS OF HOME OWNERSHIP Introduction
You can afford your mortgage now, but what if … ?
THINKING OF BUYING A COUNCIL FLAT?
OTHER THINGS TO CONSIDER Repairs 14 Improvements 15 Shared arrangements
Introduction The Housing Act 2004 requires landlord’s to provide secure tenants who have the right to buy with an outline of the main features of the right to buy scheme together with information on the responsibilities and consequences of being a homeowner. The information contained in this leaflet is intended for guidance only and not as a substitute for professional legal and financial advice. THE TERMS OF THE RIGHT TO BUY SCHEME∗ The Right to Buy scheme gives most council tenants the opportunity to buy their home with a discount off the full market value of the property. Key features of the scheme are described below. For a fuller explanation of the scheme please refer to the booklets: • “Your right to buy your home” (produced by the Government)# and • “Right to Buy – Frequently Asked Questions”# (produced by Babergh District Council
and available on our website: www.babergh-south-suffolk.gov.uk).
They are both available upon request. Important Note: The information below is intended as a brief guide to the Right to Buy Scheme and is not a complete and authoritative statement of the law. Who qualifies?
• The scheme is open to tenants who have a secure tenancy. If your secure tenancy was in
existence before 18 January 2005, or you were a public sector tenant before 18th January 2005 (and you have been a public sector tenant continuously since that time), you must be able to count at least 2 years as a public sector tenant.
• For anyone else whose secure tenancy began after 18th January 2005, you do not have the
right to buy until you have spent at least 5 years as a public sector tenant.
A full list of landlords is shown on the reverse of the blue application (RTB1) form – available upon request. The qualifying period for discount can include time spent in different homes and with different landlords. You may also count a period when your husband or wife lived in housing provided by the armed forces. The qualification period does not have to be continuous. The property you wish to purchase must be your only or principal home Sharing the RTB with a joint tenant and/or family member(s)
You can exercise your Right to Buy with someone who is a joint tenant (their name will appear on the tenancy agreement, rent book or rent card) or up to three members of your
∗ On 18th January 2005, some changes were made to the Right to Buy legislation introduced by the Housing Act 2004. If you applied for RTB before this date, then the changes do not apply to you and if you have any questions, please contact us on (01473) 826608.
# The list of publications relating to Right to Buy are listed on page 18 of this document.
family (providing they are over 16) who have lived with you for the 12 months prior to your application. Your husband or wife may share the right to buy with you if the property is their only or principal home. A person living with you as your husband or wife, but not actually married to you, is regarded as a member of your family. Are there any exceptions?
• You cannot buy your home if a court makes a “Fixed Date” possession
order, which says you must leave your home on a certain date. A tenant who is the subject of a “Suspended” possession order (i.e. subject to conditions such as to pay rent arrears at so much per week in addition to the normal rent) will still be able to exercise the right to buy. However, any breach of the order operates to determine your tenancy. Therefore if you breach the order you would no longer be a secure tenant but would be classed as a “tolerated trespasser” and thereby lose your right to buy.
• Neither can you buy your home if you are an undischarged bankrupt, have
a bankruptcy petition pending against you, or have made arrangements with creditors (people you owe money to) and you still owe money.
• Properties are excluded from the right to buy if they are due to be
demolished within 24 months. Tenants would be kept fully informed if this were ever contemplated.
• It will not be possible to exercise the Right to Buy at any time during the
suspension period of a court order made because of anti-social behaviour.
• Tenants of supported housing schemes are excluded. • The tenancies of employees who have to live in homes owned by their
employers so that they can be near their work.
• Tenants granted tenancies under homeless legislation are excluded.
• In addition to sheltered housing being excluded, the Council may refuse to
let you buy on the grounds that your home is particularly suitable for occupation by elderly people (paragraph 11 of Schedule 5 to the Housing Act 1985 as amended). This exclusion mainly affects people who live in one or two bedroom bungalows.
You do not have the Right to Buy your home:
• If is considered particularly suitable for occupation by elderly
persons, taking into account its location, size, design, heating system and other features, and
• It was let to you or a predecessor tenant (see below*) for occupation
by a person aged 60 or more, whether they were the tenant or not and
• It was first let (to you or someone else) before 1 January 1990.
*a ‘predecessor tenant’ means someone who was the tenant before you under the same tenancy (for example a deceased husband or wife).
Right to appeal If you do not agree with the Council’s decision, you have the right to appeal to the Residential Property Tribunal Service. Relevant information on the appeal procedure will be provided at the appropriate time. Rent arrears Babergh is not obliged to complete the purchase if the tenant has rent arrears. Any outstanding rent must be paid before completion can take place. Demolition notice Where a tenants’ home is scheduled for demolition, the Council may serve an “Initial Demolition Notice” which can suspend the completion of the tenants’ Right to Buy for up to 5 years. The Council may serve a “Final Demolition Notice”, if demolition is planned within 2 years, and this will have the effect of ending the RTB. The tenant may be entitled to compensation for legal and other expenses the tenant has incurred. How to apply … Our Right to Buy section is here to help you with the process of buying your home. We can give you general information, explain the procedure and help you fill out forms. Our service is FREE !!! with no commitment. Here is a brief explanation of the stages:
• Request an application form and booklets
• Complete the application – with our help if required – and send to us • We will acknowledge your application, inform Housing Section and
• Within 4 weeks we will send you a RTB2 Notice telling you whether
• At this time we will instruct our valuer to contact you to arrange an
• Within 3 weeks, we will receive the valuation and calculate your
discount. An Offer Notice will be sent to you within 8 weeks (or if your home is a flat, 12 weeks).
• Once you receive the offer of sale notice and are ready to buy your
home, you should contact your own solicitor to help you with the legal papers.
• You have 3 months to complete the purchase from the date of the Offer
For full details on the Right to Buy scheme, including an application pack and two explanatory booklets (available on the internet - see details on page 18), please contact our Right to Buy team direct – and we will tell you exactly what you need to do: Telephone 01473 826608 (ask to speak to the Right to Buy Officer) Email : [email protected]
Further copies of the current version of this document can be obtained free of charge from us at the following address: Housing Division Babergh District Council
Corks Lane, Hadleigh, Ipswich IP7 6SJ Main Switchboard: 01473 822801 Website: www.babergh-south-suffolk.gov.uk
• Beware of ‘Right to Buy’ sales people
The Government and Babergh District Council are concerned that tenants who take up these offers may be talked into financial deals and commitments that they had not bargained for and cannot afford. Don’t be hurried into signing anything until you have had time to read the documents and think things over. At the very least, you may be paying for some services that you are entitled to free from the Council. At worst, you may commit yourself to a deal you cannot afford resulting in the loss of your home.
Be very wary also of anyone who tries to hurry you into signing deals by telling you that the Right to Buy scheme is going to end. The Government has made it clear that the scheme is NOT about to end.
How is the price worked out? Valuation Our valuer will value your property – at no cost to you - and inform us of the market value of your home disregarding any improvements you may have made to the property. We will work out the discount you are entitled to. Deducting the discount from the market value will produce the purchase price. Previous Discount If you have received a previous discount in respect of an earlier purchase that discount is set against (reduces) the discount for the current application. Cost floor If the Council has, in the past 10 years spent a substantial sum on the property, the discount cannot reduce the price below what has been spent on the building. This
may result in the discount being limited or even no discount being granted. This is rarely the case and mostly will affect properties if they are less than 10 years old when land acquisition and building costs will be included. What discount am I entitled to? If your secure tenancy was in existence before 18 January 2005, or you were a public sector tenant before 18 January 2005 (and you have been a public sector tenant continuously since that time) • If your home is a house or bungalow 32% of the market value (including the 2 qualifying years as a public sector tenant) plus 1% for each complete year of tenancy up to a maximum of 60% So a tenant of 10 years receives 32% + 8% = 40% • If your home is a flat 44% of the market value (including the 2 qualifying years as a public sector tenant) plus 2% for each complete year of tenancy up to a maximum of 70% So a tenant of 10 years receives 44% + 16% = 60% If you became a secure tenant on or after 18 January 2005 and had not before that date been a public sector tenant and continued to be a public sector tenant until you became a secure tenant • If your home is a house or bungalow 35% of the market value (including the 5 qualifying years as a public sector tenant) plus 1% for each complete year of tenancy up to a maximum of 60% So a tenant for 10 years receives 35% + 5% = 40% • If your home is a flat 50% of the market value (including the 5 qualifying years as a public sector tenant) plus 2% for each complete year of tenancy up to a maximum of 70% So a tenant for 10 years receives 50% + 10% = 60% Notwithstanding the above discount rules the Government has prescribed that no tenant in South Suffolk can receive more than £34,000 discount in monetary terms even if the discount entitlement is greater. Repayment of discount If you buy your home and resell it within a period of 5 years you will have to repay the discount or a proportion of it (reducing by one fifth after each complete
year has elapsed). The amount repayable will be a percentage of the resale value of the property disregarding the value of any improvements made since the date you purchased the property. If the value of the property increases after you purchase it, the amount of the repayment will increase. Completion notices
If you have not completed your purchase of the property within 3 months of service of the Offer Notice, the Council may serve a notice on you requiring you to complete the purchase within not less than 56 days or to let us know if there are any outstanding matters that are delaying the completion. If you do not respond to this notice then the Council may serve a Final Notice giving you a further period of not less than 56 days in which to complete the purchase. At the end of that period if the purchase is not complete your application will be cancelled. If you would still like to buy your home, you will have to apply all over again. Resale of property If you buy your home and resell it within 10 years you will first have to offer to resell the property to the Council. Restrictions
If you buy your home you will be required to observe and perform various restrictions and stipulations. Examples of these are as follows: • To use the property for private residential purposes at all times and not to
carry on any trade business or profession;
• Not to alter modify or carry out any development on the property without the
• Not to cause nuisance damage or disturbance to owners or occupiers of
• To maintain and repair fences hedges and/or walls on specified boundaries of
• To pay a service charge (flats) or a contribution towards the cost of
maintaining repairing renewing and improving shared facilities (houses and bungalows) – For further information see pages 14 and 15.
A full list of restrictions and stipulations can be supplied on request. THE COSTS OF HOME OWNERSHIP
The decision to buy your home is probably the biggest financial decision you will ever make, and it is a decision that should not be taken lightly. Home ownership brings many benefits but it also involves responsibility and risk. Before making a decision, we would like you to take time to consider all the costs involved in being a homeowner. Not only the immediate costs but ongoing costs. This booklet endeavours to bring to your attention relevant information to consider before deciding whether or not to purchase your home. It is not a definitive statement and you are recommended to seek your own advice from appropriate professionals such as financial advisers, solicitors and surveyors. Remember, at the end of the day Only you can decide if buying your home is the right choice for you.
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. To find out if you are entitled to housing support to help with housing costs, contact your nearest Jobcentre Plus or social security office. Taking on a mortgage Unless you have the cash, you will need to arrange a loan or mortgage, usually from a building society, bank or other approved lender. Taking on a mortgage is a huge financial commitment both in terms of the amount you borrow, and the time you may take to repay it. It is important to understand the responsibilities that you have should you take on a mortgage. The Financial Services Authority (FSA) produces a helpful publication “Choosing a mortgage” #. It explains the types of mortgage on offer, the pros and cons of each, the costs and risks involved, and how to use the information you’ll get from lenders and mortgage brokers to shop around for the best deal. Copies are available from the Council or you can contact the FSA Consumer helpline 0845 606 1234 or their website, www.fsa.gov.uk/consumer. Before agreeing to any mortgage offer be sure you understand what the deal means for you – in particular: How much would I need to borrow? The amount you need to borrow depends on:
• Any discount you may be entitled to;
• Any cash you can put forward towards the purchase as a deposit.
The maximum amount you can borrow will depend on your income.
• Up to three-and-a-half times the main earner’s income before tax, plus one
• Two-and-a-half times their joint incomes (if this is larger)
What you can afford to spend on buying a home depends on your savings, your earnings, and expenses like food, clothes, recreation, and bills. To work out how much you can afford, you need to write down what money you have coming in and take away what you spend each month. You should feel comfortable with your commitment. It may be tempting to borrow as much as possible when the initial cost is manageable, but allow for increased costs in the future such as a rise in interest rates. You could get into difficulties and lose your home if you can’t keep up your payments.
Shop around
There can be big differences in the many mortgage deals available, so it always pays to shop around. Only deal with mortgage brokers authorised by the Financial Services Authority (FSA). This means they will have to follow certain rules and give you a “key facts illustration”. This will explain costs of the mortgage, details of the monthly repayments and the effects of the interest rate increases on those payments. An independent financial adviser may also be able to help. Mortgage related fees and costs There are costs to pay when getting a mortgage. Banks and building societies mostly charge for arranging a mortgage and then there are survey fees, valuation fees and various insurances. Make sure you know what is included. Details of the mortgage related fees you will have to pay would be set out in the “key facts illustration” that the lender or mortgage broker gives you. Valuation Fees The Council will not charge you for the cost of valuing your property for the purposes of producing the Offer Notice. However, if you take out a mortgage loan, you will have to pay a valuation fee to the mortgage lender for the purposes of securing a loan. (This will cost around £200 - £300)
Insurance
You will need to consider taking out insurance cover for your home and mortgage. There are four main types: the cost of these needs to be included when calculating what amount you can afford.
• Buildings insurance. (Previously paid by your landlord). This is essential.
It is needed to cover the full cost of rebuilding your home if it were to be destroyed by fire or some other incident. If you are buying a flat, the buildings insurance will be included in the annual service charge.
• Contents insurance. You should insure the contents of your home against
theft and other risks (as you already do as a tenant).
• Life assurance. This may sound morbid, but it ensures that the mortgage
will be repaid in the unfortunate event of your death. Your surviving family will not be left with the heavy burden of mortgage debt.
• Mortgage payment protection insurance. You need to think seriously
about how you would meet your mortgage repayments if you lost your income, say through unemployment or ill health.
Many people believe the State will help them out with their mortgage. However, eight out of ten homeowners do not qualify for any help at all. You should contact your mortgage provider to find out if you are entitled to any help if you require it. In many cases, mortgage payment protection insurance will give you the security that you need.
There are various insurance policies, which offer cover against these risks. The terms, level of cover, and costs vary. You should therefore shop around for policies that best suit your needs.
You can afford your mortgage now, but what if …
You may be able to afford the repayments now, but if you borrow a large amount over a long period of time think what could happen if, for example, your income falls or you lose your job. Or what if interest rates rise and your monthly repayments go up? Property values have generally increased in the medium to long term but past performance is no guarantee of future performance. The value of homes can go down as well as up and in some cases people find themselves in ‘negative equity’. This is when the mortgage on your home is larger than the amount for which you are able to sell it. Please remember if you get into difficulties making payments and get into arrears, the lender can, as a last resort, take back your home and sell it to get its money back.
Take time to consider all the costs involved and the choices of mortgages available. Ask your lender for advice on your ability to afford to buy your own home. Get independent information by reading publications such as What Mortgage or Your Mortgage, or useful guides such as How to buy your home from the Council of Mortgage Lenders on 020 7440 2255. Other fees you may have to pay
Stamp Duty
If you buy a property, you will sometimes have to pay Stamp Duty Land Tax. This is a one-off government tax on properties. Stamp duty is worked out as a percentage of the price you pay for a property. The current rate is 1% of purchase price. The threshold at which it is activated has been raised to £120,000 so many tenants will now escape paying this charge. If you do have to pay, your solicitor will include the duty payable in the completion statement that details all the fees he/she pays on your behalf. Legal Fees You should employ a solicitor or a licensed conveyancer to look after the legal side of buying your home. The best way to choose a solicitor or conveyancer who will give you a good service and value for money is to have one recommended by someone you know. If this is not possible, the Citizens Advice Bureau can advise on local firms, and your local public library should have a list of the solicitors in your area and the type of work they do. In addition, the solicitor will charge for other expenses such as stamp duty, search and Land Registry fees. Before employing anyone, always ask for a quote. A typical quote from a local solicitor recently was £660 for legal fees, search and registration fees. Survey Fees If you buy your home, you will take on responsibility for any outstanding repairs or structural problems. Before you decide to purchase your home you should consider asking for an independent survey from a qualified surveyor or structural engineer. When you apply for a mortgage the bank or building society will carry out their own survey but this is for valuation purposes and may not reveal any existing structural problems. The Council will let you know of any structural defects that we are aware of in the Section 125 Offer Notice but for your own peace of mind you should consider one of these:
• An RICS Home Buyers’ Survey and Valuation. This is a report and
valuation in a standardised format, to tell the buyer of all significant
defects, but not minor ones. It is likely to be adequate for most properties and provides a guide to value. It is likely to cost around £250 - £500.
• A Building Survey. This involves a detailed examination of all the visible
parts of the property. It is a good idea to have such a survey done if the property is old, has a known structural defect or obviously in need of repair, or if you are considering making alterations. It may cost £600 or more.
You can get more information about both of these from the RICS (Royal Institution of Chartered Surveyors) details in yellow pages or on the Internet at www.ricsfirms.com.uk. Your mortgage lender may be able to arrange to combine a structural report with the mortgage report therefore resulting in savings to the purchaser. Such a survey may run into hundreds of pounds but in the light of the value of the property it is a small cost in percentage terms. Homes designated as defective Certain types of houses and flats have been designated as defective under Part XVI of the Housing Act 1985, because:
• They are defective by reason of their design or construction; and
• Their value has been reduced substantially because their defects have
If your home is one of these, we will tell you before you buy. You should then consider whether it is wise to buy. You might have difficulty in selling later, because anyone thinking of buying your home from you might be unable to get a mortgage. If you do decide to buy, it is very important to find out the structural condition of your home. You should make sure that the price you pay for it reflects the structural problems and the fact that you may find it difficult to re-sell it later. Thinking of buying a flat?
Flats are usually sold on a long lease. This allows you and your successors to live in it for a fixed time, usually 125 years. What will I have to pay for?
If you are buying a flat, you will have to pay the Council a nominal ground rent of £10 per year, this gives you the right to live there during the period of the lease. In addition, you will have to pay an annual amount to the Council for service charges. Service charges are what you have to pay towards repairs, maintenance, major building works such as re-roofing and services provided for the upkeep of communal areas shared by other residents. They will include:
• The landlord’s cost in maintaining common parts, structure and exterior of
the property. These could include repairs to or replacement of the roof, windows, or external painting. The costs could be very high – several thousand pounds.
• The costs of any services provided by the landlord such lighting for shared
• The costs of any improvements to the structure, for example double-
• The landlord’s management costs and the cost of insuring the structure and
outside of the flat against accidental damage.
In certain circumstances, you may have a right to a loan to help pay for these costs. You will be responsible for keeping the inside of your flat in good repair. When you receive the purchase price of the flat you will also be issued with an estimate of any service charges you will have to pay during the first 5 years of your lease. Before you decide to buy a flat it is strongly recommended that you read the booklets#: Babergh District Council’s “A guide to Service Charges for Leasehold Flats”, and from the Office of the Deputy Prime Minister: “Residential Long Leaseholders – a guide to your rights and responsibilities”, “Your Right to Buy your home” and “Thinking of buying a council flat?” They will give you information on: • Your right to information: for example about future service charges.
• Your rights after you have bought: for example, how your service charges are limited for the first five years after you buy.
These booklets are all available free from the Council, or see Page 18 for information on where to find them on the internet. Other things to consider
There are also other costs involved with buying your home. These may not have occurred to you, so now is an appropriate time to review what they are likely to be so you do not have unexpected costs. • Repairs. When you rent your property, you receive a free repair service. As
an owner-occupier you will have to pay for future repairs and maintenance yourself. Not only routine repairs but also improvements such as a new
kitchen or bathroom, major structural repairs which may run into hundreds and thousands of pounds. 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.
• Improvements. Is the property you are currently renting in a programme for
improvements? Ask the Council if any such improvements are in the pipeline as this may influence the timing of your decision to buy.
• Shared arrangements. Your property may be subject to certain shared
arrangements in which case you will be responsible for paying a proportion of the costs of maintaining repairing, renewing and improving the shared facility. If your property is a flat, payment of the costs will be dealt with in the service charge referred to above. If your property is a house, the shared arrangements will be detailed in your Offer Notice. An indication of the cost of these shared arrangements will also be given but you must bear in mind that the cost of maintaining or replacing these facilities can sometimes run into thousands of pounds. Examples of shared facilities are given below:
• Unadopted roads.
The Highway Authority does not maintain certain roads in the district. If your property fronts on to one of these, you will be liable for a proportion of annual maintenance costs and if the road was ever brought up to adoption standard so that the Highway Authority takes over responsibility for its upkeep you would have to pay a share of these costs which could run into thousands of pounds. If your property is affected details will be included in your Offer Notice.
• Pathways, driveways and garage forecourts.
You may share a pathway or driveway with your neighbours and if you have a garage, which is in a block there is usually a communal forecourt.
• Sewage Disposal works
There are a few sewerage pumping stations and disposal works or other types of sewerage disposal arrangements in the district that are maintained by the Council and not the Sewerage Authority. If your property is served by one of these, you will be responsible for a proportion of future maintenance costs, repair improvements or renewal. When the time comes to renew the equipment or the plant, the costs could run into thousands of pounds. Details of any costs and liabilities likely to arise within the first five years will be included in your Offer Notice.
• Sewers drains pipes wires conduits cables channels gutters eaves troughs downpipes and soakaways
Any of these may be shared by your property with neighbouring properties.
• Flues and chimney stacks
You may share a flue or chimney stack with your neighbours.
• Lighting
This refers to lighting of shared facilities such as pathways.
• Building and Structures
It may be necessary to carry out works to the buildings and structures on your property for the stability preservation and/or protection of any building or structure erected on the adjoining property of the Council. If you fail to carry out these works the Council will have the right to carry out the works and you will be responsible for paying the costs and expenses incurred by the Council
The Council will also make a charge in respect of its costs of carrying out and supervising (including administration and professional fees) works to shared facilities
• Benefits. Are you eligible for Housing Benefit? Remember, as an owner-
occupier you will not receive any housing benefit to help with your mortgage costs. You may be entitled to income support but you would need to contact your local Jobcentre Plus or social security office to find out. The government website – www.direct.gov.uk – also provides information.
• The elderly. If you are considering residential care, and own your own
home, its value is likely to be taken into account in assessing whether you are eligible for financial help with the costs.
• Regular payments. In addition to your monthly mortgage payment, don’t
forget your ongoing household costs - electricity, gas, sewerage, water, telephone. You will still continue to pay Council Tax. Don’t forget you will also be paying out for building insurance, life assurance and mortgage payment protection insurance.
Decision time …. Work out how much you might have to pay for all these costs, and whether you can afford the ‘one-off’ costs in addition to the costs in the years to come, before you decide whether or not to continue with the purchase. Take time over this. You can use the following chart to help you decide whether or not to go ahead.
CHART TO HELP YOU DECIDE You can use this chart to help you decide. Use it to work out the costs, advantages and disadvantages of buying.
Costs of buying Costs of your alternative option (for example, the costs of renting) One-off costs:
Legal fees Survey fees Valuation fees Land Registry Stamp Duty Other costs Annual costs: Mortgage repayments Council tax Water charges Insurance Life assurance Internal upkeep Service charges (if a flat) Other costs Advantages of buying Advantages of your alternative option Disadvantages of buying Disadvantages of your alternative option Your decision RIGHT TO BUY PUBLICATIONS NAME PUBLISHED BY WEBSITE LOCATION
viewed at www.babergh-south-suffolk.gov.uk under “Housing and Rents Section” or in the A to Z of services under Right to Buy
Section and sent when applying for RTB. Also can be viewed on ODPM website (www.odpm.gov.uk)
viewed at www.babergh-south-suffolk.gov.uk under “Housing and Rents Section” or in the A to Z of services under Right to Buy
your rights and responsibilities Thinking of buying a Council ODPM document
INFORMATION TO TENANTS: