Right to Buy to Permitted Developments to Defaults and everything in between!

da_rule

Covenants - Under the Housing Act the Council are allowed to include any such covenants they thong are reasonable. The most common are prohibitions on extending the property as they want to retain uniformity on the street, where they probably still hold significant property themselves. These covenants are often qualified (i.e. you can’t do the work without written consent - note that planning consent does not equal vendor consent) and the consent can not be unreasonably withheld. However, it can be reasonably withheld and they can charge an admin fee.

Improvements & Extra Borrowing - Section 156 of the Housing Act 1985 sets out the position in relation to charges and extra borrowing, so there is no need for guessing. The concept is relatively simple. When you purchase a property through RTB with a mortgage there are 2 charges. The first will be the charge from the mortgage lender and the second will be the charge that lasts for 5 years from the Council to secure the repayment of discount (they will also secure their 10 year right of pre-emption as a restriction). Section 156 also sets out that, a charge will rank in priority to the Council’s charge if it is for an ‘approved purpose’. ‘Approved purpose’ includes works to the house. Therefore, if your lender is willing to lend you 90% of the property value, and providing you use the surplus money to carry out the works then the extra lending will rank in priority to the Council’s charge. This means that if the property does get repossessed, the lenders debt gets settled first, so they carry little risk. If the Council’s charge isn’t able to be satisfied then they would have to pursue it as a personal debt. Often to agree this further advance though, Council’s want evidence that the works will be actually carried out, so either a draw down type of mortgage where money is only advanced at certain stages or evidence of quotes, planning consents etc to show that you are serious about doing the works.

Also, if you do do works, make sure to get a valuation of the property before and after, as, if you do sell within the 5 years, any increase in value which is attributable to your improvement works will be disregarded when working out the repayment amount.

In terms of the defaults etc, I don’t think anyone on here will be able to give you a definitive answer. You say you’ve already spoken to an IFA, I’d go back to them and speak about next steps (decision in principal etc), once you have the property valuation.

AnotherJoe

elaine77_04 wrote: »

One of them (the largest) is a Credit Card with a balance of £12k which would likely take the same amount of time as it would take for the default to drop off anyway and so the IFA I spoke to advised me to take this into consideration when considering whether it is worth paying it or just taking the hit on the default as the penalty period will be the same...

The other could probably be cleared within 2 years but, again, not worth paying one without the other as one default would still remain and paying additional payments would alter affordability. Again, I did discuss it with an IFA and have tried to look into this as much as I can.

So you are saying that the Co-Op and Barclays have written your debts off and wont try to get you to pay them? They wont sell them on to a company who will chase them? Given you have a good salary this seems strange.

elaine77_04

ACG wrote: »

The RTB is attractive to some lenders. There are lenders who will not lend on RTB properties.

The problem is more you as an applicant. You have no history of saving a deposit and you have defaults. On paper that is not a great mix. Appreciate there is far more to it than that (there usually is), but it is not just going to be a piece of cake because you have a huge deposit.

Taken from Barclays website:


Nationwide criteria for RTBs


I am not suggesting either of these lenders are right for you, I am just showing how criteria can vary. But what the nationwide website does not say is how much over and above the discounted purchase price you can go. I am sure there is a limit of maybe 10%.

Obviously you also have to find a lender who will accept the defaults and I am not sure Nationwide or Barclays are the ones for that - happy to be proven wrong however.

Thanks for this. We do have a history of saving a deposit, as mentioned, we just haven’t saved a 42% deposit.

It may be that we will just have to buy the property at the discounted rate, wait 5 years and then either remortgage or sell it then and forget about improvements. It still makes no financial sense for me to buy on an open market with a much reduced deposit or continue to pay dead rent (not withstanding the risk of home ownership as opposed to secure tenancy).

elaine77_04

AnotherJoe wrote: »

So you are saying that the Co-Op and Barclays have written your debts off and wont try to get you to pay them? They wont sell them on to a company who will chase them? Given you have a good salary this seems strange.

I don’t have any debts with the co-op, just Barclays. The debts went to the same company who have offered settlement figures on the debts which I have been professionally advised not to pay.

I spoke to Barclays about it at the time (2017) and they advised that as they had my entire banking history of 20 years and because both rogue debts are with them they would be able to take this in to consideration if I wanted a RTB mortgage in the future and considered them as my lender. This wasn’t elaborated on at the time though for obvious reasons but was a concern in my mind at the time I knew I was going to have to default on those two debts.

elaine77_04

da_rule wrote: »

Covenants - Under the Housing Act the Council are allowed to include any such covenants they thong are reasonable. The most common are prohibitions on extending the property as they want to retain uniformity on the street, where they probably still hold significant property themselves. These covenants are often qualified (i.e. you can’t do the work without written consent - note that planning consent does not equal vendor consent) and the consent can not be unreasonably withheld. However, it can be reasonably withheld and they can charge an admin fee.

Improvements & Extra Borrowing - Section 156 of the Housing Act 1985 sets out the position in relation to charges and extra borrowing, so there is no need for guessing. The concept is relatively simple. When you purchase a property through RTB with a mortgage there are 2 charges. The first will be the charge from the mortgage lender and the second will be the charge that lasts for 5 years from the Council to secure the repayment of discount (they will also secure their 10 year right of pre-emption as a restriction). Section 156 also sets out that, a charge will rank in priority to the Council’s charge if it is for an ‘approved purpose’. ‘Approved purpose’ includes works to the house. Therefore, if your lender is willing to lend you 90% of the property value, and providing you use the surplus money to carry out the works then the extra lending will rank in priority to the Council’s charge. This means that if the property does get repossessed, the lenders debt gets settled first, so they carry little risk. If the Council’s charge isn’t able to be satisfied then they would have to pursue it as a personal debt. Often to agree this further advance though, Council’s want evidence that the works will be actually carried out, so either a draw down type of mortgage where money is only advanced at certain stages or evidence of quotes, planning consents etc to show that you are serious about doing the works.

Also, if you do do works, make sure to get a valuation of the property before and after, as, if you do sell within the 5 years, any increase in value which is attributable to your improvement works will be disregarded when working out the repayment amount.

In terms of the defaults etc, I don’t think anyone on here will be able to give you a definitive answer. You say you’ve already spoken to an IFA, I’d go back to them and speak about next steps (decision in principal etc), once you have the property valuation.

Thanks for this, it’s really helpful. I have discussed this with ex-colleagues from the council, as well as my neighbourhood officer for my estate during the RTB, and the overall message they have given me is that there won’t be any restrictions on extending the property out the back as we back onto woodland and also the vast majority of properties in my street have already been purchased so there are only around 3% of them still owned by the council anyway. We live in a cul-de-sac in a village and to be honest the Council pretty much leave us alone out here anyway as it’s too much hassle for them to be coming out here for such a small number of properties. This is probably why they’ve been encouraging me to go ahead with RTB and have given really quick retrospective permission for all of the internal improvements we’ve made across the length of our tenancy.

The only thing they have said is that if we sell within 5 years they will want some of the deposit back, which is fine and we understand that and agree with that.

Marvel1

elaine77_04 wrote: »

Appreciate your opinion but, the point stands that the Council’s failure to build new social housing is not the fault of tenants whose only chance at getting onto the property ladder is to buy the property they’ve paid rent on for years and years.

The Council are selling land and handing out planning permission hand over fist for private developers to build tiny minimum-standard homes all squashed onto the smallest amount of land possible and make huge profits from private sales. If they built social housing instead, even a fraction of the amount of private homes, there wouldn’t be a shortage of social housing and people would find home ownership a whole lot more affordable.

The reason they are not doing this? Is because the government do not want people to live in social housing because social housing means eternal entitlement to housing benefit and housing benefit is the biggest cost to the public benefits purse in this country.

You’re directing your discord at the wrong people.

Fair enough, at least you are doing for yourself and not one of these buying it on behalf of the elderly parent or renting it out privately.

elaine77_04

Marvel1 wrote: »

Fair enough, at least you are doing for yourself and not one of these buying it on behalf of the elderly parent or renting it out privately.

No definitely not; I don’t agree with the way RTB can be abused and I don’t think anyone other than the actual tenant should be able to buy the property either under any circumstances. We don’t want to sell the property as we have built a life and a home here; hence why we would rather make this house a little bit bigger than go and buy a bigger house elsewhere. If we just want a quick equity gain then we would just buy the house, sit on it for 5 years, then sell it for massive equity release. That’s not what we want to do but getting the additional money to extend may not be possible (hence my OP).

barbiedoll

If you don’t need a massive mortgage and you both have good jobs, can’t your husband apply for a mortgage in his name only? You can still be on the deeds and when your defaults drop off, you can remortgage together to fund your building plans. And don’t harbour any illusions about bank “loyalty”, they will say anything to get a sale. When you apply for a mortgage, you’ll be treated in exactly the same way as anyone else, they will still need access to your financial history, no matter who you bank with. They aren’t going to make any allowances for you because you have been a long-standing customer. They don’t even do that for their staff!

Please don’t fret about your daughter “wasting her teenage years” in a too-small house. She’s lucky to have a roof over her head and during her teenage years, you’ll hardly see her anyway. She’ll either be at her mate’s house, or firmly ensconced in her room with headphones plugged in her ears.

As for leaving an inheritance....my mum worked her butt off to pay her mortgage so that she could leave her house to me and my siblings. We’re all now in our 40’s and 50’s, all with our own properties. My mum still lives in her house (thankfully!) and we’ve all done just fine without her cash, we don’t want it or need it. Seeing her living hand-to-mouth certainly inspired us to work hard and to pay our way.

elaine77_04

barbiedoll wrote: »

If you don’t need a massive mortgage and you both have good jobs, can’t your husband apply for a mortgage in his name only? You can still be on the deeds and when your defaults drop off, you can remortgage together to fund your building plans. And don’t harbour any illusions about bank “loyalty”, they will say anything to get a sale. When you apply for a mortgage, you’ll be treated in exactly the same way as anyone else, they will still need access to your financial history, no matter who you bank with. They aren’t going to make any allowances for you because you have been a long-standing customer. They don’t even do that for their staff!

Please don’t fret about your daughter “wasting her teenage years” in a too-small house. She’s lucky to have a roof over her head and during her teenage years, you’ll hardly see her anyway. She’ll either be at her mate’s house, or firmly ensconced in her room with headphones plugged in her ears.

As for leaving an inheritance....my mum worked her butt off to pay her mortgage so that she could leave her house to me and my siblings. We’re all now in our 40’s and 50’s, all with our own properties. My mum still lives in her house (thankfully!) and we’ve all done just fine without her cash, we don’t want it or need it. Seeing her living hand-to-mouth certainly inspired us to work hard and to pay our way.

I actually earn more than my husband so affordability-wise it makes more sense to get the mortgage in my name plus it’s my tenancy (even though he is listed as living there too).

Our parents have worked hard too but unfortunately never had the opportunity to buy a property and have always lived pay check to pay check. We have worked our butts off too to try and give our kids more than what we had growing up as we were both quite poor growing up. It would be nice to Leave an inheritance to our children but we’re more bothered about just having a home of our own that we have worked for and not paying dead rent so that we have nothing to show for the sacrifices we make and how hard we work. We’ve already put so much time and money into our home already and I guess we just want to make the most of it.

AnotherJoe

elaine77_04 wrote: »

I don’t have any debts with the co-op, just Barclays. The debts went to the same company who have offered settlement figures on the debts which I have been professionally advised not to pay.

I spoke to Barclays about it at the time (2017) and they advised that as they had my entire banking history of 20 years and because both rogue debts are with them they would be able to take this in to consideration if I wanted a RTB mortgage in the future and considered them as my lender. This wasn’t elaborated on at the time though for obvious reasons but was a concern in my mind at the time I knew I was going to have to default on those two debts.

Why do you think you won't have to pay them then ? The company that took the debts on and is offering part payment isn't just going to give up and you can't claim poverty.