Right to buy - discount issue

sheramber

If the discount is a percentage of the £81,000 where does The amount you pay back depends on the value of your home when you sell it. come into it.?

lolaleigh

sheramber said:

If the discount is a percentage of the £81,000 where does The amount you pay back depends on the value of your home when you sell it. come into it.?

This is my point - it has to be based on a percentage otherwise it would remain fixed for the 5 years and I know this isn't the case. 

Do you have a view on whether they can charge me based on 50% or 37%?

theoretica

Seems pretty clear from this that it should be based on the 37%

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

lolaleigh

theoretica said:

Seems pretty clear from this that it should be based on the 37%

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

Thank you. I will share this with the council and challenge.

SDLT_Geek

theoretica said:

Seems pretty clear from this that it should be based on the 37%

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

I agree, having had a quick look at the legislation, see s155A of the Housing Ace 1985 set out below.  Where s155A(2) refers to "discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value" it is clear from the context that "discount" in each place must be referring to the cash amount of the discount, not a notional percentage. 

So in this case the repayment is worked out starting from 37% of the new market value of the property at the time of the "first relevant disposal" (the sale here) with a 20% reduction for each complete year from the right to buy purchase.

155A Amount of discount which may be demanded by landlord: right to buy

(1)  For the purposes of the covenant mentioned in section 155(2), the landlord may demand such sum as he considers appropriate, up to and including the maximum amount specified in this section.

(2)  The maximum amount which may be demanded by the landlord is a percentage of the price or premium paid for the first relevant disposal which is equal to the discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value which under section 127 was taken as the value of the dwelling-house at the relevant time.

(3)  But for each complete year which has elapsed after the conveyance or grant and before the disposal the maximum amount which may be demanded by the landlord is reduced by one-fifth.

(4)  This section is subject to section 155C.

lolaleigh

SDLT_Geek said:

theoretica said:

Seems pretty clear from this that it should be based on the 37%

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

I agree, having had a quick look at the legislation, see s155A of the Housing Ace 1985 set out below.  Where s155A(2) refers to "discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value" it is clear from the context that "discount" in each place must be referring to the cash amount of the discount, not a notional percentage. 

So in this case the repayment is worked out starting from 37% of the new market value of the property at the time of the "first relevant disposal" (the sale here) with a 20% reduction for each complete year from the right to buy purchase.

155A Amount of discount which may be demanded by landlord: right to buy

(1)  For the purposes of the covenant mentioned in section 155(2), the landlord may demand such sum as he considers appropriate, up to and including the maximum amount specified in this section.

(2)  The maximum amount which may be demanded by the landlord is a percentage of the price or premium paid for the first relevant disposal which is equal to the discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value which under section 127 was taken as the value of the dwelling-house at the relevant time.

(3)  But for each complete year which has elapsed after the conveyance or grant and before the disposal the maximum amount which may be demanded by the landlord is reduced by one-fifth.

(4)  This section is subject to section 155C.

Thank you for this. So grateful to you for taking a look. I wonder if the person in leaseholder services is taking the phrase 'discount to which the secure tenant was entitled' literally. I was entitled to 50% but didn't receive 50% because a cap is in place making the received discount 37%.

SDLT_Geek

lolaleigh said:

SDLT_Geek said:

theoretica said:

Seems pretty clear from this that it should be based on the 37%

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

I agree, having had a quick look at the legislation, see s155A of the Housing Ace 1985 set out below.  Where s155A(2) refers to "discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value" it is clear from the context that "discount" in each place must be referring to the cash amount of the discount, not a notional percentage. 

So in this case the repayment is worked out starting from 37% of the new market value of the property at the time of the "first relevant disposal" (the sale here) with a 20% reduction for each complete year from the right to buy purchase.

155A Amount of discount which may be demanded by landlord: right to buy

(1)  For the purposes of the covenant mentioned in section 155(2), the landlord may demand such sum as he considers appropriate, up to and including the maximum amount specified in this section.

(2)  The maximum amount which may be demanded by the landlord is a percentage of the price or premium paid for the first relevant disposal which is equal to the discount to which the secure tenant was entitled, where the discount is expressed as a percentage of the value which under section 127 was taken as the value of the dwelling-house at the relevant time.

(3)  But for each complete year which has elapsed after the conveyance or grant and before the disposal the maximum amount which may be demanded by the landlord is reduced by one-fifth.

(4)  This section is subject to section 155C.

Thank you for this. So grateful to you for taking a look. I wonder if the person in leaseholder services is taking the phrase 'discount to which the secure tenant was entitled' literally. I was entitled to 50% but didn't receive 50% because a cap is in place making the received discount 37%.

Yes, that is likely to be where they are going wrong.

Norman_Castle

This says a percentage of the market value when resold.

https://www.gov.uk/government/publications/your-right-to-buy-your-home-a-guide--2/your-right-to-buy-your-home-a-guide#the-discount-rules

Can I resell my home after purchasing it under the Right to Buy?

You may sell your home whenever you like. However, if you sell within 5 years of buying it, you will have to repay some or all of the discount that you received. If you sell:

• during the first year, all of the discount will have to be repaid;
• during the second year, four-fifths must be repaid;
• during the third year, three-fifths must be repaid;
• during the fourth year, two-fifths must be repaid; and
• during the fifth year, one-fifth must be repaid.

The repayment of discount will be a percentage of the market value of the property when it is resold within the first 5 years of purchase.

Norman_Castle

This says a percentage based on value at sale.

https://www.gov.uk/right-to-buy-buying-your-council-home/selling-your-home

Paying back your discount

You’ll have to pay back some or all of the discount you got if you sell your Right to Buy home within 5 years of buying it.

You’ll have to pay back all of the discount if you sell within the first year. After that, the total amount you pay back reduces to:

• 80% of the discount in the second year
• 60% of the discount in the third year
• 40% of the discount in the fourth year
• 20% of the discount in the fifth year

The amount you pay back depends on the value of your home when you sell it.

Example
You bought your home worth £100,000 and got a 40% discount (£40,000). You then sold your home after 18 months for £120,000.

40% of £120,000 is £48,000. As you’re in the second year, you would repay 80% of £48,000 (£38,400).

MalMonroe

Hi, I'm thinking of also doing a right to buy and have been looking at the repayments, should I wish to sell before the five years are over.

What Norman_Castle says is correct, according to the government website he has linked to above.

According to the table on that website, your repayment should be £64,800 because that is 80% of your given discount of £81,000. Assuming, of course, that you will receive £220,000 when you sell. 

The council can't take 50% back because although you were eligible for 50 percent, the cap meant that you couldn't receive that much.

Also in the link from Norman_Castle, scroll down to 'Selling your Home' which says you have to offer the property first to your landlord or another social housing organisation. That may be a good thing as they have to give you full market value and it will save you having to find a buyer.

I hope that's helpful. But obviously when you speak to the council, things will be clearer. I hope! What a headache.