Right to buy - discount issue

martindow

lolaleigh said:The council will be evicting the tenant and are 'awaiting a court day' - by the time I move into year 3 and can actually afford to leave I'm hoping this problem should be resolved, so will not need to be revealed. Having lived through the experience I have fallen out of love with the flat and the area. 

Were you going to take a view on a/b/c or did you come along just to make that point?

If this tenant is evicted, won't this make it bearable to stay living where you are?  From what you have said, you are going to have to put up with this individual whether you sell or not. 

PS Feel free not to comment in detail if there is more to this that you would rather not disclose.

Skylon

It should be set out in your lease, so might be worth trying to see if the conveyancers who acted for you could send a copy to you.  

As for falling out of love with somewhere, it’s very hard to explain to someone if they’re not in that situation. I had a very stressful move that took 13 months, got into the new place at the beginning of the year and absolutely hate the area and it’s made me so miserable. Although I’m not losing money by selling, I am having to borrow a fair bit more to be able to move back to my old area.  Life is too short to be miserable if it’s something that can be resolved. 

saajan_12

Norman_Castle said:

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).

Based on the example they given on the .gov.uk website, the 'discount' is calculated as the £ discount as a % of the value at the the point of purchase. So instead of starting with the 50% entitlement figure, you start with £81k, then calculate that as a % of the value ie 81k/220k = 37% so you got a 37% discount. 

Your repayment is then 80% x 37% x [value at sale] = £65,120 if the value hasn't changed at all. 

Skylon said:

It should be set out in your lease, so might be worth trying to see if the conveyancers who acted for you could send a copy to you.  

As for falling out of love with somewhere, it’s very hard to explain to someone if they’re not in that situation. I had a very stressful move that took 13 months, got into the new place at the beginning of the year and absolutely hate the area and it’s made me so miserable. Although I’m not losing money by selling, I am having to borrow a fair bit more to be able to move back to my old area.  Life is too short to be miserable if it’s something that can be resolved. 

This is understandable, but maybe its worth the OP wait for the neighbours to move out (or at least wait to see if its progressing) and see how they feel then. They might get that love back, or might not and can sell in year 3. 

lolaleigh

Thank you for all your replies and I hope you had nice Christmas.

The scary thing about this is that the confirmation of the calculation at 50% (£110,000) came in a semi-formal email from the council, for example, it asked that I take it (the email) as notice that they have exercised their option for first refusal (refused), etc. so not just a comment by the council person. If it turns out that we are correct and they should calculate at 37%, it's such bad form - how many people would make some pretty big life decisions based on it?

For the purpose of finishing the thread and for anyone who's interested, I will update when the council's legal team has been in touch.

Thanks again.

lolaleigh

In case anyone is remotely interested, I am still waiting for the council to confirm my position. I was once again advised that the repayment was based on 50% and that they would like to call me to explain, to which I responded that I was happy to speak but would also need in writing so that I can share with a solicitor (umm this is you guys and have not had a response, and no call and have chased weekly. 

This person in leaseholder services is usually very responsive. Not sure what is taking so long. I'm still expecting bad news but a little part of me is hoping that the delay is that they realise their mistake... or else surely it would be very straightforward to copy and paste the clause that disproves my claim?

lolaleigh

Just got the reply:

Please see response below with regards to percentage of discount and calculating the repayment of discount.

 

Section 129 of HA 1985 states:  “a person exercising the right to buy is entitled to a discount of a percentage calculated by reference to the period which is to be taken into account in accordance with Schedule 4 (qualifying period for right to buy and discount)”

 

When you applied for the right to buy your discount was calculated at 50% as you had been a tenant for 3 years. The actual amount was capped by the Housing (Right to Buy) (Limit on Discount) (England) Order 2014/1378.  This limited the amount of discount payable but did not affect the calculation of the percentage.  That means that you received a discount calculated by multiplying the value by 50%.  However, the actual discount was reduced by the SI 2014/1378 to £80,900. 

 

Under paragraph (a) the % discount was 50% so repayment of the discount is based on that figure i.e., 50% of the sale price.  The % discount was not amended by SI 2014/1378 so that % applies when there is a relevant disposal. It is calculated on the basis of the % discount by reference to Schedule 4 (50%) and not by reference to the actual discount divided by the value as the leaseholder submits (37%). 

 

If you have any further questions please do not hesitate to contact me.

 Does anyone have a view on whether this is correct? Just thinking back to the calculation of someone living in London buying a 400k flat with a 100K discount cap having to pay back 160k in year two. I just don't see how it can be right. 

LHCalc123

They are absolutely wrong. They cannot expect you to pay back more than you received in discount. It is nonsensical. The repayment back is a percentage of the discount received on a sliding scale. The percentage discount received doesn't enter into it at this stage. The figure for repayment calculation is the ACTUAL discount received in monetary value.

This must be so frustrating for you!!