Right to Buy before 21 November deadline, what are the implications?

dippy3103

Another thing to consider. If they need care in the future, they may have to sell the property to pay for it. It’s happened to a few friends of my parents 

GDB2222

It’s worth looking at the numbers. The discount would be 70%, with a maximum of £136,400 if the flat is in London. £136k would pay for an awful lot of repairs and service charges! 

I suppose the game plan would be to get the discount, wait the minimum period of 5 years to avoid clawback, and then sell. They would probably be left with a decent chunk of the discount, but no home! They could benefit further if house prices increase over the five years. 

The money they are left with would probably not be enough to buy their own flat, even if they move to a cheaper area, so they will be renting privately. They would be expected to pay their own rent out of the money they have, until that is depleted to £23,500.

So, the net result is that they will end up renting privately, and with £23,500 in the bank. I’m not sure that’s worth giving up the security of a council flat for?

Emmia

It's an old story from 2016, but this shows some of the financial downsides of owning a flat through RTB (or bought as a result of someone who did a RTB previously) where the council is the freeholder and manages the block 

https://www.theguardian.com/money/2016/may/28/right-to-buy-repair-bills-council-tenants

GDB2222

Emmia said:

It's an old story from 2016, but this shows some of the financial downsides of owning a flat through RTB (or bought as a result of someone who did a RTB previously) where the council is the freeholder and manages the block 

https://www.theguardian.com/money/2016/may/28/right-to-buy-repair-bills-council-tenants

I very much hope that £50,000 of repairs would improve the resale value of the property, but it is a problem if they don’t have the money. Isn’t there some protection from huge repairs costs for a few years after RTB? 

Emmia

GDB2222 said:

Emmia said:

It's an old story from 2016, but this shows some of the financial downsides of owning a flat through RTB (or bought as a result of someone who did a RTB previously) where the council is the freeholder and manages the block 

https://www.theguardian.com/money/2016/may/28/right-to-buy-repair-bills-council-tenants

I very much hope that £50,000 of repairs would improve the resale value of the property, but it is a problem if they don’t have the money. Isn’t there some protection from huge repairs costs for a few years after RTB? 

You get an estimate if 5 years of repair costs, but if the big works happen/ get identified in year 6, 7... the parents will be on the hook financially. I'm going to presume that cladding isn't a problem as they've been there 40 years, because that's the other costly item that comes up, especially in London.

The £50k isn't going to improve the resale by that much, it can just be for things like replacing the roof - if you're on the ground floor, a leaking roof 3, 4, 5... 10 floors up doesn't affect you, but you still need to pay your share - and with most blocks, scaffolding will be needed which can substantially increase the costs. 

To give a personal example... As well as the £11k we have to fork out next year mentioned upthread, there's also the current requirement to replace our front door to comply with new fire regs. There is nothing wrong with our door apart from the fact there is a tiny (and I mean tiny) gap at the bottom when it's open (when frankly it's offering no fire protection at all).

To comply, we have to find and pay for a new door + installation that looks as identical as possible to the current door... Before installation we have to send details of the door for approval and pay the freeholders legal fees for someone to look at a picture of a door, and grant us permission - this is £75. If we need to vary that agreement in some way... Guess what, another £75 needs to be forked out. I'm estimating a new door plus fees is going to be in the order of £1500 - £1750. This won't increase the value of our property one iota.

I think the rationale behind this interest in RTB, must be leaving a good asset/chunk of cash to the kids... It's really not about owning the flat themselves.

Currently as tenants they're insulated against these maintenance costs, and unlike private tenants they have security in terms of their tenure. The landlord (council) isn't likely to issue a S.21. Personally I'd think carefully about whether RTB is a good idea, given the possible costs, risks, and downsides.

Bookworm105

RTB is about 2 things only
- securing a pot of money to leave to children when the current occupants die and the kids can sell off the property 
or
- enabling a child to avoid being forced to move out of an "under occupied" property when the parents die through buying it now and letting them be its owner


meantime the fact owners have to pay for their share of repair bills is often beyond the financial awareness of people who see only the "free" £££

housebuyer143

Bookworm105 said:

RTB is about 2 things only
- securing a pot of money to leave to children when the current occupants die and the kids can sell off the property 
or
- enabling a child to avoid being forced to move out of an "under occupied" property when the parents die through buying it now and letting them be its owner


meantime the fact owners have to pay for their share of repair bills is often beyond the financial awareness of people who see only the "free" £££

I do wonder how many of these elderly parents who want to purchase their house after a lifetime of renting are doing so because they are being persuaded by their children, who are not thinking about such costs to their parents and are only seeing £signs.

Solid_Bruce

Emmia said:

To put this into context, we have a bill for repairs on the building our leasehold flat is in for a little under £11k coming in January, this is for maintenance activities which get done about once every 10 years. We have also forked out over £10k on new windows and a door to replace those that were rotten in the last 12 months.

We can't avoid the £11k charge coming in January, and we did the windows as it was clear they weren't going to be dealt with by the freeholder before they became a real security issue (and we'd have ended up paying for them anyway)

Before you do RTB I'd really look into what the potential costs might be that your parents will become liable for,  that they're not now.

Edit: If the boiler dies they're responsible, and plumbing issues, guess who is paying for the plumber...

I can see the attraction in the discount, although I question the morality of RTB as it depletes the stock of social housing your parents have benefitted from for 40 years.

Is there any way to check what maintenance activities have recently been done or due to be done? And how much thisd bill would be?

Solid_Bruce

housebuyer143 said:

Solid_Bruce said:

housebuyer143 said:

Is it in there interest to buy it? Remember all the repairs cost money and can they afford these unexpected costs if the council are not doing the repairs? 
What happens to the service charges, I imagine they are covered also by the council. 

I've seen posts on here where the parents want to leave something to their children but in doing so they actually cripple themselves in retirement because they can't actually afford the added costs associated with home ownership. 

They are thinking of it like an investment with the discount RTB is offering

An investment for who though? They have lived there for 40 years and they suddenly want to buy it now? A house you live in isn't an investment because they need to live in it - it's not going to make them money, so they are obviously planning to pass it down. 
It doesn't scream to me that it's in their interest. What if they need to move to different accommodation as they get older? The council will aid them in this, but are not likely to help if they own the house. 

How well off are they? Can they afford the mortgage? The service charge, repairs and improvements? Will owning the flat actually cause them issues in retirement because they suddenly don't have any money to live on? 

Really think it through because while I appreciate they don't want to lose a good deal, it might not be suitable or in their best interests to do this. 

They have always wanted to buy this flat and always complain how they should have purchased 20 years ago.  Now they see it as a final chance to buy  this place.  They plan to either sell and buy a place in the countryside in like 10 years or leave for the Children/Grandchildren

Whether they can afford depends on the vaulation, which is why I'm asking what implications there are of simply putting in an application.  Most likely they can't afford it but if the valuation is reasonable, the whole family can put money together and maybe see it as an investment also

Emmia

Solid_Bruce said:

Emmia said:

To put this into context, we have a bill for repairs on the building our leasehold flat is in for a little under £11k coming in January, this is for maintenance activities which get done about once every 10 years. We have also forked out over £10k on new windows and a door to replace those that were rotten in the last 12 months.

We can't avoid the £11k charge coming in January, and we did the windows as it was clear they weren't going to be dealt with by the freeholder before they became a real security issue (and we'd have ended up paying for them anyway)

Before you do RTB I'd really look into what the potential costs might be that your parents will become liable for,  that they're not now.

Edit: If the boiler dies they're responsible, and plumbing issues, guess who is paying for the plumber...

I can see the attraction in the discount, although I question the morality of RTB as it depletes the stock of social housing your parents have benefitted from for 40 years.

Is there any way to check what maintenance activities have recently been done or due to be done? And how much thisd bill would be?

You should ask the council or whoever manages the block of flats.