Right To Buy

Deciding to buy your council house is a big financial commitment. Owning a home brings many benefits but there are also costs and risks involved. Therefore, it is vital that you are aware of all the facts.

This is not a substitute for professional advice.

Do you have the Right to Buy?

If you were a secure tenant before 18th January 2005, you will have the Right to Buy if you have spent at least two years as a public sector tenant. The discount available to you after two years is:

• 32% for houses, plus 1% discount for each extra full years (up to 60% maximum)
• 44% for flats, plus 2% more discount for each extra full year (up to 70% maximum)

If you became a secure tenant after the 18th January 2005, you will have the Right to Buy once you have spent at least five years as a public sector tenant. The discount available to you after five years is:

• 35% for houses, plus 1% more discount for each extra full year (up to 60% max)
• 50% for flats, plus 2% more discount for each extra full years (up to 79% max)

But whatever percentage discount you are eligible for, it cannot be greater than the maxiumum discount for the North West, which is currently £26,000. If you have previously bought  another council property, any discount you got then will usually be deducted from the discount that you will get when you buy again.

Are there any council housing properties you can't buy?

Yes, there are a number of exceptions to the Right to Buy. For example, if your home is suitable for the elderly or is in a Sheltered Scheme we can refuse to let you buy your home.

Can you buy a flat?

Yes, as long as it doesn't fit into one of the exemption categories. However, you should be aware that any sale is conditional on a 99 year lease and annual service charge. You may have limited choice when looking for a mortgage to buy one of these properties. You will need to consider whether or not there might be any difficulty in selling this type of property in the future.

How do you apply to buy your home?

You need to complete the Right to Buy Claim form. You do not have to pay for this form and you should be wary of companies charging you for this leaflet. Once you have filled out this form, you need to return it to Property Services at Lancaster Town Hall. As it is an important document, you may wish to hand deliver it and request a receipt or send it by recorded delivery.

How will your home be valued?

The market value of your home disregarding any improvements carried out by you is assessed, the discount you will get (up to the current maximum of £26,000) is then taken off this value to produce the purchase price. You may (within three months) appeal to the District Valuer if you do not agree with the Council's assessment of the market value.

Your discount may also be reduced by the cost floor rule. This may apply if we have spent a lot of money repairing or maintaining your home. Under the cost floor rule, the discount you receive must not reduce the price you pay below what has been spent on building, buying, repairing or maintaining it.

What if there are delays or problems with the sale?

Most sales go through quickly but sometimes there are problems or delays. If there are delays with the sale that we are responsible for, you may be entitled to a reduction in the purchase price.

What other costs are there when you buy your home?

If your home is valued between £60,000 and £250,000 you will currently have to pay 1% of the value in stamp duty. You should also have a survey of your home done. This can costs between £250-£600, although it may costs more if your home has any special problems.

You should employ a solicitor or licensed conveyor to look after the legal side of buying your home. Legal costs can vary greatly and ofen depend on the amount of work involved. You will also have to pay for various searches and fees they will need to carry out to complete the purchase. Before employing anyone, always find out how much it will cost you.

If you are financing buying your home with a mortgage, you may also have to pay a valuation fee and an arrangement fee. Some mortgage companies may pay some or all of these fees for you. It is important to shop around and read the small print, as some companies may add these costs to the mortgage or you may end up paying a higher interest rate. The Citizens Advice Bureau will be able to provide you with free advice on financial matters.

What are other costs of owning your own home?

You will also have to pay for all maintenance, repair and improvements, your regular living expenses, your household bills and service charge (if you buy a flat). You need to make sure you can afford all of these and that you are aware of the costs. For example, how much will it cost you to call out a plumber at the weekend if the central heating breaks down or could you afford a new boiler if the plumber couldn't fix it?

What are the risks associated with owning your own home?

If you do not keep up repayments on your mortgage or other loan secured against your home, you home can be repossessed and you would become homeless. You are not able to claim Housing Benefit for mortgage payments. It is also important to remember that the value of property can go up as well as down.

What happens if you sell your council house after you have bought it?

You can sell you home that you bought under the Right to Buy whenever you like. However, the Government has set "discount repayment periods," which specify how much of your discount you will have to repay when you sell your home. The amount you repay will depend on when you made your application to buy.

From the 18th January 2005, if you agree to sell your home to a private company, by a post-dated agreement in order to avoid repaying all or some of your discount, you will now be liable to repay the discount in the usual way.

If you buy your home under the Right to Buy scheme from the 18th January 2005 and you wish to resell or dispose of it within 10 years, you will be required to offer it either to your former landlord or to another social landlord in the Lancaster District at full market value.

How much can you afford to borrow?

Before you decide whether to buy a property, you should think carefully about how much you can realistically afford to repay each month. You need to bear in mind that your monthly repayments may increase considerably if interest rates rise. There are lots of different mortgages on offer, so it's worth shopping around for the best deal for you.

It is sensible to be wary about borrowing a high percentage of the property's value, even if a lender says you can. The more you borrow, the higher the risks because:

• If your income falls it will be more difficult to afford your monthly payments.
• If interest rates rise your monthly payments may increase.
• If property prices fall, you run a greater risk of falling into negative equity - this is when you owe more on your mortgage that your house is worth.
• You may have to pay high interest rates and/or mortgage indemnity guarantee if you borrow a high percentage of the value of the property.

Where can you get further advice and help?

The Citizens Advice Bureau can provide free legal and financial advice. You can also contact a solicitor for legal advice and an independent financial advisor for financial advice, although there is usually a charge for this.