Buying a Council House: The Rules Explained
Estimated reading time 10 minutes
Council housing is a popular form of affordable accommodation that many people across the UK have benefited from over the years. Data currently indicates that the proportion of UK households occupied by council or social tenants now sits at 16.6%. This equates to approximately 4 million properties!
Over the past 40 years, though, many tenants occupying these properties have gradually got their foot onto the property ladder by purchasing the home that they have been renting. Thanks to the affordable prices offered by the council through the right-to-buy scheme, many renters have become buyers and as a result been able to move up that ladder much easier than they may have initially imagined.
No longer available in Scotland or Wales, council tenants can still benefit from the right-to-buy in England, so let’s explain how you can do it.
What is the right-to-buy scheme?
The right-to-buy scheme allows some council or social tenants the opportunity to buy their council house. As long as you are eligible, you can receive a discount of up to £96,000 on your property, or £127,900 if you live in London, making the purchase much more affordable. The discounted amount increases each year in line with the CPI (Consumer Price Index).
The level of discount applied will vary depending on how long you have lived at the property, and regardless of how much the discount is, you will likely need a mortgage to cover the remainder of the house purchase.
Once the mortgage is secured and the discount agreed, the house becomes yours and you can live there for as long as you wish. You can also sell the house too, hopefully delivering you a nice profit, but there are specific rules surrounding the sale of a council tax property that you have bought.
Who is eligible to buy a council house?
To become eligible to buy your council house, you must meet specific requirements. If you can say yes to these then you might be able to begin the process of buying your council house:
- You are a current council tenant or were a council tenant when the home was transferred to its current landlord
- You have been a tenant of a council house or housing association property for at least 3 years. It should be noted that these 3 years do not have to be all in a row
- You don’t currently live in sheltered housing or a form of housing specific to elderly or disabled people
- Your home is not set to be demolished
- You currently have no financial issues that have a legal action pending or in progress
- There are no outstanding possession orders against you
Your landlord will have the final say in whether you can buy your council house, so speak to them before looking into mortgages. If they say yes, you could find yourself becoming a homeowner in the not-too-distant future. You just need to see what discount could be applied to the property price to then see if a purchase is possible.
What is the buying council house discount?
The discount applied to your home will vary depending on how long you have lived in it. Put simply, the longer you have lived there, the bigger the discount. As mentioned earlier, you must have been an eligible tenant for at least three years to be able to get the discount. Whilst the discount is capped at £96,000 (£127,900 in London), it certainly does not mean you could get the house for free. You are limited to 70% off the total property value up to the amounts mentioned here.
You could find that the discount you are given is slightly less if you have previously purchased a property through this scheme. The levels of discounts vary per property type too, and this is worth noting as it could change your property plans.
Discount for buying a council house
If you live in a council house and are looking to buy it, your discount will start at 35% after three years of tenancy. Once you have been in the property for five years, you can add 1% for each extra year you live there until it reaches 70% of the property value or the current maximum discount value is reached – whichever is lowest.
Discount after three years’ tenancy:
Property value: £200,000
Tenancy: 3 years
Discount value: £70,000
House cost to you: £130,000
Discount after twenty years’ tenancy:
Property value: £200,000
Tenancy: 20 years
Discount: 50% (50% discount cannot be applied due to the £96,000 cap being reached)
Discount value: £96,000
House cost to you: £104,000
Discount for buying a council flat
The discounts for your purchase of a council flat are a little different to those for buying a house. You must have been an eligible tenant for three years but this time, the discount starts at 50% until you have held tenancy for five years. Once you reach that milestone, the increase is by 2% each year, rather than the 1% for house purchases.
This discount is also capped like that of the house purchase, with 70% of the property value or the current cash maximum, whichever is lower, being the maximum discount available.
Discount after 6 years’ tenancy:
Property value: £150,000
Tenancy: 6 years
Discount value: £78,000
Flat cost to you: £72,000
Discount after 15 years’ tenancy:
Property value: £150,000
Discount value: £96,000 (70% discount cannot be applied due to the cap being reached)
Flat cost to you: £54,000
Should you live in London, you would have been eligible for a higher discount due to the cap being set at £127,900.
Costs of buying a council house
Now that you know you are eligible and have worked out the likely discount you could be eligible for, it could be a good idea to begin researching the costs to you. Mortgages, legal fees, stamp duty and surveyors are all to be accounted for. Factor in service charges and maintenance costs too so that you can get a more realistic idea of how much everything could cost.
At this stage, there is no guarantee your landlord will be willing to let you buy the property, but you could look to get a mortgage in principle. This will at least give you a little more support when it comes to applying to buy the property. It will also give you a chance to find lenders that are willing to help finance a right to buy property. One thing especially worth noting is that some lenders will use a right-to-buy discount as the deposit on the property, but others will not.
Draw up a comparison between the costs of renting the property and those if you are buying. This will give you a clearer understanding of your position and whether proceeding with applying to buy the property is worthwhile.
How to buy a council house
If you are eligible, it seems affordable and the discount is appealing, then you could start to take the next steps. Ask the council or housing association for a form known as an RTB1. This is your application to join the right-to-buy scheme.
You must ensure that your application is filled with the correct information. Missing anything will hinder your chances of having the chance to buy the home.
Make sure that the RTB1 includes:
- The full address of the property you want to buy
- The name of your landlord (remember, this could be the council or a housing association)
- Names of all tenants and family members. Names must be in full and indicate whether each of the tenants wants to buy the property or not
- Dates, and addresses of current and previous tenancies for all applicants
- Details relating to any properties previously purchased under the right-to-buy scheme
- Details of any changes and improvements to the home you have made
- Signatures for all tenants in the correct places. Some signature boxes relate to those wishing to buy the property; others are for people not wanting to buy that will live at the property
When all parts of the form are completed, you can send it to your landlord.
The landlord now has up to eight weeks to respond, or four if you have been a tenant for three years or more. This response will confirm or not whether you have the right to buy. If they say no, they must outline their reasons why. If they accept, they have an eight-week deadline to send you an offer notice, which is extended to twelve weeks if you live in a flat.
The offer notice is called an S125 and will illustrate the valuation that they have given the property, the discount you are eligible to receive, the terms and conditions relating to the purchase and any structural problems they may know of.
If you feel the valuation is wrong, you are allowed to appeal it.
Accepting your landlord’s offer
With an offer from the landlord now on the table, you can begin arranging your mortgage, surveyor, solicitor and so on. You may have already secured an agreement in principle, but if not, head to mortgage advisors and lenders to see what mortgage you can be offered. Once a mortgage is offered and accepted, you can proceed and are just a short time away from becoming a homeowner. Your solicitor will help you work through the legal processes and with paperwork signed, finances organised and stamp duty paid, the home will become yours.
Selling council house after purchase
You are entitled to sell your house should you wish, even if it means selling a house with a mortgage. However, the discount you were given may need to be paid back. If for example, you sell within a year of buying the property, you will be required to pay back the full amount of the deposit. From the second year onwards, you would pay back a percentage on a sliding scale. This is typically in the amounts shown below but landlords have the full right to ask for 100% to be repaid.
Should you opt to sell within ten years of purchase, you will first have to offer the property to the landlord. If they say no, you can then list it on the traditional market.
|Selling the property after||% of discount to be repaid|
|2 years of purchase||80% of discount|
|3 years of purchase||60% of discount|
|4 years of purchase||40% of discount|
|5 years of purchase||20% of discount|
You should also be aware that the actual cash amount you pay back is based on the value of the house at the time you sell it, not the time you buy it.
As an example, if you purchased a house valued at £150,000 and received a 40% discount, you would have £60,000 taken off the price and paid £90,000 for it. If that house is now worth £300,000, that 40% is now worth £120,000. If this was in your third year of owning the home, it means you would pay back £72,000. A £12,000 increase on the amount you were discounted.
If you own a council house and have now decided it is time to sell, speak to Gaffsy. Our property professionals are quick house sale experts who can guarantee a sale in as little as seven days. What’s more, as cash house buyers, the funds can be with you in exactly the same timeframe. Get a free cash offer on your council house today and see how easy it is to sell fast with Gaffsy.