When can I sell my Right To Buy property? The owner of every home in London purchased from a social housing provider under RTB legislation introduced in the 1980s has the option of selling that property any time.
However, the government advises that if the owner of an RTB property sells that asset within the first five years of ownership, the former landlord has the right to ask for repayment of all or part of the discount.
The vast majority of local authorities in London follow government advice that states if RTB property owners sell the home within the first year of purchase, the whole discount will have to be repaid. Four-fifths (80%) must be repaid if the property is sold in the second year of ownership, three-fifths (60%) in the third year, two-fifths (40%) in the fourth year and one-fifth (20%) in the fifth year. After five years, the property can be sold without repaying any discount.
A large number of local authorities in London, however, say the amount of discount to be repaid if an RTB property is sold within five years of purchase will be a percentage of the resale value of the property, disregarding the value of any improvements.
Calculating the repayment
Here, Denan gives a hypothetical example. A tenant rents a local authority-owned flat in Mitcham with a market value of £300,000 and decides to buy the property after receiving a 20% discount, worth £60,000.
If the home rises in value to £450,000 in the second year of ownership and the purchaser decides to sell, they would have to repay 80% of the 20% discount, which is now worth £90,000. In other words, the seller would have to repay £72,000 –80% of £90,000.
Other local authorities demand that anyone selling an RTB property within the first five years of ownership must repay the total discount plus all or a percentage of the profit.
Meanwhile, a growing number of London councils, including Lambeth and Hackney, insert a clause into RTB sales stating that if the purchaser wishes to sell the property within five years of becoming the owner they must give the local authority first refusal.
If the local authority takes up option to repurchase the property, the seller could only receive the exact amount he or she paid for it.
On the other hand, if the local authority does not take up its right to repurchase an RTB property, the current owner could be free to sell it on the open market and not repay any money to the council.
The rules on the repayment of discounts and profit on RTB properties differ depending on the local authority, the type of property and the amount of discount the purchaser received. Denhan advises RTB property owners wishing to sell the home to contact their council in order to calculate the amount of repayment the local authority may require.
How much is your RTB home worth?
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For more information, contact us today.