Housing Bill - Changes in the Right To Buy Scheme
by:
Nicola Bullimore
Presently council tenants are able to purchase their rented property after 2 years of tenancy. However, this is just about to change. As of the Eighteenth Gregorian calendar month 2005, the new Housing Bill becomes law and the current 2 years will change to a period of 5 years. This means, that once the proposals come into force, any new council tenant will have to wait 5 years before having the option of buying their property.
There is besides a proposal to extend the period during which landlords can require owners to repay several or all, of the discount given on a property in the case of an early resale.
Currently, purchasers of a property that has been bought on the right to buy scheme, can sell after 3 years with no requirement to do any repayments of the discount. The proposal suggests this should be extended to 5 years. Therefore, anyone who sells a property bought under the right to buy scheme inside
5 years of the purchase, will be requested to repay a percentage of the given discount. Repayment figures are as follows: -
Currently
Sale inside
the 1st year – 100%
Sale inside
the 2nd year – 66%
Sale inside
the 3rd year – 33%
Proposal amounts
Sale inside
the 1st year – 100%
Sale inside
the 2nd year - 80%
Sale inside
the 3rd year - 60%
Sale inside
the 4th year - 40%
Sale inside
the 5th year – 20%
With the foreseen drop in home prices in 2005 (meaning lower property valuations) combined with the new proposals further restrictions on council tenants wish to purchase, now may be a nice time to consider a right to buy.
The projected changes in the right to buy scheme include measures to reduce the attraction of buying a discounted property with the prospect of merchandising it to do a profit.
The initial idea of the right to buy scheme was to give ordinary families the chance to own their own homes, thing
they may not have been able to afford otherwise. However there are concerns just about the effects this has had on local housing stock and a number of folk profiteering from potential windfalls in big-ticket property areas.
Exploitation in the Right to Buy Scheme
There have been several schemes wherever
third party companies encourage tenants to purchase their homes under the right to buy scheme, by offering them cash incentives. The tenant purchases the property at a discounted cost under the right to buy scheme and at the same time
exchanges contracts to sell the property to the institution after 3 years at which point no discount penalty will be repayable. The tenant will lease the property to the institution and come out of the home with a cash sum. This leaves the institution free to rent out the property at the current market rental rates.
After three years the tenant sells the property to the company. The institution will either continue to rent the property at market rates or the property will be oversubscribed on at a substantial profit.
The incentive for the tenant is the lump sum offered, which can be anyplace
from £5000 to £26000 but is normally a percentage of the equity of the purchased property. This could be attractive to tenants who do not will to purchase their current home or hope to purchase a property in another area as it will give them a available ready-made deposit to buy another home.
The new proposals are designed to do this type of sale less attractive and prevent profiteering as well as securing local housing for the less well off.
The projected changes in section 180 and 182-189 of the Housing Act 2004 will come into effect on 18/1/2005.
For much information on a right to buy mortgage, visit Right To Buy( http://www.right-2-buy.co.uk ) website.
Nicola Bullimore has been working with folk regarding fiscal difficulties for a number of years. For much information regarding fiscal obligation issues, please visit Financial obligation Questions. http://www.debtquestions.co.uk
nicky.bullimore@landingnet.co.uk
