Steps to owning your own home

Transcription

1 Steps to owning your own home Information for secure tenants about their right to buy Section 121(A) of the Housing Act 1985 (as amended) Statutory Instrument 2005 no We have a duty to tell our secure tenants about their right to buy the home they live in. Already, more than 15,000 secure council tenants have bought their home from Southwark Council. If you are thinking about exercising your right to buy, there are a number of things set out in this leaflet which you will need to consider.

2 Who can buy their council home? Most of the council s secure tenants have the right to buy their home, but there are some exceptions. These can concern the applicant or the property they live in. Please look carefully at the appendices on pages 10 and 11, at the back of this leaflet, where the exceptions are set out in detail. The first lists why a person cannot exercise their right to buy. The second lists the reasons why a property cannot be bought. How do I buy my council home? Step 1 Application If you think you are eligible to buy your council home, you can ask for a right to buy pack at Home Ownership Services, Abbeyfield Road, London SE16 2BS. You can also call , hsg.homeownership@southwark.gov.uk, or visit Southwark s website for more information. The RTB1 application form should be completed and returned to Home Ownership Services at the above address. Please note that we often require people to prove that they are the secure tenant and while we do check signatures, we sometimes need to ask for additional proof. If you need any help in completing the form, you can contact the right to buy team and speak to a right to buy officer. 2

3 Step 2 Qualification We will send you a RTB2 response form telling you whether or not you have the right to buy. For you to be able to exercise your right to buy, you need to have been a tenant or licensee of a public authority, such as a local council, housing association or other social landlord, for a minimum number of years. This is called the qualifying period. The rules governing the qualifying period changed on January You only need to have a two year qualifying period if either: a) your current tenancy was granted before January and has been continuous, or b) you have had a continuous series of tenancies or licences from before January (but you must hold a secure tenancy at the time you make your application). In all other circumstances, e.g. if your first tenancy was after January , or if for a period ending after January you were not a public sector tenant or licensee, your qualifying period is five years. Step 3 Offer notice If you do have the right to buy, we will need to gain access to your property to carry out a valuation and energy performance survey. We will send you a formal offer notice, also known as a section 125 notice, which will tell you how much you will have to pay to buy your home, and other important information about service charges. The notice will also tell you about any structural defects we know about in the building. In addition, for properties to be sold on a leasehold basis, it will tell you about any planned major works the council intends to carry out in the next six to seven years, and the amount you will have to pay. The offer will also include an energy performance certificate which contains information about how energy efficient and carbon efficient your home is. 3

4 Step 4 Accepting the offer Along with the offer notice, we will send you a form asking if you wish to accept the offer, decline it or ask for the property to be re-valued independently by the district valuer. If you accept the offer and want to continue with the purchase, you must tell us the name of the solicitor who will be acting for you. We will need to have floor plans drawn up of your property. This will mean gaining access to your home. If you feel that our valuation of your home is too high, you may reject the section 125 offer notice and request an independent valuation from the district valuer. This must be done within three months of receiving the section 125 offer notice. You must submit any supporting documents you wish the district valuer to take into consideration within four weeks of your request. The district valuer will inspect your home before arriving at his decision. Once we receive the district valuer s decision, we will serve you with a section 128 offer notice. If you feel that the district valuer has made a significant error or disregarded your evidence you can submit an appeal within 28 days of receiving the section 128 offer notice. Step 5 Legal representation If you accept the offer, we must get plans of your property from the Land Registry. This takes six to eight weeks. To speed the process along you may wish to arrange for any mortgage you may need while we are obtaining the plans. Once we have the plans, we will pass all the documents to our solicitors who will then contact your solicitor to arrange the final details of the sale. Step 6 Completion Just before completion, we will undertake a rent check to ensure your rent has been paid up-to-date: we can stop completion if you owe four or more weeks rent. When completion occurs, the council will close your rent account and open a service charge account to which any service charge monies you paid on completion will be credited. 4

5 What happens if you believe Southwark Council is delaying the sale? If at any time during the process you believe that the council is delaying the sale, you may send us an RTB6 initial notice of delay form. The council must respond to this within one month with a counter notice form, RTB7. If it fails to do this or fails to take the necessary action to remedy the delay you may serve an RTB8 operative notice of delay. Forms RTB6 and RTB8 can both be obtained from Home Ownership Services. The rent you have paid in the period between the service of a valid RTB6 (if the delay is because we have not sent you an RTB2 or section 125 notice) or RTB8 (in any other circumstance) and when the council serves an RTB7 counter notice, or up to completion of the sale, may be deducted from the purchase price. The amount of rent that can be deducted depends on the length of the delay. What happens if I delay the sale? If the council thinks that you are delaying the sale, it can serve you a notice instructing you to complete the sale within eight weeks. This notice is valid unless you reply and are able to provide reasonable grounds of a disagreement concerning the terms of the sale. If you cannot do this, we send you a second notice, which gives you a final eight weeks to complete your purchase. After the expiry of this second notice your right to buy application is terminated. If this happens and you still wish to exercise your right to buy, you may have to submit a new application and start the process again. What can stop the right to buy process? Demolition notice If there are proposals to demolish your home and the council has served an initial demolition notice, we may suspend your application for the term as stated on the notice. If the demolition does not take place after that time, you may complete the purchase on the original terms. However, if plans to demolish continue and we serve a final demolition notice, then your right to buy that property will cease. Under certain circumstances you may be entitled to compensation to cover your out of pocket expenses. 5

6 How much will I have to pay for my home? First, the council will calculate the value of your property as if it is empty and there are no legal issues that could affect its value. This is called an open market valuation. Then, because secure council tenants in Southwark qualify for a discount of up to 100,000, the council will re-calculate the purchase price by subtracting your discount from the open market valuation. However, if we have paid to build, acquire, repair or renovate your home, we cannot sell it to you for less money than we have spent on it over the past fifteen years. In these circumstances the discount will be limited. This situation is rare in Southwark and usually only occurs when a property has been built or acquired recently. The value placed on your property will reflect the current state of repair. If the council carries out works to your home after your application date and prior to completion you will need to pay for them on completion. The valuation will take into account any future major works which you will have to pay for later. We will notify you of this in your offer notice. What else will I have to pay for if I buy my home? Your solicitor who will act on your behalf to make sure that everything is done properly. You will have to pay for their time and for disbursements, which are costs that they incur on your behalf (such as local authority and land registry searches). Survey the council will not carry out a survey of your property as we have already carried out a stock condition survey for all our properties. You are strongly advised to have a survey of your own carried out. Stamp duty land tax this is a tax on the sale of the property and is calculated as a percentage of the property s value. If your home is in one of the electoral wards listed below, the threshold over which you start to pay stamp duty is 150,000 rather than 125,000. This Disadvantaged Areas Relief applies because the Government has decided to give extra help to people buying properties in areas classified as disadvantaged : Friary, St Giles, Consort, Cathedrals, Liddle, Browning, Brunswick, Faraday, Rotherhithe, Abbey, Chaucer, Newington, Barset, Waverley, The Lane, Bellenden, Burgess and Bricklayers. Rate Properties in disadvantaged wards All other properties 0% 0 up to 150,000 0 up to 125,000 1% Over 150,000 up to 250,000 Over 125,000 up to 250,000 3% Over 250,000 up to 500,000 4% Over 500,000 Valuation fees and mortgage costs the council will not charge you when it carries out the valuation of your property, but if you are buying your property with a mortgage, the mortgage company will probably want to carry out its own valuation. They usually charge for this. Many mortgage companies also charge an administration fee for arranging the mortgage. 6

7 What will I have to pay for after I have bought my home? Although you will no longer pay rent to the council, you will now have other financial commitments: Mortgage you will start to pay the mortgage company at the rate you first agree with them when you take out your mortgage but you need to be aware that mortgage interest rates may go up or down. If they go up, your mortgage repayments will increase. You will also have to pay the charges for any other loan you take out which is secured on the property (for home improvements, for example). If you do not make payments as required by the mortgage or loan company, they can take action to repossess your home. The council cannot assist you in arranging a mortgage. Life insurance your mortgage company may insist that you take out life insurance or mortgage protection insurance to cover the cost of your mortgage. Council tax you must continue to pay your council tax and your bills for gas, electricity, telephone, and other services. Water rates while tenants pay an amount for water rates directly to the council who then pay the water company, home owners must pay these directly to the water company. We will notify Thames Water on completion that you are now liable. Insurance you will be expected to insure the contents of your home. You should consider making sure that this insurance will also cover damage caused to any neighbouring property by something that happens in your home, such as a leak from an appliance or pipe for which you are responsible. This is called third party insurance. For freehold properties, or houses sold on leases, you will also be required by your mortgage lender to take out buildings insurance. For leaseholders this is included in the annual service charge. Maintenance you will be responsible for repairing and decorating the inside of your home. Things that the council might have done for you as a tenant e.g. replacing and annual servicing of individual hot water boilers, repairing kitchen units and bathroom fittings, or the electrical wiring or plumbing will now be your responsibility. If a house has been sold to you freehold, you are also responsible for repair of the property s exterior, roof, and other structures. 7

8 Service charges If you become a leaseholder, you will own your own home, but not the building or the land that it is on. You are required to pay service charges for any communal services the council provides to the building or land. There are two types of service charge: 1. Annual (or revenue ) service charges are for things such as cleaning, day to day repairs, lifts, caretaking, grounds maintenance, heating and hot water (if your property is part of a district heating system), as well as buildings insurance. If you apply for the right to buy, the council will let you have an estimate of what your service charges will cost. The services for which you will have to pay will be listed in your offer notice. 2. Major works (or capital ) service charges are for any large scale repairs the council may carry out to the block, such as redecoration, concrete repairs, renewing the roof, replacing windows, renewing water tanks, or rewiring the landlord s electrical supply, etc. If you apply for the right to buy the council will let you know what major works it expects to carry out in the next six to seven years and give you an estimate of the cost of works. This estimate will be at today s prices, so we are allowed to add compound building cost inflation when the works are carried out. This can increase the cost substantially because of the rates at which building costs are increasing. Remember, if you do not pay your service charges, the council may ask the court for a money judgement against you. This may affect your future ability to obtain credit. With most houses you will be sold the freehold instead of a leasehold. You will own both the building and the land that your home is on. As a freeholder, you will be responsible for looking after both the inside and outside of your home, including any garden and fences sold with your home. You will also be responsible for insuring the building as well as its contents. If the house is on an estate, you will have to contribute towards the upkeep of the estate, such as caretaking and grounds maintenance, repairs to communal footpaths, estate lighting, and other items. If your house is connected to a communal district heating system you will also have to pay for this service, although in such cases the council will carry out heating repairs for you when necessary. In some cases, houses are sold on leases. This happens when the council does not own the freehold of the land, and therefore cannot sell you the freehold. If the house is sold on a lease, your position to all intents and purposes is the same as a freeholder in terms of the payment of service charges. There are some blocks of flats in Southwark where the council does not own the freehold of the land on which they are built. In these cases we will sell you an underlease. Service charges for these properties may differ depending on which (if any) services are supplied by the the council s landlord. 8

9 Discount repayment If you sell your home before the discount repayment period expires you will be legally bound to pay back some, all of, or in some cases more than the original discount. It is the council s policy to insist on repayment in all cases, except where there are the most extreme medical circumstances and where the repayment of the discount monies would greatly impact on the homeowner s ability to fund the purchase of a suitable property. The council can use its discretionary power to waive the charge. The applicant(s) will be asked to complete medical and financial questionnaires and provide supporting documentation. The discount repayment period is either: a) three years if the application was made before January or b) five years for applications made after January The amount of discount repayable on properties sold following an application made before January is the amount of discount given, reduced by one-third for each full year after the date of completion of the sale. For applications made on or after January , the amount of discount repayable is more complicated. The full amount to be repaid is calculated as a percentage of the value of the property on resale. This figure will be reduced by one-fifth for each full year after the date of completion of the sale. Discount repayment periods are reduced by the length of time any valid delay notice was in effect. Right of pre-emption (right of first refusal) This applies to the resale of any property sold under the right to buy, which results from an application made after January Your lease or transfer will contain an obligation that, should you wish to sell the property within ten years of the right to buy sale, you must first offer it back to the council. This will be noted on the title deeds. We have first right of refusal to buy the property back at full open market value price. The council will only exercise its rights in exceptional circumstances, and we have to respond within a strict statutory timetable. 9

10 Circumstances under which right to buy cannot be exercised Appendix A: Reasons relating to the persons applying You do not have the right to buy your property if: You are the spouse or family member of a secure tenant and that secure tenant does not wish to buy. You are a joint tenant and one or more of the other joint tenants do not wish to exercise the right to buy and refuse to allow you to make an application in your own name. (Note: permission for one or more tenants to make an application must be in writing from the joint tenant(s) who do not wish to participate.) You are applying jointly with (a) secure tenant(s) as a family member but have not lived in the premises continuously for 12 months before the application was made. (Note: the council may exercise some discretion in these circumstances if there are medical reasons and the family member cares for the joint tenant(s).) You are not the secure tenant (e.g. you have an introductory tenancy, demoted tenancy or a licence). You have a bankruptcy petition against you; you have a receiving order in force against you; you are an undischarged bankrupt or you have made a composition or arrangement with your creditors, the terms of which are still outstanding. 10

11 Appendix B: Reasons relating to the property The following relate to Schedule 5 of the Housing Act 1985 (as amended) which provides seven types of property that cannot be sold under the right to buy: The council leases the property from another landlord and there are less than 21 years remaining on that lease where the property is a house or 50 years otherwise (there are some exceptions to this where the council s landlord is a housing association). The property forms part of, or is within the enclosure of, a building which is held mainly for purposes other than housing or is situated in a cemetery and the property was provided to you or your predecessor as part of a job. The home has features which are substantially different from those of ordinary homes and are designed to make it suitable for occupation by physically disabled persons. It must also be one of a group of homes that the council normally lets to physically disabled persons and have services or facilities provided in close proximity to the group of homes to assist those persons. The home is one of a group of homes generally let to people who are suffering, or who have suffered, from a mental disorder and special services or facilities are provided to them (e.g. social services). The home is one of a group of homes that are particularly suitable for occupation by elderly persons and that the council normally lets to such persons and physically disabled persons. There must also be special facilities provided to the group of homes to assist those persons. The home is particularly suitable for occupation by elderly persons and was let to the tenant or a predecessor for occupation by a person aged 60 years or more. Homes which have been served with a final demolition notice. There are other properties within Southwark that cannot be sold under the right to buy. These are listed below: Some homes which are let as part of a business premises (i.e. public houses, shops). Almshouses. Homes given to students so that they can follow certain full-time courses at a university or college (unless the tenancy continues for more than six months after the tenant stops attending the course). Properties which have been bought for development and which are being used as temporary housing before the land is developed. 11

12 Contact Southwark Council Home Ownership Services Specialist Housing Services Division Abbeyfield Road London SE16 2BS Tel Fax website. 12