Right to Buy Information for Tenants

Initial costs likely to be incurred by a secure tenant in exercising the Right to Buy

If you exercise the Right to Buy, you will incur various costs before you complete the purchase of your home and on completion.

The following additional costs are likely to apply:

• Solicitors fees (for the conveyancing)
• Land Registry fees
• Fees for local searches
• Stamp Duty

There are also costs associated with arranging a mortgage, namely:

• Mortgage arrangement fees
• Valuation & survey fees

There are currently three types of survey available:

• Mortgage Valuation (basic)
• Homebuyer Survey & Valuation
• Building Survey (recommended)

The best way to reach an informed decision on such an important investment as a home is to have a professional survey carried out.

When looking for a solicitor, surveyor or a mortgage, it is always advisable to shop around and obtain independent financial advice.

Costs associated with owning your own home

As the owner of a property you are likely to have to make regular payments associated with owning your own home.  These will include the following:

Mortgage Repayments

Unless you purchase your home with cash you will normally need to take out a mortgage (or legal charge) to buy the property. A mortgage is a long-term loan to buy property and there are various kinds of mortgage that your Bank or Building Society will be able to tell you about. An independent financial adviser may also be able to help you.

Typically the amount that you borrow is repaid by instalments, plus interest, usually monthly, over a number of years. This is often a 25-year period but could be a different number of years depending on your circumstances.

Building insurance

Building insurance is required to cover the cost of rebuilding your home in the event of damage caused by certain unexpected events such as a fire.  If you are buying a leasehold flat or maisonette the Council will insure the property and you will pay your contribution towards the cost with your service charges. If you buy a freehold house you will need to take out building insurance yourself.

Mortgage Payment Protection Insurance.

You may also decide to take out mortgage payment protection insurance. This again would normally mean you paying a monthly premium. Should you become unemployed or unable to work through illness your mortgage repayments would be met for an agreed maximum period. 

The importance of making regular mortgage payments

As referred to above, you are likely to have to take out a mortgage to purchase your own home.

It is very important that you make regular mortgage repayments as if you fall behind you risk losing your home.

If you are unable to keep up your mortgage repayments, you should speak to your lender as soon as possible and should not wait until you are months in arrears. Lenders may be able to tell you where to get help. 

If you lost your income through unemployment and as a result your property was repossessed, you would not normally receive Income Support for the first nine months. The Income Support you would be entitled to claim would only be for the mortgage interest payments, and may not cover the total monthly repayments.

In addition, the Council does not have to give you another tenancy if you lose your home in this way.

Costs associated with keeping your property in good repair

If your home is a house and you buy the freehold, you would be responsible 

for keeping your property in a good state of repair. This is likely to include ongoing maintenance and from time to time major repairs, such as replacing the roof. You should be prepared and budget for such occurrences.

If you are buying a leasehold flat or maisonette, your landlord will remain responsible for the maintenance of the structure of the building and any common parts: you will be responsible for the internal parts of your property.

Your share of the Landlord’s costs is known as a service charge. Service charges can vary considerably but, particularly for flats in high-rise blocks, can be very high and you must budget for them.

If you decide to buy, your landlord must give you an estimate of any service charges that you are likely to have to pay. The estimate will be in two parts – day-to-day service charges and major works charges. Please read this information carefully and obtain any advice that you need.

Day-to-day service charges cover the ongoing costs of managing and maintaining your block and estate. Typically these may include the following:

• Day-to-day repairs to the structure and common parts
• Management
• Communal Grounds Maintenance
• Communal Cleaning/Caretaking
• Communal Electricity
• Lift Costs
• Concierge Costs
• Buildings Insurance

Day-to-day service charges do change, even during the first five years of a lease.

Major works charges are your contribution towards the landlord’s cost in carrying out any major repairs or improvements to the block and/or estate. These could include repairs to or replacement of the roof, windows, lifts, staircase or external painting and could potentially run to tens of thousands of pounds

Once he has given you an estimate for major works, the landlord is limited to charging you no more than the estimated sums during the initial period of the lease (approximately the first five years), except to take account of inflation. However, there is no special limit on charges for repairs carried out after the first five years. As stated earlier, bills for major works can be very large but there are schemes to help you with payments and your landlord will provide details of these at the appropriate times.

Some Freeholders may also have to pay estate costs for the repair and maintenance of shared communal areas on an estate such as pathways, play areas and gardens.

Repayment of discount

If you decide to sell your property within 5 years of completing your purchase under the Right to Buy you must pay back some or all of the discount that you received on the original purchase price.

The amount of discount that you must pay back is based on the resale value of the property. If you received a 10% discount on your original purchase, you would be required to pay back:

• 10% of the resale value if you sold in the first year
• 8% of the resale value if you sold in the second year
• 6% of the resale value if you sold in the third year
• 4% of the resale value if you sold in the fourth year
• 2% of the resale value if you sold in the fifth year

After 5 years you would not have to pay back any of the discount. In exceptional cases your landlord may waive the requirement to repay discount.