The Right to Buy (RTB) scheme in the UK allows eligible council and housing association tenants to purchase their homes at a significant discount.
Introduced in 1980, the scheme has helped millions of people become homeowners. However, selling a Right to Buy property comes with specific rules and considerations. This article explores when and how you can sell a Right to Buy property in the UK.
Selling a Right to Buy property in the UK involves understanding and navigating specific restrictions, especially within the first five to ten years of ownership.
After these initial periods, you can sell your property much like any other homeowner, but it’s crucial to consider market conditions, property maintenance, and potential tax implications.
Initial restrictions on selling
When you buy a property under the Right to Buy scheme, you are subject to certain restrictions on selling the property for a specified period. These restrictions are intended to prevent the immediate sale of the property for profit and to ensure that the scheme benefits long-term residents.
Five-Year Rule
If you sell your Right to Buy property within the first five years of ownership, you will be required to repay some or all of the discount you received. The amount you repay is based on a sliding scale:
- Year 1: 100% of the discount
- Year 2: 80% of the discount
- Year 3: 60% of the discount
- Year 4: 40% of the discount
- Year 5: 20% of the discount
After five years, you can sell the property without repaying any of the discount.
Offer back to the local authority
If you decide to sell your Right to Buy property within the first ten years, you must first offer it to your former landlord (usually the local council or housing association) or another social landlord in your area.
This is known as the “right of first refusal.” The landlord has the right to buy the property back at the full market value, as determined by an independent valuation.
Homes in rural areas
Your former landlord may limit who you can sell your home to if your home is in:
- a national park
- an area of outstanding natural beauty
- an area the government says is rural for Right to Buy
For example, you may have to sell your home to someone who’s lived or worked in the area for more than 3 years. This may mean you have difficulty getting a mortgage to buy your home.
Your landlord will tell you if this could apply to your home when you apply for Right to Buy.
Considerations for selling after the initial period
Once the initial five-year period has passed, and you have adhered to the right of first refusal within ten years, you are free to sell your property without any specific restrictions related to the Right to Buy scheme. However, there are still important considerations:
- Property Market: Like any property sale, the timing of selling your Right to Buy property should consider current market conditions. Selling in a seller’s market, where demand is high, can yield a better price than in a buyer’s market.
- Property Condition: Ensure your property is in good condition before putting it on the market. Well-maintained properties are more attractive to buyers and can sell for a higher price.
- Capital Gains Tax: If the property is not your primary residence, you may be liable for Capital Gains Tax (CGT) on any profit made from the sale. It’s advisable to consult a tax advisor to understand your potential tax liability.
- Mortgage Considerations: If you have an outstanding mortgage on the property, ensure you understand the terms of your mortgage agreement, especially any early repayment charges or conditions.
5 steps to sell your Right to Buy property
- Valuation: Get an accurate valuation of your property from a qualified estate agent or surveyor.
- Estate Agent: Choose a reputable estate agent to help market your property.
- Legal Assistance: Contact Oakwood Property Solicitors to handle the legal aspects of the sale.
- Marketing: Ensure your property is well-marketed, with high-quality photos and detailed descriptions.
- Negotiation and Sale: Be prepared to negotiate with potential buyers and proceed through the sale process with the guidance of your estate agent and solicitor.
Further reading
Selling – Oakwood Property Solicitors
WHAT TO DO NEXT
To make a start on the next step in your property journey, get in touch today to book a consultation with a member of our team. Call us on 0113 218 5727 to find out how we can help you.
