Right to Buy Maximum Discount Increase
On the 21st July 2014, the maximum Right to Buy discount for tenants wishing to purchase their rented property was increased to £77,000.00 (from £75,000.00) across England (£102,700.00 from £100,000.00 in London).
The changes have also seen an increase in the discount that previously applied only to houses.
The maximum discount for houses has been increased from 60% to 70% in line with the discount that applied and continues to apply to flats.
The maximum discount will now increase on an annual basis (the next increase coming into effect on 5th April 2015 and will be reviewed every April) in line with the Consumer Price Index.
How does this affect our Landlord Clients?
If a Landlord has served a Section 125 Notice to a qualifying tenant prior to 21st July 2014 and the tenant qualified for the maximum discount available, if the purchase has not yet completed, a revised Section 125 Notice must be served as soon as reasonably practicable confirming the increased maximum discount entitlement.
A revised notice does not need to be served where the tenant notified the Landlord before 4th August that the new discount should apply.
All ongoing Right to Buy transactions should be reviewed to ascertain whether a revised Section 125 Notice will need to be served.
What if completion took place before 21st July 2014?
Where completion took place prior to 21st July 2014 then no further action is required. Tenants may make contact and try to claim a higher maximum discount applied to their transaction but changes to the purchase price only need to be made where completion has not yet taken place or if completion took place after 21st July 2014.
Any Section 125 Notices served from now should reflect the increased discounts until 5th April 2015 where further increases may take affect and the maximum discounts for all live transactions at the time should be reviewed.
The increases to the maximum discount seek to increase the number of tenants who are becoming homeowners via the scheme. The money generated from sales of Right to Buy properties is recycled and provides a fund for the building of new affordable homes for rent.
Since 2012, where the last increase in the maximum discount was applied, there has been an increase in the number of tenants who have purchased their home. A further increase in the discount, along with an easier application process (the application forms are to be simplified and a Right to Buy agent service will start to run to advise tenants seeking to apply), should see further increases in the number of tenants applying.
Stewart Freeman, Shakespeares