Housing Lawyer
Reinvigorating Right to Buy PDF Print E-mail
Thursday, 12 April 2012 00:00

Michelle Knight and Sarah Greenhalgh look at how the Government plans to kickstart the Right to Buy scheme and explain the impact on local authorities and housing associations.

The Government confirmed recently that from 2 April 2012 the right to buy discount available to tenants who qualify for the right to buy their home would be £75,000.00, subject to a cap of a maximum discount of 60% for a house and 70% for a flat.


Part V of The Housing Act 1985 sets out the main provisions governing the right to buy in England. The legislation was introduced in order to give council tenants the right to buy (RTB) their home at a discounted value, depending on how long they had been a tenant. A proportion of the discount is repayable where the former tenant sells their home within a certain period of time after completion. Concerns over the reduction in social housing led to discounts being reduced in 1997 and subsequently the introduction of the ‘Right of First Refusal’ for Registered Providers where a former tenant wishes to sell their home within 10 years of purchase.

The right to buy includes housing stock transferred from Local Authorities to Housing Associations; this right is referred to as the preserved right to buy (PRTB). To qualify for the PRTB, a tenant must have been a public sector tenant for five years. The percentage discount received depended upon the length of time spent as a public sector tenant and was capped at between £16,000.00 in most of London and £38,000 in the South East. 

The reform of the current right to buy legislation was first announced at the Conservatives' annual conference in Autumn 2011. It was not originally clear whether the reforms would include former council properties that qualify for the PRTB. However, the Government made it clear in their consultation paper, Laying the Foundations: A Housing Strategy for England that the discount changes will apply equally to the PRTB. The consultation ended on 2 February and the Government have now confirmed that the maximum discount level will be raised to £75,000.00 from 2 April 2012 under The Housing (Right to Buy) (Limit on Discount) (England) Order 2012. These changes will almost certainly result in reduced housing stock at a time when waiting lists for social housing are full. However, the Government has reaffirmed their ‘one for one’ commitment - to replace every additional home that is sold with a new affordable home. 

Reinvigorating Right to Buy – the new discount cap 

The new discount cap will be £75,000.00 across the country and applies to both local authorities and housing associations. The maximum discount percentage will remain unchanged at 60% for a house and 70% for a flat. The cost floor (which limits the discount to ensure that the purchase price does not fall below the costs incurred in respect of the dwelling house), will also be amended to apply to dwelling houses:

  • for 10 years for houses built or acquired by the landlord prior to 2 April 2012
  • for 15 years for houses built or acquired by the landlord on or after 2 April 2012.

The discount rates and qualifying period for eligibility have not changed. 

One for One Replacement – Local Authorities 

The way in which receipts will be dealt with by local authorities differs substantially from the current arrangements. Receipts will first be used to meet debt on additional properties sold. They will then be used to meet Treasury and Council forecast receipts. Finally, the balance will be used for investment into replacement properties. However, this balance will be handed over to central Government unless the local authority enter into an agreement showing that they can meet the one-to-one promise by contributing only 30% of the RTB receipts towards the cost of new affordable homes (matching the current affordable homes programme where the balance of costs are met by investment from private companies or by developing land currently owned). 

There are also new RTB pooling arrangements effected through The Local Authorities (Capital Finance and Accounting) (England) (Amendment) (No2) Regulations 2012. These require pooling payments to be made to the Government quarterly in arrears. The existing exemptions from pooling still apply, so that Councils can continue to apply for exemption from pooling arrangements (and therefore one-for-one replacement) for RTB receipts from new social homes built after July 2008. 

Currently local authorities cannot deduct administrative costs relating to RTB applications which do not result in a sale. The new legislation will introduce flat rate allowances for successful sales and will include 50% uplift for withdrawn applications. Full guidance for local authorities on the changes is available on the Communities and Local Government website. 

One for One Replacement – Housing Associations 

The Government have acknowledged that they cannot mandate how housing associations use their receipts from PRTB sales as private bodies. However, it is expected that any surplus receipts from sales are likely to be recycled to support new build and other public benefits. Where receipts are shared with councils, the sharing arrangements will continue in the same way as they do now. However, it is envisaged that housing associations will work with local authorities to develop replacement homes and the Government are working on incentives to encourage housing associations to reinvest. For further guidance on the forecast impact to housing associations please visit the Communities and Local Government website where an Impact Assessment has been prepared. Section 7 specifically outlines the impact to housing associations. 

Practical Steps to take

  • The discount cap should be applied to all existing RTB or PRTB applications where the transfer will not complete before 2 April. Local authorities and housing associations should therefore review all of their current applications and re-issue the Section 125 notices using the new discount cap.
  • Local authorities and housing associations need to be aware that all precedent documentation will need to be amended to take account of the new discount rules. This includes conveyancing documents, guidance notes issued to tenants and precedent letters.
  • Be aware that there are likely to be an influx of new applications and plan for this now.
  • Housing associations in particular must be aware that their administrative costs will rise due to the increase in PRTB applications (those that result in a sale as well as those that do not complete).
  • Your Stock Transfer Sharing Agreement will outline the allowance made for deducting sales costs from receipts and this will continue to be the case.

The Housing (Right to Buy) (Limit on Discount) (England) Order 2012 was laid before parliament on 12 March and will come into force on 2 April 2012.

Michelle Knight is a solicitor and head of the Home Ownership team and Sarah Greenhalgh is a paralegal at Anthony Collins. Michelle can be contacted on 0121 214 3550 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it


Latest News

April 23, 2014

Supreme Court to hold expedited hearing on benefit cap next week

The Supreme Court will next week hold an expedited hearing of a challenge to the Government’s introduction of the controversial ‘benefit cap’. Read more
April 15, 2014

Council, HCA and pension fund seal "first of its kind" housing investment fund

A contract for a housing investment fund – said to be the first of its kind – has been signed by Manchester City Council, the Greater Manchester Pension Fund and the Homes & Communities Agency. Read more
April 14, 2014

Supreme Court to hear case on EU migrants and temporary inability to work

The Supreme Court has agreed to hear an EU national’s appeal over a ruling that he was not eligible for housing assistance from a local authority as his inability to work was not temporary. Read more
April 01, 2014

London borough to use s. 106 agreements to tackle 'buy-to-leave' homes

A London borough is consulting on plans to use s. 106 agreements to tackle the issue of “buy-to-leave” homes. Read more
April 01, 2014

Law firm launches social housing litigation boutique with senior hires

An international business law firm has hired two senior lawyers to head up a specialist social housing litigation boutique. Read more



Construction iStock 000002149516XSmall 146x219
April 10, 2014

A new dawn for public sector bonds

In the light of the recent North Tyneside PFI Housing Project, Paul McDermott looks at the scope for the public sector to use bond finance for long term capital projects. Read more
Anti-Social 2 iStock 000001684994XSmall 146x219
April 10, 2014

Anti-social Behaviour Bill – nearly there!

Alex Loxton highlights some key issues on the pending anti-social behaviour reforms. Read more
April 10, 2014

Stating your grounds

A recent case has stressed the importance of stating grounds relied on in notices, writes Sharon Garrity. Read more
April 02, 2014

The Better Care Fund – what is in it for housing providers?

What opportunities does the Better Care Fund offer housing providers? David Owens explains. Read more
March 26, 2014

Refusing accommodation because of a misunderstanding

The Court of Appeal has upheld an appeal from an applicant who rejected an offer of accommodation while under a misapprehension that was only revealed after the refusal. Emily Orme analyses the case. Read more
March 26, 2014

It's a sin to tell a lie

Jon Baines looks at the data protection issues raised by councils' use of voice risk analysis when benefit claimants are on the telephone. Read more
March 26, 2014

Migrant children: s. 17 support for members of extended family

The High Court has dealt firmly with three arguments which are quite commonly relied upon in requests by NRPF (no recourse to public funds) individuals for support and accommodation under the Children Act 1989. Jonathan Auburn and Ben Tankel review… Read more


Older news and features

April 10, 2014

Stating your grounds

March 26, 2014

It's a sin to tell a lie

March 12, 2014

Room for manoeuvre

March 05, 2014

Core stability

March 05, 2014

The cap fits?

Click here for full section archive

Now Previewing on LGL.tv: Social Housing Allocations: Law and Practice (Click on bottom right of screen for full size.)

Featured Jobs

Coventry Law Centre

CLICK HERE to search all current vacancies

Featured Courses & Events

50% off LGLtv subscriptions
  • 1
  • 2

Sign up for Courses and Events Updates

* indicates required

Services v2

Yellow pages iStock 000009762383XSmall cropTo access details of individual advertisers, please click on the relevant banner below.

To search all entries in the Local Government Lawyer Services Directory, please click here


Easton Bevins Chartered Surveyors


 Shout_to_the_top_looking_left_iStock_000006002590XSmall_98x74 Latest Blog Posts





Snap Judgement

Is the role of monitoring officer worth the risk?