Home ownership brings many benefits but it also involves responsibility and risk. This page endeavours to bring to prospective purchasers attention relevant information to consider before deciding whether or not to purchase their home. It is not a definitive statement and prospective purchasers are recommended to take their own advice from appropriate professionals such as financial advisers, solicitors and surveyors.
If a purchaser obtains a loan [e.g. a mortgage] to finance the purchase or uses their home as security for further loans and fails to keep up with repayments then the lender may take possession of the property and sell it using the proceeds to discharge outstanding monies.
Property values have generally increased in the medium to long term but past performance is no guarantee of future performance and values can fall as well as rise. Prospective purchasers must bear this in mind.
A government survey has shown the vast majority of tenants that have purchased under the Right to Buy were satisfied or very satisfied with their purchase.
A tenant of a Council dwelling who has been a secure tenant for at least five years in the case of tenancies granted after 18 January 2005 or two years if the tenancy was granted prior to that. This does not have to be with Thurrock Council or even in the present dwelling, tenancies with other Councils or Housing Associations may count in establishing the tenancy qualification.
Yes. There are a number, including sheltered housing for the elderly, those with special physical and/or mental needs. Dwellings let in connection with the tenant's employment e.g. dwellings occupied by school caretakers. Dwellings used for temporary housing.
In addition to sheltered housing being excluded, homes that are particularly suitable for occupation by elderly people having regard to the dwelling's location, size, design, heating system and other features are excluded. If an applicant finds her/his application denied under these grounds there is a right of appeal and relevant information will be provided with the refusal.
The market value of the property disregarding any improvements carried out by the tenant is assessed, against this is set discount to produce the purchase price. An applicant may [within three months] appeal to the District Valuer if s/he does not agree with the Council's assessment of the market value.
If the prospective purchaser has received previous discount in respect of an earlier purchase that discount is set against [reduces] the discount for the current application.
If the Council has in the past 10-11 years spent a substantial sum on the property the discount cannot reduce the price below what has been spent on the building. This may result in the discount being limited or even no discount being granted.
A tenant of a house starts with 35%, this increases by 1% per annum for each year of tenancy up to a maximum of 60%. So a tenant of ten years receives 35% +5% =40%
A tenant of a flat starts with 50%, this increases by 2% per annum for each additional year of tenancy up to a maximum of 70%. So a tenant of ten years receives 50% +10% =60%
Notwithstanding the above discount rules the Government have prescribed that no tenant in Thurrock can receive more than £75,000 discount in monetary terms even if their percentage entitlement is greater.
A small proportion of Council dwellings have been designated defective. These are concrete properties built in the 1950s and elsewhere in the country [but not Thurrock] examples of these types of dwellings have failed structurally. Homes falling into this category include the following forms of construction: Airey, Unity, Stent, Wates and Cornish. As a result of their designation as defective, lenders will not usually make mortgage finance available unless costly remedial works have been carried out. Tenants of these properties may still exercise the right to buy. They will receive a letter formally notifying them that their dwelling is designated defective and the market value will reflect this designation. Prospective buyers must however carefully consider the structural condition of the property and the resale implications of the designation in making their purchase decision.
Flats in these blocks may not attract mortgage finance and if they do at the present time lenders may stop lending on them in the future. Purchasers of these flats in the past have had difficulty in selling their homes.
If you purchase a dwelling under the Right to Buy you may sell it at anytime but if you sell within the first ten years of buying you must give a local social housing provider the first option of buying it. This measure came into effect on 18 January 2005 as a result of the Housing Act 2004.
If you sell within the first five years of buying you will have to repay discount. A sale in the first year will result in 100% discount being repayable, this reduces by 20% for each complete year of ownership so that a sale in year five gives rise to only 20% discount being repayable. The discount repayable is based on a percentage of open market value of the property [owner's improvements are disregarded]. If a tenant buys a property valued at £120,000 and receives discount of £34,000 his/her discount in percentage terms is 28.33%. Therefore if a sale takes place in the first year of ownership 28.33% of the market value of the property must be paid to the Council. If a sale takes place in the fifth year of ownership 20% of 28.33% of the property's open market value must be repaid. See below:
|Repayable Discount:||Market value||£200,000|
|Discount on original sale||28.33%|
|Repayable in year 5||20%|
This measure was introduced on 18 January 2005 by the Housing Act 2004. Prior to that discount was only repayable if a sale took place in the first three years of ownership and was based on a percentage of the actual discount given in monetary terms.
There are many lenders providing different types of mortgages, it is therefore vital that purchasers consider all the options so that they can choose the best type of mortgage and the best provider for their personal circumstances. Taking advice from an Independent Financial Advisor is recommended. The Financial Services Authority [FSA] provides helpful advice for consumers. Their telephone number is 0845-6061234 and their webpage is www.fsa.gov.uk.
The Council does not provide mortgages either for tenants to purchase or for future buyers of the property.
If you buy your home, you will take on responsibility for any outstanding repairs or structural problems. This is often referred to as 'caveat emptor' let the buyer beware. In order to make the right decision you must satisfy yourself about the structural condition of the property. Prior to making you an offer to purchase, the Council will carry out a limited valuation inspection. This is not a survey of the structure of the property. If you are buying with a mortgage the lender will require a mortgage survey to be carried out, this involves a limited inspection and is designed to enable the lender to decide if the property offers suitable security for lending purposes. The Council therefore recommends that all prospective purchasers commission their own Homebuyers Report or Structural Survey. The cost for this will fall on the prospective purchaser but with the consent of the mortgage lender it is sometimes possible to combine a structural report with the mortgage report therefore resulting in savings to the purchaser. Such a report may run into hundreds of pounds but in the light of the value of the property it is a small cost in percentage terms. Addresses and telephone numbers for local Chartered Surveyors that will provide appropriate survey reports can be found in the Yellow Pages or on the internet at www.ricsfirms.com
Most buyers instruct a solicitor to handle the legal procedure necessary to complete the purchase. This is not mandatory and books are available to help buyers deal with the procedures and paperwork themselves.
The costs charged by solicitors vary so it is worthwhile for buyers to speak to and get quotes from a number of practices. Addresses and telephone numbers for local Solicitors can be found in the Yellow Pages or on the internet at www.lawsociety.org.uk.
After you purchase, you alone will be responsible for the future decoration, repair and maintenance of the interior of the property and its services. If you purchase a house you will also be responsible for all repairs and services to the exterior of the property and its grounds too. In the case of flats the Council retains responsibility for the exterior and common parts but recovers its costs in the annual service charge. Building repairs can be costly hence the importance of obtaining a survey prior to purchase so buyers have as much knowledge as possible about the property. Building elements deteriorate over time and their replacement can be expensive. Repairs can also occur at a financially inconvenient time for owners. It is therefore prudent to set money aside at regular intervals to cover for such repairs. If you are a house owner you should arrange for building insurance to cover the cost of repair/reinstatement in the event of fire or a similar incident. Such insurance will not however cover you for repairs arising from wear and tear to the property. Buildings insurance is provided for flat owners by the Council but the cost of providing it is recovered in the annual service charge.
If you buy a flat or maisonette the Council will be responsible for the external repair and maintenance of the block and its common parts. The Council will also provide communal services such as lighting and caretaking. The Council will recover its costs from you by way of a service charge. Such charges can fluctuate according to what works are carried out in a particular year and the level of communal services provided in that year. With some types of property such as high-rise flats repairs can be very expensive and frequent giving rise to high service charges. Also, the Council is obliged to carry out repairs when they are needed which may not be financially convenient for you. When you receive the purchase price of a flat you will be issued with estimated service charge. This will give you an indication of the charge that you will pay in the first year but bear in mind unexpected repairs might become necessary resulting in a higher charge and the general trend for charges is upwards. The law does however provide a number of protective measures for leaseholders and the following independent website is worth looking at by prospective flat and maisonette buyers www.lease-advice.org.
Tenants already pay for most of their utility costs [electricity, gas, sewerage and telecommunications] but the rent [where there isn't a meter] includes a sum for water so purchasers will need to include this in their calculations. Tenants pay Council Tax and this will continue if they become owners.
It is prudent for everyone whether they be a tenant or an owner to insure the contents of their home. There are many policies available so it is advisable to seek a variety of quotes to obtain the cover that is best for your personal circumstances.
Mortgage lenders will require you to take out life assurance to at least the value of the property. This means that in the event of your death the loan will be discharged. There are many providers of this cover and you should liaise with the lender to get the best cover for you.
You should consider taking out such insurance to cover payments in the event of you losing your income through illness or unemployment. Again, there are many providers and you should seek quotes and liaise with your lender.
If you are buying with the assistance of a mortgage you will know the property currently qualifies for mortgage lending. If you are paying without such finance you should make enquiries to satisfy yourself by talking to lenders to confirm mortgages are available to prospective purchasers. If mortgage finance is not available it will be difficult to sell the property on and its value will be depressed.
Buyers need to be aware lenders over time can change their policy on mortgage lending for certain types of properties in certain locations. The fact that mortgage finance is currently available to purchasers does not mean it will always be available. This is a risk of property ownership.
As an owner when you sell you will have a capital sum to purchase another property of your choosing [subject to your financial circumstances] in the location of your choice. You will usually have a much wider choice than tenants wanting to move. However for some types of property, most notably sheltered housing, there is very limited choice in the private sector. Consideration should be given to this.
The PDF file linked below contains a grid wherein you can set out your possible costs of home ownership. This will indicate the affordability of your home at the present time. You should also bear in mind the prospects of your income changing and how that might affect the property's affordability.