Capital Funding Guide

13. Voluntary Right to Buy Pilot

This chapter sets out the requirements and procedures which must be followed when providers process a Voluntary Right to Buy discount.

1. Overview

1.1 Purpose

1.1.1 The Voluntary Right to Buy Midlands Pilot permits tenants of housing associations to purchase their home at Right to Buy level discounts by way of voluntary agreement rather than legislation.

1.1.2 This guidance is to enable landlords to process the claim and payment of the Right to Buy discount through Homes England’s Investment Management System (IMS).

1.1.3 The Voluntary Right to Buy Pilot is not a Homes England Programme and queries about the pilot should be directed to the Ministry of Housing, Communities and Local Government (MHCLG) and the National Housing Federation (NHF).

1.1.4 Payment of compensation is made by Homes England as Financial Assistance on behalf of MHCLG and is therefore not subject to Homes England’s grant recovery requirements. Please see section 4.2.1 for further information.

1.2. Context

1.2.1 The policy and process for the Voluntary Right to Buy Midlands Pilot are described in the joint NHF/MHCLG document ‘Voluntary Right to Buy - Midlands Pilot: guidance for housing associations’ (the joint guide).

1.2.2 A landlord selling a home to a tenant under the scheme can obtain the full market value of the property it sells and can claim compensation for the value of the discount.

1.2.3 Under the pilot an applicant is only eligible if the tenanted home is located in the Midlands. Homes England is responsible for making such compensation payments for properties sold under this pilot. For further information about eligibility please refer to the joint guide.

1.2.4 In order to receive compensation (and compensation against future claims) landlords must follow the requirements set out in this chapter of the Capital Funding Guide. If a landlord breaches these requirements Homes England may make no compensation payment.

1.2.5 In this chapter of the Capital Funding Guide, the term ‘landlord’ is used instead of ‘provider’ or ‘Registered Provider’ to give consistency with other documentation for the Voluntary Right to Buy Midlands Pilot. ‘Applicant’ refers to the tenant in the process of purchasing his or her home.

2. Pre-Sale requirements

2.1 Registration

2.1.1 If the tenant(s) of a home have applied for the Voluntary Right to Buy and their landlord has conducted a basic check that the application is valid, for the purposes of systems management, the landlord must register the valid application on IMS within 10 working days.

2.1.2 The information required in the initial log is:

  • Unique Reference Number (URN) (note that this will be checked against the list of URNs allocated via the Digital Gateway)
  • landlord
  • address of the applicant’s home
  • LA

2.2 Eligibility

2.2.1 After the landlord has carried out the full tenant and property eligibility Check according to the eligibility criteria set out in section 3 of the joint NHF/MHCLG guide, the landlord should record in IMS if the applicant is eligible or not.

2.2.2 If the applicant is eligible and proceeding with the purchase the landlord should record the following details in IMS within 4 weeks of receipt of the application (up to 8 weeks is permitted for more complex applications):

  • Confirmation that the applicant(s) meet all the qualifying eligibility criteria
  • forecast value of property to be purchased (see below), estimated discount, and estimated sales completion date
  • qualifying period of public sector tenancy
  • headline details of applicant(s)’ income and savings
  • applicant(s)’ property details
  • if a portable discount, the address of the home the applicant is purchasing (if known).

2.2.3 The forecast value of the property purchased should be based on the landlord’s asset management records wherever possible.

2.2.4 For a ‘portable discount’ sale (where a tenant is purchasing a different property to the one they currently reside in) a reasonable estimate of the value of the property to be purchased should be made, using the estimate value of the tenant’s existing home in the absence of other evidence (e.g. in the event the tenant may be porting to a different landlord). The field will need to be updated once a valuation has been conducted (for both a standard and a ‘portable discount’ sale).

2.2.5 For a ‘portable discount’ sale the address of the home to be purchased and details of the new landlord, where applicable, should be entered as soon as it is known.

2.3 Valuation and authorisation to proceed

2.3.1 After the landlord’s valuation has been carried by an independent Royal Institute of Chartered Surveyors qualified valuer and prior to making a formal offer to the tenant, they must submit the information listed below with a request for an authorisation to proceed.

  • value as confirmed by the independent valuer
  • value of discount and compensation claim
  • forecast date of completion (updated)

2.3.2 Homes England will then issue a notice to the landlord, through IMS, either:

(a) authorising the landlord to proceed with the application, or (b) requiring the landlord to halt further processing (if there are insufficient funds to cover the forecast compensation in the forecast completion year)

2.3.3 In the case of (b) the application will be shown on IMS as ‘eligible, pending available resources’ and will be placed on a waiting list. If further resources become available, and this point on the waiting list is reached, the landlord will be notified and is required to reconfirm the request for an authorisation to proceed.

2.4 Following an authorisation to proceed

2.4.1 The record of the application remains available to the landlord to amend. The following information must be added as soon as it becomes available from the application process:

  • date of formal offer made to tenant
  • date offer to tenant accepted
  • agreed date of completion

2.4.2 If there is a change to either (a) the value of the compensation claim, or (b) the date of completion is updated then the landlord will be required to make a further request for an authorisation to proceed (with the same potential outcomes and consequences set out above).

2.5 Termination

2.5.1 An application may be terminated on IMS at any stage (subject to the policy set out in the joint NHF/MHCLG guide). The landlord is required to give a reason for termination (e.g. application withdrawn, ineligible, offer refused, etc.). Once an application is terminated, a new URN and IMS registration would be required for it to be restarted.

2.6 Portability

2.6.1 Registered Providers must contact Homes England to discuss porting eligibility for Voluntary Right to Buy to a home funded and completed under the SOAHP 2016-21. Requests will only be considered on a case by case basis and approved in exceptional circumstances.

3. Sale Requirements

3.1.1 The Voluntary Right to Buy discount becomes repayable, by the homeowner, if the property is sold or sublet within five years from the date of purchase. Please refer to the joint guidance and related annexes for the conveyancing process including how discounts provisions are secured on the property.

4. Post-Sale requirements

4.1 Financial assistance

4.1.1 After the sale of the property, the landlord can claim a financial assistance payment to cover the Right to Buy discount (from Homes England).

4.1.2 The claim must be submitted within one month of the date of sale.

4.1.3 The claim must be made through IMS and requires the information set out in (a) to (d) below.

(a) Confirmation of the amount claimed. The amount claimed must be equal to the discount on the agreed valuation provided to the purchaser. This discount must itself be calculated according to the formula set out in section 3 of the joint NHF/MHCLG guide. (b) Re-confirmation of the data provided at registration (as subsequently updated during application processing). (c) Additional data covering:

  • purchase funded by:
    • Mortgage
    • Deposit
    • Discount
    • sales proceeds
  • any grant subject to recovery. (Please refer to the Grant Recovery chapter for guidance on the recovery of any capital grant contained within properties to be sold through the Voluntary Right to Buy)
  • costs held against receipt
  • usable receipt

(d) Confirm of the landlord’s acceptance of the certifications and conditions that appear within the Voluntary Right to Buy certification screen of IMS:

  • The contents of the claim are correct
  • The property is being sold under the Voluntary Right to Buy, and the tenant does not have a right under a Preserved Right to Buy or Statutory Right to Buy

    • The sale process has followed the requirements of the joint NHF/MHCLG guide including (but not limited to):the provisions against fraudulent application
    • the use of standard legal documentation
    • the inclusion in their conveyances of an appropriate repayment of discount covenant and legal charge, requiring repayment on a disposal within 5 years of the initial sale
  • The sale of the property has been completed

The landlord will comply with requirements (set out below) on the use of any funds repaid by the homeowner. Payment will be made in accordance with guidance set out in the Finance chapter of the Capital Funding Guide.

4.2 Repayment of Voluntary Right to Buy discount

4.2.1 Compensation is paid by the Homes England as Financial Assistance and is therefore not recyclable by Registered Providers who must account for and hold recovered compensation payments outside of their Recycled Capital Grant Funds.

4.2.2 Where properties with capital grant attached is sold under the Voluntary Right to Buy, housing associations will need to recycle the grant through their Recycled Capital Grant Fund (subject to the existing guidance, as is set out in the Grant Recovery chapter).

4.3 Replacement property

4.3.1 For the purposes of the Midlands pilot, where the landlord is successful in clawing back all or part of the discount from the homeowner (for instance, where that tenant resells or sublets the property within 5 years), the landlord will be permitted to retain this for the purposes of reinvestment in new build housing. Reinvestment must be in line with the requirements set out in the joint guide for investment in one for one replacement.

4.3.2 Receipts from this Pilot only can be used with recycled grant held in a Registered Providers Recycled Capital Grant Fund to deliver replacement units in line with the joint guidance. Registered Providers should note that they are not permitted to include any grant classified as Social Housing Assistance for replacement property.

4.4 Compliance Audit

4.4.1 Compensation claims and payments covering the discount provided under the Voluntary Right to Buy are subject to Homes England’s Compliance Audit process. The sampling procedure and Compliance Audit process are described in the Programme Management chapter of the Capital Grant Fund.