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.
1.1 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 There is additional guidance available to assist housing associations in submitting claims for compensation for the Voluntary Right to Buy through IMS - please refer to Investment Management System: guidance documents and training.
1.2.3 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.
1.2.4 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.
1.2.5 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, or request that compensation is repaid.
1.2.6 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.
2.1 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, the landlord should register the valid application in 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
- local authority
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. If the applicant is not eligible the landlord should terminate the record in IMS. The landlord should state the reason for termination selecting from the pre-defined list and adding additional comments if necessary.
2.2.2 If the applicant is eligible and proceeding with the purchase the landlord must record the following details in IMS within four weeks of receipt of the application (up to eight weeks is permitted for more complex applications):-
- confirmation that the applicant(s) meets 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
- where it is a ‘portable discount’ (the tenant is purchasing a different property to the one they currently reside in), 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, or a value should be estimated using available on-line valuation tools and entered in IMS as soon as possible.
2.2.4 For a portable discount sale a reasonable estimate of the value of the property to be purchased should be made, using the estimated value of the tenant’s existing home in the absence of other evidence (for example, 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 Institution 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 If there are sufficient funds for the sale to proceed at this point the landlord will be allowed to progress the application in IMS. If there are insufficient funds to cover the forecast compensation in the forecast completion year, the landlord will receive a notification requesting them to halt further processing.
2.3.3 If there are insufficient funds to cover the forecast compensation in the forecast completion year a message will appear which states that the application is ‘eligible, pending further 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 will be 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
2.4.2 If there is a change to the value of the compensation claim 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 in IMS at any stage (subject to the policy set out in the NHF/MHCLG guide). The landlord is required to give a reason for termination (for example, application withdrawn, ineligible, offer refused, etc). Where possible, the landlord should select the reason from the pre-defined fields in IMS, only adding additional comments if necessary. For the duration of the pilot if an application has been terminated in error by the landlord, a new application may be started using the same URN.
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.
3.1 Restrictions on resale and covenants and legal charge
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 NHF/MHCLG guidance and related annexes for the conveyancing process, including how discount provisions are secured on the property.
4.1 Financial assistance
4.1.1 After the sale of the property, the landlord can claim a financial assistance payment from Homes England to cover the Right to Buy discount.
4.1.2 The claim must be submitted within one month of the date of sale. The claim must not be submitted prior to the sale completing. Landlords who submit claims prior to completion risk the compensation not being paid.
4.1.3 The claim must be made through IMS and requires the information set out in (a) to (f) 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 NHF/MHCLG guide. In addition, £2,000 will be refunded by MHCLG to cover any accrued expenses or costs in relation to the sale.
(b) Re-confirmation of the data provided at registration (as subsequently updated during application processing).
(c) Confirmation of how the property is funded listing:-
- mortgage
- deposit (if it is a cash purchase then all of the amount must be entered in the deposit)
- discount
(d) Recording the net receipt for replacement covering:-
- sales proceeds (including the discount provided by MHCLG)
- deducting any grant subject to recovery (please refer to the Grant Recovery chapter for guidance on the recovery of any capital grant contained within properties sold through the Voluntray Right to Buy)
- deducting any deemed loan debt attributed to the property - the deemed loan debt amount is the total scheme costs less capital subsidy (grant, RCGF, Disposal Proceeds Fund, Other Public Subsidy), less the provider’s own resources that went in to the property / scheme
- the final useable receipt is calculated by deducting the grant and debt repayment as described above
(e) Confirmation of the landlord’s acceptance of the certifications and conditions that appear within the Voluntary Right to Buy certification screen in IMS including:-
- confirming the final completion date and that the sale of the property has been completed
- confirming the contents of the claim are correct
- confirming that the property is being sold under the Voluntary Right to Buy, and that the tenant does not have a right under a Preserved Right to Buy or statutory Right to Buy
- the landlord will comply with the requirements on the use of any funds repaid by the homeowner (see 4.2 below)
(f) Confirmation that the sale process has followed the requirements of the NHF/MHCLG guide including (but not limited to):-
- any 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 or sublet within five years of the initial sale
Payment will be made in accordance with the 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 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 Fund.
4.2.2 Where a property with capital grant attached is sold under the Voluntary Right to Buy, providers will need to recycle the grant through their Recycled Capital Grant Fund (subject to the existing guidance, as 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 five 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 scheme can only be used with recycled grant held in a provider’s Recycled Capital Grant Fund to deliver replacement units in line with the joint guidance One for One replacement guidance, which can be found on the housing website. Providers should note that they are not permitted to include any grant classified as Social Housing Assistance for replacement property.
4.3.3 Where Shared Ownership homes are funded from receipts from this pilot scheme on or after 1 April 2021 then they should be sold according to the new Shared Ownership model introduced by Government from 1 April 2021. Please see the Shared Ownership chapter of this guide and the Government’s New model for Shared Ownership: technical consultation response for more detail.
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 Funding Guide.