Right to Buy revival

The Queen's Speech has indicated that legislation will be introduced by the government to support home ownership and give housing association tenants the chance to own their own home.

The original Right to Buy legislation introduced in the Housing Act 1980 became one of the key features of Thatcherism, allowing around 2.5 million council houses to be sold to tenants with discounts of between 33 and 50 per cent
on market value.

However, this proceeded on the basis that if the house was then sold on before the end of a minimum period, then part of the discount would have to be paid back to the local authority. This was obviously an attractive deal for tenants, with the purchase funds often being provided by relatives keen to invest in property and to take advantage of the substantial discounts available.

Trust or legal charge documentation was often put
in place to protect beneficial entitlement of those providing the funds. Inevitably, this gave rise to a whole raft of litigation when disputes between co-owners and family members emerged over their respective interests in the property and proceeds of sale, especially as house prices escalated in the property boom of the early 1990s.

Council house sales declined during the 90s and the Right
to Buy rules subsequently changed in 2005, tightening the qualification criteria, and limiting the ability to sell on the open market.

The Housing Bill proposes that the Right to Buy be revived and extends the scheme to housing association tenants in a bid to give more than a million first-time buyers a leg up onto the housing ladder.

The proposed discounts are between 35 and 70 per cent
of market value and, despite controls introduced by the Financial Conduct Authority to prevent mis-selling of mortgages and excessive brokerage fees, in the current rising market this could give rise to a whole new raft of litigation, with speculative investors buying up housing association stock through deferred transaction agreements.

For those unable to afford
a mortgage but relying instead on funds from family in return for a beneficial interest in the property, careful consideration needs to be given to the drafting of the underlying documentation protecting those interests to avoid triggering claw-back provisions. It is feared the compulsory sale of housing association stock will reduce the number of homes available at social rents and increase the pressure to build replacements, despite the limited availability of appropriate sites in urban areas.

The scheme has also proposed the building of more than 200,000 starter homes on brownfield land, to be sold at a
20 per cent discount to first-time buyers under the age of 40,
and includes a 'right to build' scheme making more land available for people wanting
to build their own homes.

These proposals will,
of course, impact on planning policy and create new challenges throughout the house building industry, with the courts likely
to take the strain. SJ

Belinda Walkinshaw is a partner at SA Law | @SA_Law