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Social Housing Speed Read – right to buy

We look at the Community and Local Government Committee’s report into the Right to Buy and in particular the criticisms levelled at the ability of providers to refuse to sell a property.

Can a provider decline to sell a property under Right to Buy?

In principle, yes. But ……

This is arguably a grey area. For starters, the tenant does not have a statutory right to buy. The scheme has been set up as voluntary agreement made between the National Housing Federation and the Government as part of a deal to de-regulate the sector.

Some 261 providers did not vote for the agreement and there is therefore uncertainty as to what extent these providers will be bound by it. It may be that this will need to be tested by the courts before there is any certainty over this.

The offer by the NHF included terms for a provider to decline to sell a property to a tenant exercising their Right to Buy. The offer outlined examples of where a provider may decline such a right, but explicitly stated that these were just examples where such a “right to decline” could be considered appropriate.

The offer did not set out with any certainty circumstances where the provider could safely decline to sell without risk of challenge. The Government has equally not provided any more clarity nor come up with categories of housing that are exempt from the entire arrangement.

What can you consider in declining to sell a property?

The NHF offer listed examples where a provider may decline to sell the property, and these examples included properties in rural locations, or supported housing.

These categories of housing should arguably be exempt from the entire voluntary arrangement, for if a provider declines to sell a particular property, it must consider offering a portable discount on a property elsewhere.

While it is understandable that a provider will want to retain its specialist supported housing stock, how does a provider then offer a tenant a portable discount for a less suitable, non-supported housing, property? Or if a provider wants to retain its rural stock in a particular geographic area as part of its core values and purpose, it surely makes the provisions meaningless to offer a tenant a portable discount on a property some distance away.

These are just two  examples. The NHF terms clearly imply, without providing any clarity, that providers may come up with their own grounds for declining to sell under Right to Buy.

Furthermore, the concept of the portable discount is treated with a similar lack of clarity in the NHF terms with no reference to the reasonableness of the offer or what a provider must take into account in making such an offer.

The only real clarity seems to be in relation to where there are pre-existing restrictive covenants restricting the sale of a property as these will take precedence over Right to Buy.

What should you do?

Providers may wish to give this matter some thought in advance of a tenant exercising their Right to Buy. Consider reviewing your housing stock and which properties you know you would not wish to sell. Consider getting advice on the title documents for your properties to see if there are any with relevant restrictive covenants.

Providers should prepare for this and consider their stock and how these provisions fit into their growth and sustainability models, while keeping a clear view of their association’s values and governing documents.

Is there any certainty?

The only certainty is that there is no certainty, and therefore this is an area where providers should expect to see challenges made. The offer provides for challenges to be made to the HCA as regulator, but with the current ONS designation of public bodies, Judicial Review remains a possibility.

For more information on the report, which also covers the “Pay to Stay” proposals and the 1% Rent Cut, please click here.

Ward Hadaway’s Social Housing Group have devised a package of support for Registered Providers to assist in setting up Right to Buy policies and procedures, including a suite of documentation, training on all aspects (including fraud), and to process or support on individual transactions.

If you have any questions on the Right to Buy and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact me or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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