CABINET – 23 NOVEMBER 2006
Report of the Director of Risk Management
ITEM 19
POLICY ON REPAYMENT OF RIGHT TO BUY DISCOUNT
Purpose of the Report
To approve a policy for repayment of discount on Right to Buy properties.
Recommendation(s)
1. That the Right to Buy Discount Policy is approved.
2. That delegated authority is given to the Deputy Chief Executive to determine
the actual amount of discount repayable in individual cases in respect of the
sale of properties previously purchased under the Right to Buy scheme,
including the determination of applications to waive repayment, in accordance
with Section 155 of the Housing Act 1985, as amended and subject to the
Council’s Right to Buy Discount Policy, and that the constitution be amended
to reflect this delegation.
3. That an appeals process be established in relation to the waiver of the
repayment of Right to Buy discount decisions and that a sub-committee of
Cabinet consisting of three members of Cabinet, to be selected by the
Director of Change Management, sits as an appeals panel to determine any
appeals on the basis of written representations, and that the constitution be
amended to reflect this.
Reason(s)
1. To clarify the Council’s policy on demanding repayment of Right to Buy
discount as this is an area where the Council has discretion.
2. To ensure that decisions are reached in a timely manner.
3. To provide applicants with an opportunity to appeal decisions in respect of
the waiver of repayment of Right to Buy discount.
Policy Context
As part of the improved, value for money services outcome of the Excellent Council
Corporate Plan theme, the Council aims to ensure value for money and good
financial management in delivering its services.
211
Background
Under the Right to Buy legislation when a Council tenant purchases a property they
receive a discount on the market price of the property up to a maximum of £24,000.
The amount of discount received relates to the length of their tenancy and the value
of the property. Where a former tenant sells the property within a three year
period (five years in the case of Right to Buy applications made after 18th January
2005) following purchase, the Council may demand a repayment of the discount
given at the time of the original Right to Buy purchase.
The table below shows the number of properties purchased from Charnwood
Borough Council under the Right to Buy scheme in 2005/6 and 2006/7. It also
shows that there are very few cases where properties, previously purchased under
the Right to Buy scheme are disposed of within the period where discount is
repayable. However it should be noted that this could increase as the period within
which discount is repayable has increased from three years to five years. There
were six cases in the last year where Right to Buy discount was repaid and there has
been one case in 2006/7 to date. This has resulted in a repayment of discount of
£53,033 since 1 April 2005.
2005/2006
RTB sales completed
37
Value of RTB sales completed
£2,237,660
Cases where disposal has resulted in repayment of 6
discount
Value of Repayments received
£45,033
Requests for discount to be waived
2
Cases where discount waived
0
212
2006/2007
27
£1,882,250
1
£8000
1
0
Amount of Discount to be reclaimed
Where the Right to Buy application was made prior to 18 January 2005, the Council
may reclaim no more than the original discount, reduced by one third for each full
year elapsed since the disposal. However in the case of Right to Buy applications
made after 18 January 2005 the Housing Act 2004 allows for the inclusion of any
increase or decrease in market value of the property when calculating the amount of
discount to be repaid. The amount due is determined by applying the discount
received, as a proportion of the original sale price, to the current market value less
any increase in value related to home improvements carried out since the Right to
Buy purchase. For example in the case of a property sold under the Right to Buy
scheme at £85,000 with a discount of £24,000 and a current market value of
£120,000, the maximum amount which the Council could demand would be £33,882.
The discount repayable is also reduced by one fifth for each full year that has elapsed
since the Right to Buy purchase. So the range would be £33,882 decreasing to
£6,776 in the fifth year.
The Right to Buy Discount Policy at Appendix 1 reflects the Housing Act
requirements in respect of the amount to be reclaimed for both Right to Buy
applications submitted before 18 January 2005 and those submitted after that date.
To ensure that sales can be progressed promptly it is proposed that authority for
determining the amount to be reclaimed in individual cases, subject to the application
of the Right to Buy Discount Policy, is delegated to the Deputy Chief Executive.
Exercising Discretion in respect of Applications to Waive Repayment of Discount
The legislation gives a local authority discretion as to whether it demands repayment
of the discount due in full, in part or at all. The Department for Communities and
Local Government provides guidance (appendix 2) regarding situations where it may
be appropriate to use discretionary powers to waive repayment in full or in part. It
indicates that it is for each landlord body to decide whether the circumstances of a
case justify the exercise of the discretion allowed in the Act. The Government does
however state that the use of discretion to waive repayment is most likely to be
justified where a move is necessary and prevented by the need to repay discount and
that repayment would lead to demonstrable personal hardship. Section 5 of the
guidance in paragraphs (a)-(d) sets out the exceptional circumstances leading to
demonstrable personal hardship which the government considers would be likely to
justify the exercise of discretion by Councils. In summary the examples included in
the guidance are that the applicant needs to move due to a threat of violence or
significant harm; the onset of severe medical condition or deterioration of that
condition; to enable the return to employment; or a traumatic personal event.
The authority has in the past considered a small number of requests to waive the
repayment of discount where the applicant has stated that the circumstances
warrant the exercise of discretion. There is currently no officer delegation to deal
with these applications and therefore they have been considered by Cabinet. Two
applications to waive repayment of discount were received in 2005/06 and to date
one application has been made in the current year.
213
It is evident from the Department for Communities and Local Government guidance
that the decision not to demand all or part of the discount should only be taken in
exceptional cases of hardship. For this reason it is proposed that the Council’s
general policy approach should be to require repayment of the full amount of
discount as is recoverable under the legislation. This is reflected in the draft policy
at appendix 1. However since the Council must determine each case on its own
merits the policy allows for applications to be made to waive repayment of the
discount in whole or in part. A decision as to whether to exercise the discretion
not to demand repayment based on the facts of each case would be made in line
with the criteria in the policy,
It is proposed that as the sums of money involved are likely to be relatively small,
determination of requests to waive discount should be delegated to a senior officer.
It is therefore recommended that changes should be made to the Council’s
constitution to delegate authority to the Deputy Chief Executive to determine
applications to waive Right to Buy discount. The proposed policy at appendix 1 will
be applied in considering all applications.
Appeals process
There is no statutory right for applicants to appeal against a decision regarding the
waiver of the repayment of discount. However it is considered good practice to
offer such a facility and therefore it is proposed that an appeals process is introduced
at Charnwood Borough Council. As it is proposed that the Deputy Chief Executive
will determine applications for waiver of repayment, it would be inappropriate for
more junior members of staff to review that decision. Therefore it is proposed that
appeals should be considered by Members. Any decision of the review panel would
have direct financial implications. It is therefore appropriate that this panel should be
made up of Cabinet members rather than be formed from members of the
Regulatory Committee as for other appeals or reviews. It is proposed that a subcommittee is formed from any three members of Cabinet to consider a review as
required. To enable the prompt consideration of applications it is proposed that
authority to identify, on each occasion, the three members to sit on the panel is
delegated to the Director of Change Management. This will prevent the need for
Cabinet to meet to appoint the sub-committee whenever a panel is needed.
It is proposed that appeals will be determined by way of written representations
only. Application forms, procedures and guidance notes will be drawn up to ensure
that the procedures are understood, fair, transparent and consistent and guide those
determining the application through the decision-making process.
214
Financial Implications
Any receipt from a repayment of Right to Buy discount is treated as a capital receipt.
The Council is only able to retain 25% of such receipts and would use these to fund
the general capital programme. There is no requirement to spend these receipts on
housing projects. Any decision to waive the repayment of discount on an individual
case would reduce the income of the Council.
Risk Management
Risk Identified
The decisions could
be challenged by the
applicants or others,
either through
judicial review or a
complaint to the
Local Government
Ombudsman.
Likelihood Impact
High
Low
Applications to waive
repayments of
discount could
increase resulting in a
loss of income to the
Council.
Medium
Risk Management Actions Planned
- Ensure decision complies with
government guidance.
- Reasons for decision clearly
documented.
- Provide applicants with clear
reasons for the decision.
Medium - Policy documents based on
government guidance will be used as
basis for making decisions so that the
number of cases where discount is
waived is kept to a minimum.
Key Decision:
No
Background Papers:
none
Officer(s) to Contact:
Christine Taylor 01509 634620
Email: Christine.taylor@charnwood .gov.uk
Karen Sullivan 01509 634580
Email: [email protected]
215
appendix 1
DRAFT RIGHT TO BUY DISCOUNT POLICY
Introduction
The purpose of this policy is to define the Council’s approach to determining the
amount of discount to be repaid in respect of Right to Buy properties sold before
the completion of the discount period. It also sets out the policy for considering
requests to waive all or part of the repayment of discount.
Calculation of discount due
Under the Right to Buy legislation when a Council tenant purchases a property they
receive a discount on the market price of the property. The amount of discount
received relates to the length of their tenancy and the value of the property. Should
a former tenant sell the property within a three year period (five years in the case of
Right to Buy applications made after 18 January 2005) following purchase, the
Council can demand a repayment of the discount on the sale of the property.
Where the Right to Buy application was made prior to 18 January 2005, the Council
will reclaim no more than the original discount, reduced by one third for each full
year elapsed since the disposal.
In the case of Right to Buy applications made after 18 January 2005, the discount
reclaimed will reflect the increase or decrease in market value of the property
between the purchase under the Right to Buy scheme and the date of subsequent
sale. The amount due will be calculated by applying the amount of discount received,
as a proportion of the valuation under the Right to Buy scheme, to the current
market value less any increase in value related to home improvements carried out
since the Right to Buy purchase. For example in the case of a property sold under
the Right to Buy scheme at £85,000 with a discount of £24,000 and a current market
value of £120,000, the maximum amount which the Council could demand would be
£33,882. The discount repayable is also reduced by one fifth for each full year that
has elapsed since the Right to Buy purchase. So the range would be £33,882
decreasing to £6,776 in the fifth year.
216
Use of discretionary powers to waive repayment of discount
Right to Buy legislation allows the Council discretion to decide not to demand
repayment of part or the entire discount. The Department for Communities and
Local Government provides guidance regarding situations where it may be
appropriate to use discretionary powers. It is for each landlord body to decide
whether the circumstances of a case justify the exercise of the discretion allowed in
the Act.
The Council will only waive the repayment of discount in exceptional circumstances
where a move is necessary and prevented due to the need to repay the discount and
where repayment would lead to demonstrable personal hardship.
Justification for the exercise of discretion should normally be supported by the
applicant(s) satisfying a two part test. BOTH PARTS OF THE TEST MUST BE
SATISFIED.
Part 1 – a requirement for a move AND
Part 2 – the move could not take place unless part or all of the repayable discount
were to be waived AND repayment would lead to demonstrable personal hardship.
The two Parts are discussed further below.
Part 1 – a requirement for a move
The applicant must demonstrate that they are unable to remain in their current
property and as a result a move is required immediately. The circumstances
resulting in a requirement to move would need to be unusual and severe.
Government guidance suggests (although the list is not exhaustive) that the following
are examples of circumstances that may justify a move:
1.
the applicant must leave the property because he and/or especially any
children face a demonstrable threat of violence or of significant harm due
to:
• a relationship breakdown
• racial, faith, homophobic or any other kind of harassment
• extreme antisocial behaviour
2.
where there is either the sudden onset of a severe medical condition or
serious deterioration of an existing condition which makes a move
essential on medical grounds.
3.
where it is essential to move within the discount repayment period because
the applicant(s) has a firm offer of a job in another area and would be able to
return to work after
• long term employment or
• having been made redundant and the applicant’s skills are such that there
is no prospect of getting another job locally.
217
4.
a traumatic personal event (for example sudden bereavement) makes a move
essential for emotional or psychological reasons.
Part 2 – demonstrable personal hardship
If the applicant’s situation satisfies any of the tests in Part 1, it will then be necessary
to establish that repayment of the discount would cause the applicant demonstrable
personal hardship and the move could not take place unless part or all of the
repayable discount were to be waived.
An application must be made in writing to the Deputy Chief Executive, setting out
justification for the repayment of Right to Buy discount to be waived. Evidence must
be provided in relation to both Part 1 and Part 2 above. The evidence must be clear
and objective; appropriate sources of evidence would be the police, doctor,
psychiatrist or employer.
Review Process
There is no statutory right for applicants to appeal against a decision regarding the
waiver of the repayment of discount. However the Council considers it good
practice to offer such a facility and has introduced an appeals process.
Following receipt of the written decision by the Council an applicant may appeal
against that decision. Any request for an appeal must be made in writing to the
Deputy Chief Executive and state the reasons for the appeal. The appeal will be
determined by an appeals panel consisting of three members of Cabinet. Applicants
can provide additional or new evidence in written form to the appeals panel. There
is no facility for the applicant to be represented in person at the appeals panel.
The panel will determine the application in line with this policy and relevant
procedure notes.
218
Right to buy – the use of
discretionary powers on
repayment of discount
Guidance to Local Authorities, Housing Associations
and other Registered Social Landlords
Introduction
1.
Under section 155 of the Housing Act 1985, former social tenants who dispose of a
property within a specified period after purchasing it under the Right to Buy scheme have
to repay upon demand by the former landlord all or part of the discount they received on
purchase, unless it is an exempted disposal. Section 185 of the Housing Act 2004 amends
section 155 by extending the specified period from 3 years to 5 years. Section 155 (as
amended) and the new section 155B also apply to the Rent to Mortgage scheme.1
2.
Section 185 of the 2004 Act also clarifies that former landlords have discretion not to
demand that former social tenants should repay part or all of the discount they received.
This note offers guidance on when in the Government’s view it might be appropriate to
exercise this discretion.
Operational Date
3.
1
Section 185 comes into force on 18 January 2005. Most of the changes it makes apply
only to cases where the tenant’s notice claiming to exercise the right to buy under section
122 of the Housing Act 1985 is served on or after 18 January 2005. However, in relation
to a disposal which takes place on or after 18 January, and which triggers repayment of
discount (regardless of when the property was bought), the requirement that a person is
liable to pay an amount to the landlord ‘on demand’ is to be read as his being liable to pay
to the landlord so much of that amount (if any) as the landlord may demand. This means
that landlords will have discretion as to whether or not to demand repayment of the full
amount of discount for any disposal which takes place on or after 18 January, and which
triggers repayment of discount.
this scheme will no longer be available to tenants after 17 July 2005.
219
Situations where it may be appropriate to use discretionary powers
4.
It is for each landlord to decide whether the circumstances in any particular case would
justify the exercise of discretion under section 155 of the Housing Act 1985 as amended.
However, the Government considers that this is most likely to be justified in circumstances
where repayment would lead to demonstrable personal hardship. But it may also be
justified in other circumstances.
5.
Examples of circumstances where discretion might be justified include the following. In
each case, it will normally be necessary to establish both the facts justifying a move, and
that such a move could not take place unless part or all of the repayable discount were to
be waived.
(a) where an owner of the property wishes to move because otherwise he or she and/or
other family members (especially children) face a demonstrable threat of violence or
of significant harm; for example, due to:
•
•
•
relationship breakdowns involving actual or threatened domestic violence;
racial, faith, homophobic or any other kind of harassment;
extreme anti-social behaviour, such as persistent drug dealing in an adjoining or
nearby property;
(b) where the sudden onset of a severe medical condition or serious deterioration of an
existing condition makes a move essential on medical grounds;
(c) where an early move is essential to return to employment; for instance where an
individual has a firm offer of a job in another area and would thereby be able to
return to work, either:
•
•
after long term unemployment; or
after having been made redundant, when his/her skills are such that there is no
prospect of getting another job locally.
(d) where a traumatic personal event (for example, sudden bereavement) makes a move
essential for emotional or psychological reasons.
220
Consideration of requests for the exercise of discretion
6.
It is envisaged that this power will only be used in exceptional circumstances, and that
landlords will have procedures in place to consider and decide requests that discretion
should be exercised. The consideration process should be open, fair and transparent,
bearing in mind that decisions may be subject to judicial review and/or to scrutiny by the
Local Government Ombudsman or Housing Ombudsman.
7.
It will be for landlords themselves to decide what procedures to use, and whether or not
such decisions should be subject to review and, if so, by what means. Requests could be
determined by means of written representations, or by a formal hearing of the parties
(in which case the applicant should have the option of appearing with a representative
or advisor).
8.
Landlords will also wish to bear in mind the need for clear and objective evidence; for
example, from a local police force, a doctor or psychiatrist, or an employer.
Financial Implications
9.
It is envisaged that former landlords will only exercise their discretion in cases where the
former tenant cannot afford to repay part or all of their discount.
10. In most cases a decision by a former landlord not to demand repayment will lead to a net
cost to the public purse. Landlords should therefore clear decisions with their auditors.
In cases where the former landlords are registered social landlords (for example, where
the former tenant bought under the Preserved Right to Buy), they should bear in mind
that, under the Housing Corporation’s regulatory code, they are required to protect
public money.
221
Further Information
Further copies of this guidance are available from:
ODPM Publications
PO Box No 236
Wetherby LS23 7NB
Tel: 08701 226 236
Fax: 08701 226 237
Email: [email protected]
Or via the ODPM website: http://www.odpm.gov.uk/housing
January 2005
© Crown copyright 2005
Copyright in the typographical arrangement and design rests with the Crown.
This publication (excluding the Royal Arms and logos) may be reproduced free of charge in
any format or medium provided it is reproduced accurately and not used in a misleading
context. The material must be acknowledged as Crown copyright with the title and source of
the publication specified.
Published by the Office of the Deputy Prime Minister. Printed in the UK, January 2005 on
material containing 100% post consumer waste.
Product code 04HC02121/20
222