IHTM23200 - Special valuation matters: property acquired under right to buy legislation

Under the Housing Act 1985 Part V an individual who had occupied a house or flat

• as a secure tenant
• for at least two years

was given, in certain circumstances, the opportunity of purchasing the freehold ( IHTM23001) or a leasehold ( IHTM23001) interest at a discount.

The discount, under s.129 of that Act, was based on the period of occupation and could be up to 60% of the value.

If the new owner sold his property within five years he had to repay part of the discount. The amount to be repaid diminished over time and a death was not a sale for this purpose.

Under the Housing and Planning Act 1986, the maximum discount was increased to 70%, with a ceiling of £35,000 from 7 January 1987. The liability to repay part of the discount was extinguished after three years instead of five, irrespective of the date of purchase.

The right to buy provisions extend (subject to various exceptions) to tenants of public sector properties. This means where the owner or landlord is

• a local authority
• a new town or urban development corporation
• a qualifying housing association or trust (as defined in s.5 and 6 of the Housing Act), or
• the Development Board for Rural Wales

The equivalent Scottish legislation is the Housing (Sco) Act 1987.

Similar provisions apply in Northern Ireland under the Housing (NI) Order 1983.

The decision in Alexander v IRC ( IHTM23182) is of direct application and means that the contingent liability is a factor to be taken into account when valuing the property. Therefore, before referring the property to the VOA ( IHTM23002) you should obtain details of

• the date of the conveyance (or of the grant of a lease), and
• the amount of discount allowed on the purchase

You should then ask the VOA to value the property in accordance with Chapter 1B Section 17.

The question of whether the right to buy was capable of transmission was put to the test in England in Bradford Metropolitan City Council v McMahon and another [1993 All ER 237. In that case the deceased had made clear her intention to buy the property of which she had been a secure tenant. She died before the property could be conveyed to her. On appeal it was held that she had not acquired an equitable interest as the 1985 legislation contained an implicit requirement that the tenant wishing to exercise the right of purchase had to remain a secure tenant until the conveyance of the property. As the death occurred before that time there was no right to purchase which could rest in the deceased’s estate. However, in Scotland, the conclusion reached in Coopers’ Exr v City of Edinburgh D.C. (1991 SLT (HL) 518) was that the Council was authorised to implement missives entered into between a secure tenant who later died, and the local authority.