The Right to Buy and Right to Acquire schemes, by edk10782

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									 The Right to Buy and Right to Acquire schemes, and voluntary sales to social tenants;
                       right of first refusal for social landlords

                       Response by the Council of Mortgage Lenders

                    to the Office of the Deputy Prime Minister (ODPM)

23 June 2004

Introduction

1.      The Council of Mortgage Lenders (CML) welcomes the opportunity to respond to the
ODPM consultation paper The Right to Buy and Right to Acquire schemes, and voluntary
sales to social tenants; right of first refusal for social landlords to buy back homes offered for
resale.

2.      The Council of Mortgage Lenders is the representative trade body for the residential
mortgage lending industry. Its 143 members currently hold over 98% of the assets of the UK
mortgage market. In addition to lending for owner occupation, the CML members have also
lent over £34 billion for new build, repair and improvement to social housing.

3.     This response has been prepared following consultation with the CML Social Housing
Panel of lenders.

General remarks

4.     The Right to Buy (RTB) has been uniquely successful in enabling c. 2 million tenants
UK-wide, to realise their aspirations for home ownership. In England alone, RTB
applications are currently running at over 60,000 per year.

5.      RTB has been valuable in assisting the transformation of single tenure areas and has
also encouraged a sustainable social balance within communities, by allowing those who
aspire to home ownership and have the ability to sustain it to remain within those
communities. RTB has also represented good value for the public purse.

6.      Critics of RTB have claimed that it has had a negative impact on the supply of
affordable housing. Recent studies, focussing on the fact that RTB owners tend to stay in
their properties for long periods, have demonstrated that the negative impact of RTB in this
respect is far less than those critics have suggested. Nevertheless, there will, inevitably, be
situations where a local housing authority will be able to make a strong case for re-absorbing
former RTB properties into the local social housing stock, and for this reason, the CML has
not opposed the principle of giving social landlords the right of first refusal as set out in the
Housing Bill.

7.     For the right of first refusal to work effectively from the owner’s perspective,
however, it is essential that a proper balance is struck between the time needed by a social
landlord to consider whether the property in question should be re-purchased, and the need of
an owner-occupier to be able to proceed with a sale and probably a re-purchase without
undue delay.
8.      In many cases, an owner will wish to sell their property because they have already
identified another property that they wish to purchase. In these circumstances, they stand to
lose that opportunity if there is undue delay, particularly in a buoyant market. Those seeking
to move for employment reasons will also have practical limitations on how long they can
wait before they risk losing their job or placing unacceptable strain on their families through
long distance commuting or the cost of running two homes.

9.      A particular case is that of a mortgagee in possession where an owner has defaulted
on their mortgage. Lenders assess properties as security for a mortgage in terms of how
easily they can be sold at full value to repay the mortgage loan. The prospect of significant
delay or uncertainty would discourage some lenders from granting loans on RTB properties
or might cause them to place a lower than normal limit on the loan to value ratio.

10.    The CML has thus considered the proposals in the consultation paper in the context of
the need to protect owners from undue delay and uncertainty when selling their properties.
From this perspective, they appear to be broadly acceptable, though ODPM should avoid
making further concessions to social landlords in this respect. A further extension of
timescales would lead to a real loss of control for RTB owners relative to other home-owners,
placing them at a significant disadvantage in the housing market.

Specific comments

11.     It is not clear how the freeholder of the property will be aware that they will have to
offer their home to their former landlord and the local housing authority for the area. Will all
those who have exercised their RTB or RTA be notified of the need to offer their home to
social landlords before sale on the open market?

12.     The overall time limit of eight weeks in most cases for both leaseholders and
freeholders is acceptable, though it does represent a significant delay for an owner hoping to
acquire a particular property in a buoyant market. It is not clear, however, whether the
former landlord or other social landlord will be accepting an offer subject to survey as well as
the usual searches and checks on title, etc. It would be unfair to an owner if, having waited
for eight weeks and having had their offer accepted by a landlord, that acceptance was to be
withdrawn because of unforeseen problems arising from a survey. The delay could, by then,
be considerably more than eight weeks. If the landlord intends to survey the property as a
condition of purchase, this should be done within the eight week period. This is not an
unrealistic requirement.

13.     In respect of freeholders, it appears that the eight-week period can be extended to 10
weeks, where a former landlord decides that it is the appropriate body to offer, but declines to
make an offer. In this case, the local housing authority will have a further four weeks in
which to accept the offer, over and above the total of six weeks which could have already
passed. This is unreasonable. The local housing authority will have been notified of the offer
at the same time as the former landlord, and should be in a position to move quickly, if
necessary.

14.     The proposed deadline for completion of purchases is 12 weeks. Given the
suggestion above that any survey will have been carried out prior to acceptance of the offer,
this period could be reduced. The CML would suggest that 10 weeks would be adequate.
This would lessen the disadvantage of RTB owners in relation to others buying or selling
within the housing market.
A proper balance

15.     While the ODPM proposals strike a reasonable balance between the rights of RTB
owners and social landlords, there is room for some tightening of timescales, particularly
over the obtaining of surveys and over completions. Timescales should not be lengthened as
a result of this consultation, since this would place RTB owners at a disadvantage and might
adversely affect the availability of mortgage finance.

16.      This response has been prepared by the CML in consultation with its members.
Comments and queries should be addressed to Andrew Heywood, Senior Policy Adviser, in
the first instance:

Telephone: 020 7440 2227

Email: Andrew.Heywood@cml.org.uk

								
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