Application Processing

4.1 General

4.1.1 All RSL applications for confirmation of grant and claims for payment of grant must be submitted via the internet using the Agency’s Investment Management System (IMS). For guidance see www.housingcorp-online.org.

4.1.2 Scheme submissions must comply with the Funding Conditions as accepted by the RSL and confirmed on line by the RSL’s Systems Administrator at the beginning of the financial year, plus any further conditions issued by the Homes and Communities Agency in year. See Section 1.

4.1.3 The Agency does not provide an RTA lease, but a plain English model lease has been prepared by NHF Publications. Follow asterisk for details.  

 

4.2 Letters And Application Forms

4.2.1 When RTA was introduced the Agency produced standard forms including tenant’s applications and RSL notifications to assist processing applications. Following the changes resulting from the Housing Act 2004 the Housing (Right to Acquire) Regulations 1997 are being revised. In the meantime the existing suite of RTA forms are still appropriate and can be downloaded from the Agency’s website. These are not Statutory forms and RSLs may produce their own, but in doing so must satisfy themselves that they meet any legal requirements. 

4.2.2 The Housing (Right to Acquire) Regulations 1997 require tenants’ applications and RSL notifications to tenants to be in writing although there are no statutory prescribed forms. To ensure consistency in dealing with applications the Corporation has produced a series of application forms and notifications for RSLs use. Supplies of these forms can be downloaded by following the asterisk.  

 

4.2.3 RSLs should draft their own standard letters in seeking the tenant's confirmation to proceed with RTA and when notifying the RSL's lender of a sale.

4.3 Publicity

4.3.1 RSLs should ensure that all tenants living in qualifying properties after 1 April 1997 are given information on RTA. An information booklet has been produced by the Agency, which can be downloaded from Publications. If required hard copies can be requested from the Agency’s publication team.

4.3.2 RSLs must ensure that the requirements of SI 1735 to provide tenants with information on  the RTA are met, see www.opsi.gov.uk for Statutory Instrument 1735. RSLs should note that they will not comply with this obligation by simply issuing the Agency’s information booklet, but will need to address all the information requirements set out in the Statutory Instrument.  These include:

• An outline of RTA;
• That initial costs are likely to be incurred upon exercising RTA;
• The likely regular payments to be incurred by a homeowner;
• The risk of repossession;
• The requirement for, and likely level of, expenditure in relation to good repair and maintenance of a property, which may include the payment of a service charge.

4.4 Exercising Right To Acquire: Action By The Tenant

4.4.1 To exercise their RTA the tenant must serve a written notice on the landlord, claiming their Right.  The effective date of the notice is taken to be its date, rather than when it is received by the landlord. This is important for calculating qualifying periods of residency, valuation periods etc.

4.4.2  RSLs must obtain certain information from applicants. It will assist the RSL in their processing if Form RTA-1 is used or one of their own design.  However, tenants are not obliged to a form, and can serve a notice on the landlord by writing to them. Where the tenant has already made an application in writing, the RSL should ask the tenant to complete the form, but should accept the date of the letter for the purposes of valuation and establishing the qualifying period. See sub section 2.2.

4.4.3 The notice may be withdrawn at any time by the tenant by serving a written notice on the RSL.

4.4.4 A tenant who has already claimed the Right to Buy or Preserved Right to Buy will not be able to claim RTA until such time as the Right to Buy/Preserved Right to Buy application is withdrawn or the landlord responds denying the right. The tenant may withdraw an existing Right to Buy claim and submit a claim for RTA at any time.

4.4.5 A tenant claiming RTA may include up to 3 members of the family, who are not joint tenants but who occupy the dwelling as their only or main residence, in the purchase. For more details on this click on the asterisk.  

 

4.5 Action By The RSL

4.5.1  On receipt of the tenant's application the landlord must check:

• that the tenant(s) is/are Secure or Assured;
• whether it is a joint tenancy;
• the application has been correctly completed and signed by the tenant and others joining in the application;
• the tenant has been a public sector tenant for the appropriate qualifying period;
• whether the tenant is an undischarged bankrupt or has made a compromise or an arrangement with his creditors.
• whether there is an effective possession order;
• whether there is an effective suspension order (on the grounds of anti- social behaviour); 
• the property is not excluded from the scheme;
• whether the tenant or co-purchasers have previously received a discount to purchase a property from a public sector landlord. This is not applicable to cases where the tenant repaid the whole of the discount on disposal within a repayment period. Click on the asterisk for Guidance Notes on this issue.
• Whether it must consult with its own lender in accordance with the arrangements stated in The Housing (Right to Acquire) Regulations 1997. See para 4.14.2.  

 

4.5.2  The RSL must respond in writing to the tenant's claim to exercise RTA, either admitting or denying the right. If the RSL does not consider the tenant has RTA it must state the reasons in the notice. See Form RTA 2.
 
4.5.3  The RSL must respond to the tenant's application within 4 weeks if it has been the tenant's landlord for the previous two years, or 8 weeks in any other case e.g. if the RSL is still seeking clarification over the tenant's records from a previous landlord.
 
4.5.4  At this stage of responding to the tenant, the RSL may offer the tenant an alternative property to purchase under the scheme.  Where this is the case, the RSL must make clear that there is no obligation placed on the tenant to accept the alternative property.  This option is only applicable in cases where RTA is admitted.
 
4.5.5  If an alternative property is offered the tenant will not be eligible for a higher discount.  The level of discount applicable to the alternative property is established by reference to the local authority area in which it is located, except where the discount would be greater than the amount the tenant would receive by purchasing their current home, in which case the maximum discount would be the amount applicable to the property where the tenant lives.
 
4.5.6 Only naturally occurring voids can be offered as alternative properties; the RSL must not keep homes vacant to use in this way or offer properties in new developments for rent or sale that have been grant funded.

4.5.7 The RSL must commission a valuation of the property from a suitably qualified independent valuer. The valuation must be prepared in the light of:

• the nature of the title being sold (for example the terms of a lease)
• any improvements to the property carried out by the tenant (which must be disregarded in the valuation);
• the provisions which, in the opinion of the landlord, should be contained in the conveyance or grant
• service charge estimates and repair and improvement costs (where they are payable) (see para 4.8 for the details of these requirements);
• details of any known structural defects 

4.6  Offer Notice 

4.6.1 After confirming eligibility to the tenant, the RSL can prepare the offer notice, detailing the terms of sale and confirming the purchase price.

4.6.2 A standard form of offer notice has been drafted for use in the scheme based on the provisions of s. 125 (as amended) of the Housing Act 1985.  See Form RTA 3.

4.6.3 The landlord must serve an offer notice on the tenant within 8 weeks (where the tenant has claimed the Right To Acquire the freehold) or 12 weeks where the tenant wishes to acquire a lease.

  
4.6.4 The offer notice must contain the following information:

• a description of the property to enable the tenant to identify the property and land to be sold;
• the sale price and how it was calculated;
• the value of the property  at the date of the tenant's application;
• any improvements to the property carried out by the tenant which have been disregarded in the valuation;
• the tenant's discount entitlement. Where the discount has been reduced to take account of previous discount paid the landlord should provide details;
• the provisions which, in the opinion of the landlord, should be contained in the conveyance or grant;
• accurate service charge estimates and improvement costs (where they are payable);
• details of any known structural defects;
• advise the tenant of the effect of sections of RTA Regulations 1997. Follow asterisk for details.  
  

 

4.6.5 RSLs must ensure that they understand the effect of the RTA Regulations cited above.

4.7 Purchase Price

4.7.1 To establish the purchase price of a property under RTA, the landlord has first to determine the Market Value of the property at the date of the tenant's claim, and then deduct the appropriate discount.

4.7.2 Discounts, and the areas they apply to, will be subject to review and revised orders may be made from time to time. Currently they are set out at http://www.uk-legislation.hmso.gov.uk/si/si2002/20021091.htm

4.7.3 The value of the dwelling must be based on its Market Value at the time of the tenant's claim (click on asterisk) and based on the following assumptions:  

 

• disregarding the tenant's improvements and the failure of the tenant to keep the dwelling in good internal repair;
• any service charges or improvement contributions payable will not be less than the estimates contained in the RSL's offer notice;
• the nature of the title being sold:
• for freehold property, the RSL is selling a freehold interest with vacant possession;
• for leasehold property, the RSL is selling with vacant possession for the appropriate term, i.e. not less than 125 years or, where the landlord's lease has less than 125 years and 5 days left to run, a term expiring 5 days before the term of the RSL's lease is to expire.

4.7.4  Where the RTA discount represents more than 50% of the value of the property the maximum amount of discount is to be capped at 50% of the value of the property.  For example, if the discount entitlement is £9,000 and the property subject to RTA is valued at £15,000, the maximum discount is £7,500.  Although an unlikely scenario, it is still a Requirement, should the situation arise.

4.7.5  Valuation fees incurred by the RSL smust not be charged to the applicant, but are to be deducted from the gross proceeds of sale when calculating the amount to transfer to the Disposal Proceeds Fund.

4.8 Service Charges

4.8.1 Where the RSL is selling flats and maisonettes on a leasehold basis it will continue to be responsible for the repair and maintenance of the building and the provision of services such as lighting in communal areas. The RSL will need to apportion these costs to the individual unit and recover the costs from the leaseholders by way of the service charges. Follow link for guidance.  

 

4.8.2  In summary, legislation requires landlords to provide accurate estimates of service charges for tenants wishing to purchase. In particular:
1. estimates of the predicted repairs and improvements for the first five years of the lease;
2. any known structural defects affecting the building and ensure that if they are to be repaired in the first five years they are included in the service charge estimates for repairs. 

4.8.3 The annual service charge for repairs and improvements can only be increased to take account of inflation (not inaccurate predictions) within the first five years of the lease. Follow asterisk for guidance.  

 

4.8.4 Estimates of other service charges, apart from repairs and improvements, such as amounts to be charged for caretaking or communal lighting, must also be provided but are not binding. Follow asterisk.  

 

4.9 Tenant’s Response

 
4.9.1 After the RSL has served the offer notice, the tenant must respond in writing, confirming that he/she will pursue the claim or that he/she wishes to withdraw the claim. The tenant should respond to the offer notice within 12 weeks.
 
4.9.2  The tenant may appeal against the RSL's proposed purchase price within 3 months of receipt of the offer notice. The RSL must refer any appeal to the District Valuer for a valuation which will be binding on both parties.

4.9.3  If the tenant has applied for a revaluation of the property, an updated offer notice needs to be served on the tenant when the new valuation has been obtained the tenant has a further 3 month acceptance period from the date of the updated offer. See Form RTA 4 Landlord’s Revised Offer Notice.

4.9.4 In the event of the tenant not responding to the offer notice within the acceptance period, the RSL must serve a written notice giving the tenant a further 28 days to state in writing whether he/she wishes to pursue the claim.

4.9.5  The notice served on the tenant should explain that failure to respond within the notice period will lead to the RSL treating the application as withdrawn. The RSL has discretion to extend the period.

4.9.6  The RSL can choose whether or not to treat the application as being withdrawn, if the tenant fails to reply within 28 day period.  If the RSL chooses to allow a longer period to elapse, before treating the application as withdrawn, they must state what that period of time is in the notice.

4.10 Completion

4.10.1 Where a tenant fails to progress the purchase within a reasonable time, the RSL must try to maintain progress by serving ‘notices to complete’ on the tenant. See Form RTA 5 Landlord’s Prior Notice to Complete the Purchase.

4.10.2  The RSL may serve a first ‘notice to complete’ at any time once the 3 month acceptance period has expired. Seel Form RTA 6 - Landlord’s Notice to Complete. The first notice must:

1. include a request to specify any matters that may be outstanding and
2. give the tenant a reasonable period in which to complete (at least 56 calendar days) and 
3. inform the tenant of the effect of Sections 140 and 141.

4.10.3  If the tenant fails to comply with the first notice, the landlord may serve a second notice to complete:

1. giving the tenant a further reasonable period to complete (at least 56 days) and 
2. again informing the tenant of the effect of Sections 140 and 141 {link to s140-141} and 
3. highlighting that failure to comply with the second notice to complete allows the landlord to deem the application to be withdrawn.

 
4.10.4  Once the tenant has issued appropriate instructions to its Approved Lender (see sub section 4.15 below) and legal representative, the RSL will be in a position to dispose of the property. The RSL should carry out the following checks before completion takes place:

• the tenant is not more than 4 weeks in arrears with rent;
• a possession or suspension order has not been obtained during the period of processing the tenant's application;
• the mortgage offer is from an Approved Lender who is entitled to register the tenant's mortgage as a first charge;
• the landlord has consulted its own lender in accordance with the arrangements stated in The Housing (Right to Acquire) Regulations 1997 unless otherwise agreed in writing with the lender.

 

4.11  Grant Claim 

4.11.1  After the sale of the property, the RSL will be in a position to make a submission for Grant to the Agency. The claim should be submitted within 6 months of the date of sale. The amount of Grant claimed should correspond to the relevant cash discount published in the current Right To Acquire Discount Order. The discount should be that current at the date of the service of the offer notice.
 
4.11.2  The scheme submission must comply with the Funding Conditions accepted by the Committee of the RSL and confirmed on line by the RSL’s System Administrator at the beginning of the financial year. 
 
4.11.3  The RSL's submission must be input via the internet using the Agency’s IMS system. https://www.housingcorp-online.org
 
4.11.4  The RSL must be able to confirm acceptance of the three certifications that appear on screen when the scheme has been submitted.
 
4.11.5  To ensure it conforms to the Agency’s Funding Conditions, the RSL must also be able to confirm acceptance of the following certifications which will appear on the submission screen:

• This property is subject to Right To Acquire under Section 16 of the Housing Act 1996 and has been sold in accordance with the current Right To Acquire regulations as amended;
• The sale of the property has been completed. 

4.11.6  Where the Agency is satisfied with the scheme submission, payment to the RSL will be made within 8 working days of receipt of a valid submission.

 
4.12  Restrictions On Resale And Covenants 

4.12.1 It used to be possible that the tenant could exchange and complete on a contract of sale, but where both parties agreed that the legal transfer of ownership would occur after the three-year deadline for repayment of discount had passed.  This worked because the trigger for repaying discount is normally the legal transfer of ownership at the Land Registry.  Section 187 of the Housing 2004 has closed this loophole by triggering the repayment of discount when the purchaser enters into such a contract.
    

4.12.2  The RSL must ensure that their conveyance includes an appropriate repayment covenant. For a model repayment of discount clause {click here}, however the RSL must satisfy itself by taking its own legal advice that the repayment covenant in the model clause is adequate for its purposes.
 
4.12.3  The requirement to repay discount is a charge that will rank immediately after that of the purchaser’s lender. If, in the future, the new owner wishes to extend their mortgage to fund works to the property the RSL may postpone its charge in favour of the lender. The charge should not be postponed for any other reason. Follow asterisk for guidance.  
 

4.12.4 RSLs must retain the right of first refusal if / when the new owner sells the property. Under S188 of the Housing Act 2004 the RSL may set a covenant requiring that, during the period of 10 years from the date of conveyance the tenant (purchaser) or any successor in title, must make an offer of first refusal to the former landlord.  The Housing (Right To Acquire) Regulations 1997 are to be amended appropriately in due course when further guidance will be published.
 
4.12.5 The covenant must be registered by the RSLs solicitor as a local land charge and must be entered into the property’s register of title by the Chief Land Registrar. This will avoid the covenant being overlooked at the point of resale.

 

4.13  Conveyance of Freehold and Grant of Lease 

4.13.1  The RSL must refer to The Housing (Right to Acquire) Regulations 1997  which contain the statutory requirements for conveying the freehold or granting the lease. The Agency does not produce a model lease for RTA scheme but a plain English model lease can be purchased from the National Housing Federation See 4.1.3 above.

 
4.14  Legal Charges 

4.14.1  The RSL must dispose of the property to the tenant free of any legal charge on the property e.g. a secured mortgage.

4.14.2The RSL must therefore agree with it’s lender whether it will redeem the mortgage or provide alternative security for the loan.  This process is a requirement of the Housing (Right to Acquire) Regulations 1997; the notification process is summarised below.
 
4.14.3 When the tenant responds to the offer notice notifying the landlord of his/her intention to proceed with the purchase, the RSL must, within 7 days of receipt of the tenant's notification, give written notice to the lender. For further details follow the asterisk.  

 

4.15 Approved Lenders

4.15.1  If the tenant is purchasing property with a mortgage, the mortgage has to be provided by an Approved Lender

4.15.2  The Agency maintains a list of Approved Lending Institutions in accordance with Section 156 of Housing Act 1985 or in orders made under that Section. Click on the asterisk for more details.