If you’ve bought your council home through the Right to Buy scheme and you’re thinking about selling it before the 5-year mark, there are a few important rules to know. Whether you’re moving for work, downsizing, or just looking to make a change, selling your Right to Buy property early can have financial and legal implications. Here’s a clear guide to help you understand your options.
Can You Sell a Right to Buy Property Before 5 Years?
Yes, you can sell your Right to Buy home before the 5-year period is up. However, if you do, you may have to pay back some or all of the discount you received when you bought it. The amount depends on how long you’ve owned the property and how much you originally saved through the scheme.
How Much Discount Do You Have to Repay?
The repayment works on a sliding scale:
- If you sell within the first year, you’ll usually have to repay the full discount.
- In year two, you’ll repay 80% of the discount.
- In year three, it drops to 60%.
- Year four, it’s 40%.
- Year five, you’ll repay just 20%.
So, the longer you wait before selling, the less you’ll have to repay. Once you’ve owned the property for five years, you won’t need to pay back any of the discount at all.
Example:
If you got a £60,000 discount and sold the property two years later, you’d need to repay 80% of that – so £48,000. However, if the home has gone up in value, the repayment will be based on the current market value, not the original purchase price.
So, if your home is now worth more, the repayment figure will be higher too.
Will You Need Permission to Sell?
If you’re selling within the first 10 years, you’ll need to offer the property back to your former landlord (usually the council or housing association) first. This is known as the “right of first refusal”. They have eight weeks to decide if they want to buy it back at full market value.
If they choose not to, you’re free to sell it on the open market.
Selling to a Private Buyer
Once you’ve offered it back to the council and they’ve declined (or the 8 weeks pass), you can sell to anyone – estate agents, property investors, or private buyers. Just remember, if you’re still within the 5-year period, the discount repayment will apply, and the buyer should be aware of any remaining conditions.
Are There Any Tax Implications?
Selling a Right to Buy home within a few years may trigger Capital Gains Tax (CGT) if it wasn’t your main residence the whole time. If you’ve been living in the property since you bought it, this probably won’t be an issue. But if you’ve rented it out or moved, it’s worth checking with a tax adviser.
Can You Rent It Out Before 5 Years?
Yes, you can rent out a Right to Buy property before 5 years, but you must get permission from your mortgage lender, and in many cases, also from the council. Also, if you’re renting it and planning to sell, the discount repayment may still apply.
What if I Want to Sell Due to a Change in Circumstances?
Life happens – whether it’s a new job, relationship changes or financial strain, you might need to move on. If you’re within the five-year period, just be aware of the repayment terms. In some situations, it’s worth speaking with a property solicitor or financial adviser before making any big decisions.
FAQs
Yes. If you sell your Right to Buy home within 5 years of purchasing it, you’ll be required to repay a portion – or all – of the original discount, depending on how soon you sell. The repayment is calculated based on the property’s current value at the time of sale.
You can legally sell it at any time, even within the first year. However, if you sell within the first 12 months, you’ll have to repay 100% of the Right to Buy discount. Selling this early may also raise questions with lenders or raise tax implications.
The main ‘penalty’ is the required repayment of the discount. There’s no fine or ban on selling, but the financial cost of paying back the discount in full or in part can significantly affect your final profit.
Yes, but if it’s done within five years of purchase and without market value exchange, it may still be classed as a disposal. That means discount repayment could still apply. Always seek legal advice before transferring ownership.
If you sell your Right to Buy property within 10 years, you must offer it to your former landlord (usually the local authority or housing association) first. If they decline, you can then sell it on the open market. This process is known as the “right of first refusal”.
No specific restrictions are placed on who can buy your home. However, potential buyers may be cautious if the discount repayment still applies or if there are any lingering legal obligations tied to the property.
You might. If the property is no longer your main residence (for example, if you’ve let it out), selling it could trigger Capital Gains Tax. This applies regardless of how long you’ve owned it. Always check with a tax adviser.
It can. If you sell your council home and apply for social housing again later, your past sale could be considered, especially if it was sold quickly for profit. This varies by local authority, but some councils may treat it as voluntary homelessness.