Right to Buy Guidance Circular A guide for social landlords

Annex A - Sales procedure and conditions of sale

Service of notice

1. This annex summarises the process to be followed in administering the RTB. It sets out the key stages and the timeframe within which they should be met.

2. The purchaser(s) must serve notice to their landlord on claiming the RTB on the statutory RTB application form ( APP2). The current form is set out in an Order, the Right to Purchase (Application Form) (Scotland) Order 2011 ( SSI 2011/97) and is available for social landlords to download and print. The Scottish Government no longer prints and distributes the application form.

3. When an application is received the landlord should check this application in respect of entitlement under the legislation to buy the house and also for accuracy of completion.

Key issues include:

(a) whether the applicant meets the qualifying criteria (2 or 5 years depending on the RTB entitlement of the tenant) and is not a new social housing tenant; that the applicant is not in arrears with their rent or council tax; that no notice of eviction proceedings has been served on the tenant due to their conduct; that where joint tenants wish to exercise the RTB, all such applicants sign the declaration to this effect; and establishing that the property can be purchased under the RTB, rather than being exempt, in a designated pressured area, new supply social housing, or with a landlord which is exempt from the RTB;

(b) the discount entitlement claimed and details of the tenancies on which the claim is based (section 63(1), 1987 Act).

4. If the application is in order, the landlord should:

(a) calculate the cost floor in respect of the property;

(b) instruct the district valuer (or other qualified valuer acceptable to the tenant) to provide a market value of the property;

(c) determine the sale price and the amount of discount entitlement.

Responding to notice served by tenant

Application proceeding to sale

5. Where the landlord is satisfied that a valid application has been received and that all necessary information has been provided, an offer to sell must be served on the tenant (and any joint tenant named in the original application) within 2 months of the application to buy being received (section 63(2), 1987 Act). If the offer of sale is not made within 3 months the selling price can be reduced by the amount of rent incurred due to delay (section 66A requires the tenant to serve a notice after the statutory 2 months have elapsed, with which the landlord has a further month to comply). The formal offer to sell must contain:

(a) the market value of the house, as determined by the district valuer or other qualified valuer;

(b) the discount entitlement (which may be restricted by the cost floor);

(c) the selling price;

(d) any reasonable conditions which the landlord intends to impose in terms of section 64(1) of the 1987 Act, including future owner-occupier responsibilities with regard to repairs and improvements to common parts or areas, as well as service and factoring charges.

6. The offer from the landlord should also propose a date of entry if the offer is accepted, which is likely to be calculated from the acceptance date. Paragraphs 12-15 below give guidance on the issuing of the offer of sale.

Application not proceeding to sale

7. Where the landlord disputes the tenant"s RTB, a notice of refusal must be served on the tenant (and any joint tenant named in the original application) within one month of receipt of the application to buy (section 68(1) of the 1987 Act, or s.69A(2) where the house is held for police purposes).

8. Where the landlord intends to seek authority from the Scottish Ministers to refuse an application because the property has been specially adapted for persons of pensionable age (section 69 of the 1987 Act), or because the house has been earmarked for demolition (section 70A of the 1987 Act), application must be made to Scottish Ministers within one month of receipt of the application. A notice of refusal must be served on the tenant within one month of authority being granted by Scottish Ministers.

9. Where the application received was incorrect in a material respect and the tenant has had an opportunity to amend the application if, after enquiries by the landlord, material information is still incorrect (which may include information being missing), a notice of refusal must be served within 2 months of the application having been received (section 68(2), 1987 Act).

10. At the landlord"s request, the solicitor acting on its behalf should issue the formal refusal to the tenant, or any agent the tenant has advised is acting on their behalf. As this refusal must normally be issued not later than one month from the date of receipt of the tenant"s application to buy or Scottish Ministers" authorisation of refusal, the landlord"s solicitor must be advised of the deadline by which the refusal must be issued and how it is calculated. The solicitor will also need to know the basis of refusal, with the material that supports it, if the solicitor has not already been involved in considering the possible refusal of the application.

11. The notice of refusal must contain the grounds on which the landlord is refusing the application to buy, or, as the case may be, the grounds on which the landlord disputes the accuracy of the information provided by the tenant. Where an application to buy has been refused, the tenant may apply to the Lands Tribunal within one month of the notice of refusal being received, for a finding that he/she does have the RTB (section 68(4) 1987 Act).

Issue of offer

Instruction to solicitor

12. At the landlord"s request, the solicitor acting on its behalf should proceed with the sales transaction and should submit a formal offer to sell to the tenant, or any agent the tenant has advised is acting on their behalf. This formal offer must normally be issued not later than 2 months from the date of receipt of the tenant"s application to buy (section 63(2)). The landlord"s solicitor must therefore be advised of the date on which the tenant"s application was made and of the deadline by which the offer to sell must be issued.

13. The following information should also be passed to the solicitor:

(a) the district valuer"s or other qualified valuer"s report;

(b) a detailed plan showing the boundaries of property to be sold with a clear description of any joint or common parts; and

(c) an extract of any prepared deed of conditions. It is particularly important that the deed of conditions makes provision for factoring or service charges, where these are appropriate, otherwise such charges may not be enforceable.

14. Where an offer to sell is served on the tenant and the tenant wishes to proceed, they will have up to 2 months from the date of offer to accept it. The tenant has one month from the date of offer to propose variation of the conditions in the offer, or to add or remove a joint purchaser, which the landlord should respond to within one month (section 66A(1)).

15. If the landlord fails to meet these time deadlines, or fails to deliver a good title in terms of a concluded contract of sale, then they will be subject to the penalties outlined in sections 66A-C of the 1987 Act. If the tenant does not respond to the landlord"s offer to sell within the specified 2 months, then the application can be treated as withdrawn and the sales procedure terminated.

Conditions of sale

16. Section 64 of the 1987 Act stipulates that no conditions of sale should be introduced which would unreasonably affect the tenant"s position as owner. They should at least have as much enjoyment of the property as owner as they previously realised as tenant and the offer should contain such terms as are necessary to give a marketable title to the house. While the purchase may bring new responsibilities (particularly for the likes of common parts of a shared building), any charges should be in reasonable proportion to the cost of the service provided.

17. In most circumstances, the landlord seller cannot specify conditions for the future sale of the property. However, under section 64 of the 1987 Act, properties which are substantially different to accommodate the requirements of people of pensionable age or disabled people can have a pre-emption condition attached to the sale. This would provide the landlord with first refusal at market value when the property is subsequently made available for sale. In such circumstances and subject to any discount clawback, the landlord would be able to buy the property at market value as determined by the district valuer.

Lands Tribunal

18. Section 65 of the 1987 Act allows for disputes over the conditions of sale to be referred to the Lands Tribunal for Scotland. The time limits for such a referral can be found in section 65(2) of the 1987 Act and are linked to a landlord"s refusal to vary a condition.

Conclusion of contract of sale

19. Once a tenant has accepted the conditions attached to the sale, or the landlord has accepted any variation proposed by the tenant, the contract of sale is concluded. It is legally binding on both parties.