Tenant (Incremental) Purchase Scheme 2016

Tenant (Incremental) Purchase Scheme 2016

·        Introduction

·        Tenants Eligible to Purchase

·        Calculation of Reckonable Tenant Income

·        Purchase Price of House

·        Tenant Purchase Discount

·        Incremental Purchase Charge

Introduction
Leitrim County Council was formally notified by the Department of the Environment, Community & Local Government recently with details of a new tenant purchase scheme called the Incremental Purchase Scheme along the lines of the incremental purchase model in place for local authority apartments and certain new local authority houses. The scheme involves discounts for purchasers linked to household income (40%, 50% or 60%) and a discount-related charge on the property that reduces to nil over a period, unless the house is resold or the purchaser fails to comply with conditions of the sale. If approved for the Incremental Purchase Scheme, you must continue nto live in the house for as long as you own it.  Where the tenant purchaser resells the property before the end of the charge period, he or she is required to pay back to the housing authority a portion of any profits arising from the sale, thereby generating funds for the local authority to invest in new social housing or the refurbishment of existing housing. The general terms of the scheme are as follows:-

Tenants Eligible to Purchase

·        A house may be sold only to its tenant (including joint tenants)

·        The tenant (or one of the joint tenants) must have been in receipt of social housing support for a minimum prescribed period, which period may differ according to the form of social housing support involved (including RAS, HAP and approved body housing) but shall not in any case be less than 1 year: a minimum prescribed period of 1 year is proposed, which will apply to all forms of social housing support or combinations of such support;

·        The house occupied by the tenant must be available for sale under the scheme. 

·        The tenant must have minimum reckonable income of at least €15,000 p.a.

All classes of tenants that fulfill the conditions set out above may purchase under the scheme, except where they are disqualified from purchasing in any of the following circumstances: 

·        Arrears – You must not have been behind in your rent or local authority charges for more than 12 weeks in the past 3 years.  If you were, you must have made a payment arrangement with your local authority and be following that arrangement.

·        Previous Ownership - The tenant previously purchased a dwelling under this or a previous tenant purchase scheme

·        Water Charges - The tenant has failed to pay all outstanding water charges due and owing in respect of water services

·        Anti Social Behaviour - A housing authority may refuse to sell a house to a tenant under the scheme where the authority considers that the tenant or any household member is or has been engaged in anti-social behaviour or that a sale to that tenant would not be in the interest of good estate management;

Tenants are also required to indicate the intended source of funding to pay the discounted purchase price of the house.

Houses are sold in their existing state of repair and condition with an express exclusion of any warranty as to the state of repair or habitability of the house.  You will be responsible for the maintenance and upkeep of the house from the date that your purchase it. 

Calculation of Reckonable Tenant Income

·        Housing authorities will include the reckonable income of all joint tenants and any tenant’s spouse, civil partner or cohabitant who is resident in the house when calculating reckonable tenant income for the purposes of the minimum income requirement and the level of discount to be applied.  Various sources of state supports will be discounted e.g. child benefit, family income supplement.

Purchase Price of House

·        The purchase price of a house is the value of the house for the purposes of calculating the applicable discount and will be calculated as the greater of—

(a) the market value of the house (which reflects its prevailing state of repair and condition) – independently valued or

(b)  half the estimated cost to the Council of providing a replacement house to modern standards in its housing stock to accommodate a household in the same class as that for which the house was designed. Replacement cost will come into play in rare cases only where, due to localised factors, the market value of a house is very low.

Tenant Purchase Discount

The housing authority will give the tenant a discount of 60%, 50% or 40% off the purchase  price of the house, depending on reckonable tenant income;

·        60% Discount - A discount of 60% off the purchase price applies where reckonable tenant income is between €15,000 and €20,000;

·        50% Discount - A discount of 50% off the purchase price applies where reckonable tenant income is between €20,001 and €29,999;

·        40% Discount - A discount of 40% off the purchase price applies where reckonable income is equal to or greater than €30,000.

Incremental Purchase Charge

On sale of a house under the scheme, the Council will place an incremental purchase charge on the house equivalent to the discount granted to the tenant off the purchase price. Thus, if the Council gives a 50% discount to the purchaser, the incremental purchase charge will be 50% of the value of the house;

The period for which the charge applies to the house (i.e. the charged period) depends on the level of the charge:

·        If the charge is 60% of the value of the house, the charged period is 30 years,

·        If the charge is 50% of the value of the house, the charged period is 25 years,

·        If the charge is 40% of the value of the house, the charged period is 20 years;

The incremental purchase charge will wither away to nothing over the charged period in annual incremental releases of 2% of the value of the house, provided that the purchaser complies with the terms and conditions of the transfer order. The incremental releases for the first 5 years of occupancy will not be applied until that period has expired. If the tenant purchaser resells the house in the market within 5 years of purchase, he or she must pay the current value of the charge back to the council. If he or she sells the house later in the charged period, he or she must pay to the Council the current value of the outstanding charge. The charge only applies where the tenant purchaser makes a profit on resale of the house (net or selling expenses) and the amount of the outstanding charge payable by the tenant purchaser may be reduced to avoid, as far as possible, the tenant incurring a net loss on the resale;

Example:ATenant Purchases a House under the Incremental Purchase Scheme  and retains it for charged period

The Housing Department will be communicating details of the new tenant purchase scheme directly to all existing tenants.

Tenant Purchase Scheme – Information Booklet

Further Details are available from:

The Housing Department,
Leitrim County Council,
Aras An Chontae,
Carrick on Shannon,
Co. Leitrim.

Telephone No. 071 9650426
E-Mail:  housing@leitrimcoco.ie