The Right to Buy cost floor rule is one reason your Right to Buy discount could be lower than expected. It can apply where your landlord has spent money buying, building, repairing, maintaining or improving your home.
A lower discount means a higher purchase price. That can increase the amount you need to borrow through a Right-to-Buy mortgage and affect whether the discount can help as your deposit.
The cost floor is one of several rules that can affect how Right to Buy works and the final price you are offered for your council home.
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What is the Right to Buy cost floor rule?
The cost floor limits how far your discount can reduce the price of your home.
It looks at certain costs your landlord has incurred on the property over a set period. If those costs mean the home cannot be sold as cheaply as your normal discount would suggest, your discount can be reduced.
It does not affect every purchase, and it does not always remove the discount. Your landlord confirms whether it applies and how it affects your offer.
How long does the cost floor period last?
Under current GOV.UK guidance, the cost floor period is generally 30 years.
For applications successfully lodged before 21 November 2024, it is generally 10 years, or 15 years where the home was built or acquired by the landlord on or after 2 April 2012.
A 15-year period also applies to Preserved Right to Buy, so the rules affecting your purchase can depend on which scheme and application date apply to you.
Example of how the cost floor could affect your price
Suppose your home is valued at £160,000:
- Expected discount: £26,000
- Expected purchase price: £134,000
- Cost-floor minimum sale price: £148,000
- Revised discount: £12,000
- Revised purchase price: £148,000
Here, the discount falls by £14,000, so the buyer would need to cover an extra £14,000 through their mortgage, cash or both.
This is only an example. Your landlord calculates the actual figures.
Where will you see the cost floor adjustment?
If your landlord agrees that you have the Right to Buy, they will send you a Section 125 Notice setting out the proposed price, discount and terms of sale.
The notice should state if your discount has been reduced because of the cost floor. If the figure is unclear, ask your landlord to explain it. You should also make sure you have told them about improvements you paid for yourself.
How could the cost floor rule affect your mortgage?
A smaller discount usually means a higher Right-to-Buy purchase price. That may mean:
- You need to borrow more.
- Your estimated monthly repayments rise.
- The higher mortgage amount affects affordability.
- The remaining discount is less useful as a deposit.
- You decide the purchase no longer works for your budget.
This can be particularly important if you were planning on using your Right to Buy discount as a deposit. Some lenders may accept the discount instead of a separate cash deposit, but a smaller discount can change those figures.
You can adjust the property value and discount in our Right-to-Buy mortgage calculator to estimate how the revised purchase price could affect your mortgage amount and monthly repayments.
What should you do if your discount is lower than expected?
If the figures in your offer are different from what you expected:
- Check the Section 125 Notice.
- Ask your landlord to explain the cost-floor adjustment.
- Check that improvements you paid for yourself have been recorded.
- Consider independent legal advice if you disagree with or do not understand the figure.
- Recheck your mortgage numbers before deciding whether to continue.
A mortgage broker cannot decide whether the cost floor has been applied correctly. Their role becomes more relevant once your landlord has confirmed the revised price and discount.
When to speak to a mortgage broker
Once those figures are known, a broker can check whether the higher borrowing amount looks affordable, whether the remaining discount may still work as a deposit and which lenders may consider the case.
If the cost floor has changed the amount you need to borrow, getting help with a Right-to-Buy mortgage can help you understand whether the revised purchase price still works with your income, deposit position and lender options.
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FAQs
Why has my Right-to-Buy discount been reduced?
The cost floor is one possible reason. It can limit the discount where your landlord has incurred certain costs on the property.
Does the cost floor mean I cannot buy my council house?
No. It may increase the purchase price, but it does not automatically stop you buying.
Can I challenge the cost floor figure?
If you do not understand or agree with the adjustment, ask your landlord for clarification and consider independent legal advice.
Does the cost floor affect my mortgage?
It can. A reduced discount increases the purchase price, which may mean you need a larger mortgage and could change your affordability.
Can the discount still be used as a deposit?
Potentially. Some lenders may accept the remaining discount as a deposit, but this depends on the lender and your wider application.
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