Council rapped for failure to tell homeowners of property sale restriction

The Local Government Ombudsman has criticised a local authority for failing to tell the purchasers of ex-council homes of the full extent of a restriction on the property.

The LGO launched an investigation after two homeowners complained that South Oxfordshire failed to tell them fully about a restriction under s. 157 of the Housing Act.

Under s. 157 councils are able to impose a restriction on the future sales of homes bought under the ‘Right to Buy’ scheme if the property is in a national park, area of outstanding natural beauty or designated rural area.

This means that the property cannot be sold without the consent of the local council; and the person intending to buy the home must have lived or worked in the specified area for three years.

Councils do, however, have the discretion to agree to the sale of the property if the potential purchaser does not have a local connection.

The two homeowners had both lived out of the area when they bought their ex-local authority homes some years ago. The LGO said the purchasers were aware of a restriction on the properties at the time but South Oxfordshire did not inform their legal representatives of the full extent of that restriction.

According to the Ombudsman, the homes should only have been sold to people living in a specific area. The council also did not check if the homeowners were entitled to buy the properties, it said.

By the time the homeowners decided to sell in 2014, South Oxfordshire had revised its policy and was enforcing the local restriction.

One of the homeowners lost a sale, while the other’s sale was more difficult. The sales prices of both houses were affected because of the restriction.

Both homeowners insisted that they would not have bought their properties had they known South Oxfordshire would only grant consent to a person with a local connection as this limited the future market for their properties. Neither of the homeowners were the first purchasers of the properties.

South Oxfordshire argued that the onus was on the homeowners’ solicitors to check the full details and inform them of the restrictions and added that it exercised its discretion not to enforce the full terms of the restriction until 2013.

In its report the Ombudsman concluded that the council had been at fault for failing to check either homeowner had a local connection before granting consent to buy, and found no evidence that South Oxfordshire actively made a decision to exercise discretion not to enforce the local connection requirement.

The LGO said the local authority should have informed the women of the restriction. The investigation also found the council at fault for failing to give the solicitors complete information about the s. 157 restrictions.

The Ombudsman recommended that South Oxfordshire should, within three months of the publication of its report, instruct the district valuer to carry out two valuations as follows:

• to assess the value of the properties at the point at which Mrs X and Ms Y sold with the partial restriction advised by the council when they bought the properties; and
• to assess the value of the properties at the point at which Mrs X and Ms Y sold with the full s. 157 restriction.

The district valuer should then compare the two valuations to see if the value of the properties was diminished by the full s. 157 restriction.

If the value was affected the council should pay 50% of the difference to Mrs X and Ms Y, the LGO said.

The Ombudsman said South Oxfordhsire should only pay half the amount because it could not hold the council fully responsible for any advice given to the homeowners about the restrictions when they bought their properties.

The LGO also called on the local authority to pay £250 each to Mrs X and Ms Y to acknowledge the significant stress caused to them.

Dr Jane Martin, the Ombudsman, said: “Selling a home is a stressful time for most people, but in these two instances South Oxfordshire Council made the moving process all the more difficult because of the historic restrictions they were now enforcing on the properties.

“I have found no evidence that the council made an active decision not to enforce the restrictions when the homeowners bought their properties, and officers should have properly informed the sellers and buyers’ legal representatives when they made enquiries.

“I now urge the council to consider my report and provide the remedy I have recommended.”