Summary: Mrs X complained that the Council misinformed her about the amount of Right to Buy discount she would have to repay when she sold her home. She had to repay far more than the amount originally stated which caused considerable stress and financial difficulties for her and her family. The Council has agreed to provide a suitable financial remedy for the injustice caused by this fault.

The complaint

1. Mrs X complained that the Council misinformed her in March 2021 about the amount of Right to Buy discount she would have to repay when she sold her home. The Council did not inform her or her solicitor when it discovered the error and it did not provide the correct repayment figure until after contracts were exchanged in June 2021.
2. Mrs X has had to repay £5,772 more than she expected. She says she would not have proceeded with the sale if she had been given the correct figure at the outset. The additional repayment has caused her and her family distress and financial hardship.

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The Ombudsman’s role and powers

3. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. If we are satisfied with an organisation’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

5. I have spoken to Mrs X. I also considered the Council’s comments on the complaint and relevant records, including the correspondence between Council officers, Mrs X and her solicitor about the sale of the property.
6. Mrs X and the organisation had an opportunity to comment on my draft decision. I considered their comments before making a final decision.
7.  

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What I found

The relevant law

8. The Housing Act 1985 gives Council tenants the right to buy their home at a discount, subject to meeting certain criteria.
9. When someone decides to sell a property purchased under the Right to Buy scheme within the first ten years, they must give written notice to the Council and give it the option of buying back the property. This is known as the right of first refusal. If the Council decides not to purchase the property, the owner may then sell it on the open market.
10. If the property is sold within the first five years of ownership, the owner must repay a proportion of the discount they received under the Right to Buy scheme. In Year 1 this is 100%, in Year 2 80%, Year 3 60%, Year 4 40% and in Year 5 20%. These rates are set by central government.

The Council’s service standards

11. The Council says it does not have a service level agreement for handling requests for early disposal of a property and repayment of discounts. But it would usually aim to respond to requests within 10 working days.

What happened

12. Mrs X and her husband bought their Council property under the Right to Buy scheme in December 2016. They received a discount of £64,750 on the purchase price.
13. In early 2021 they decided to sell the property. Mrs X sent an email to the Council’s Residential Services team on 8 March to make enquiries about the process. Officer A replied the following day. She explained that a solicitor should serve a statutory offer notice on the Council giving it the right to first refusal.
14. Officer A’s email included the following statement about the amount of discount Mrs X would have to repay when she sold the property:

“I also need to make you aware that if the property is sold within the first 5 years of the Right to Buy completion a percentage of the discount you received will need to be paid back.

Therefore if the property completes before the 11/12/21 you will need to pay Arun District Council £12,950. This is calculated that as you are in your fifth year of ownership 20% of the discount will need repaying. The original discount was £64,750 so 20% of this is £12,950.”

15. She did not include any caveat that this was a provisional figure which could change. She did not explain the amount of discount to be repaid would be calculated with reference to the final sale price.
16. Mrs X instructed a solicitor and forwarded Officer A’s email to him on 11 March.
17. By then Mrs X had a prospective buyer and she had accepted an offer on her property. She had also found a property she wished to purchase. She told her solicitor in March she wished to proceed as quickly as possible to benefit from the stamp duty holiday.
18. Mrs X’s solicitor sent the offer notice to the Council on 8 April. Eleven days later one of the Council’s legal officers confirmed the Council did not wish to buy back the property and gave consent for it to be sold on the open market.
19. On 22 April Mrs X’s solicitor e-mailed the Council’s legal officer to say the property would be sold for £253,000. He asked if she needed any further information. On 4 May the legal officer asked for a copy of the property valuation. She later requested a copy of the draft contract of sale confirming the sale price. Mrs X’s solicitor sent the draft contract to the legal officer on 7 May. This confirmed the sale price was £253,000.
20. On 5 May the legal officer contacted Officer A to ask her to confirm the amount of discount Mrs X would have to repay. One week later the legal officer forwarded the contract of sale to Officer A and repeated her request. She sent a further reminder to Officer A on 25 May.
21. Officer A replied on 2 June and apologised for the delay. She said she had done some research on a government website which suggested the discount repayable is based on a percentage of the current value of the property.
22. Officer A’s email set out the details of her calculation. Mrs X had received a discount of 37% when she purchased her home in 2016. She was now in the fifth year since the purchase so she would have to repay 20% of the discount. But the 37% figure had to be calculated with reference to the current sale price of £253,000 rather than the original purchase price of £110,250. So she had calculated that Mr & Mrs X would have to repay £18,722 to the Council.
23. In response to my enquiries, the Council said it first identified the error with the figure in the 9 March email on 2 June. But it did not inform Mrs X’s solicitor of the error then. And Officer A did not mention in her 2 June email to the legal officer that she had previously given Mrs X a much lower repayment figure - £12,950 – on 9 March.
24. On 10 June Mrs X’s solicitor contacted the legal officer to say contracts for the sale of Mrs X’s property had been exchanged earlier that day. The completion date was set for 18 June. He asked the Council to confirm the amount required to redeem the charge in favour of the Council as soon as possible.
25. On the same day the legal officer informed the solicitor that his clients would have to repay 20% of the discount, based on the current value of the property, which was £18,722.
26. Mrs X’s solicitor contacted the Council on 15 June to query the figure of £18,722. He referred to Officer A’s 9 March email which gave the lower figure of £12,950. He said his client was confused and asked for an explanation. The legal officer replied the same day to say the £18,722 figure was correct and she provided a breakdown of the calculation. She referred to a clause in the transfer document from the sale of the property to Mr & Mrs X in 2016 which explained how the discount would be calculated.
27. The sale of Mrs X’s property completed on 18 June and her solicitor then transferred £18,722 to the Council to repay 20% of the discount
28. Mrs X complained to the Council. In its first response, the Council accepted it had provided a poor service and made an error by giving Mrs X the wrong repayment figure in March 2021. It also accepted there had been delay and it had not responded as quickly as it should have done. It apologised and explained it had taken the following steps to prevent a recurrence:
• staff training;
• ensuring the initial repayment figure is presented as an estimate;
• explaining the final repayment figure will be based on the sale price once it has been confirmed by the vendor’s solicitor;
• improve the way it shares information and ensure it is clear and accurate.
29. In its final response to the complaint the Council said it would have been reasonable for Mrs X’s solicitor to have waited for final confirmation of the redemption figure, or at least to have chased it up, before exchanging contracts. The Council referred to the Law Society conveyancing protocol and said solicitors are responsible for verifying any outstanding matters before committing their client to a contract.

The impact on Mrs X

30. Mrs X had already exchanged contracts with her buyer before the Council confirmed the correct figure on 10 June. By then it was too late for her to withdraw. She also had a linked transaction to buy another property and had exchanged contracts for that on the same day. She was therefore committed to selling her home and buying another property and she could not withdraw without incurring significant financial losses.
31. Mrs X told me her family were on a tight budget and they had been careful to check and plan for all the costs before putting their home on the market. The property they were moving to needed major work which they had budgeted for. Due to the higher than expected repayment to the Council, Mrs X had to take out a loan and borrow money from a relative. She would not have put herself in that position if she had been given accurate information in March about the amount of discount she would have to repay.
32. Mrs X says the Council admitted its error but then tried to shift responsibility on to her solicitor. Her solicitor had seen Officer A’s 9 March email which clearly stated the amount she would have to repay. There was no reason for him to query that figure because it was not expressed as a provisional sum. He was entitled to assume the Council had given her an accurate figure and it was not for him to check its calculation. She does not consider her solicitor was to blame because he did due diligence.
33. Mrs X wants the Council to accept that because of its error she has had to repay £5,7772 more than expected. This has caused considerable worry and financial difficulties for her and her family.

My analysis

34. The Council accepts it misinformed Mrs X about the repayment figure in the 9 March email. The figure was wrongly calculated: it was based on repaying 20% of the original discount without factoring in the increased value of the property at the time of sale in 2021. There was no reason for Mrs X, or her solicitor, to question the accuracy of the figure which was set out in clear terms in an email from an officer who handled Right to Buy cases. The solicitor was entitled to rely on the Council to calculate the figure correctly and provide accurate information to his client. It is not reasonable to expect him to have made further enquiries.
35. There was a significant error in the 9 March email and that was clearly fault. By the time Mrs X found out the correct repayment figure, she had already exchanged contracts so it was too late to withdraw from the two linked transactions without incurring substantial financial penalties. Mrs X made the point that she would not have proceeded to sell her home in March 2021 if she had known the correct repayment figure at the outset.
36. I was not swayed by the Council’s argument that Mrs X’s solicitor should have paused the transaction. The solicitor had seen Officer A’s 9 March email to Mrs X and he was entitled to rely on that. There was nothing unclear or ambiguous in the email which should have prompted him to make further enquiries. The solicitor responded in a timely way to the Council’s requests for information at every stage. Despite that, the Council took more than a month to send him the correct discount figure after it received the draft contract of sale. Finally the Council could have alerted the solicitor on 2 June that it had identified a significant error but it failed to do that. By the time it informed him of the correct figure eight days later, it was too late for Mrs X to withdraw from the sale as contracts had been exchanged earlier on that day.
37. The injustice to Mrs X is that she proceeded with a significant financial transaction on the clear understanding she would have to repay £12,950 of the discount. She was dismayed to find out she had been misinformed and would have to repay an extra £5,772 to the Council. She and her family had not budgeted for this unexpected expense and they had no option but to borrow the money. This was a very stressful and worrying experience for them.

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Agreed action

38. Within one month of this final decision, the Council will:
• Make a further apology to Mrs X;
• Pay her £5,722 (the difference between the figure in the 9 March email and the repayment figure notified on 10 June);
• Pay Mrs X an additional £150 to recognise the distress its error caused her and her family.
39. The Council has already taken steps to improve staff training and its communications with the public to prevent a recurrence of these faults. For this reason, I have not recommended any service improvements.

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Final decision

40. I have completed the investigation and found the Council was at fault and this caused injustice to Mrs X.

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Investigator's decision on behalf of the Ombudsman