Service charge

Right to Purchase: Loans with Service Charges


If you own an apartment that was originally sold under the Right to Buy scheme in England, you will be the tenant of that apartment and will have to pay a share of the cost of any repairs and improvements that the landlord frees (probably your former owner) realizes. You may be eligible for a loan to help with these costs.

You do not have to be the person who originally bought the flat under the right to buy, but your landlord must be either the housing authority who sold the flat (usually a local authority or a housing association) or another housing authority.

You are not entitled to a loan if you or a previous buyer bought your apartment under the Preserved Purchase Right. The preserved purchase right applies to tenants of the housing association who lived in their social housing when the town hall transferred it to the housing association.

If your landlord is a local authority, you ask them for the loan. The loan takes the form of a right to leave service charges unpaid for a specified period. This means that you will make monthly payments to your landlord over the specified period. Payments will include interest.

If your landlord is a housing association, Homes England will give you a loan to help you pay the service charge to your landlord. You will make monthly payments to Homes England over the life of the loan.

What service charges qualify for a loan?

You are only entitled to a loan for the costs of repairs and improvements carried out by the owner of the apartment, the building of which it is part or any other building or land, if the costs are due within 10 years. starting either:

  • the day the property was sold under the right of purchase, or

  • on a date specified by the owner (this is a date no later than 6 months after the owner has sent the notice of right to purchase offer).

How much am I allowed to borrow?

You are not eligible for a loan until your service charge in an accounting period totals £1,500 or more. The total may include costs for repairs, improvements, maintenance, management, etc., although the loan itself may only cover repair and improvement costs. (Separate service fee invoices may be added for this purpose.)

The accounting period is the annual period for which the charges are due under the lease. If no period is specified, this will be the 12 month period commencing on the date you purchased the property and subsequent 12 month periods commencing thereafter.

You can borrow the amount by which the service charge for the accounting period exceeds £1,500, but you can only borrow for the cost of repairs and improvements. For example, if your costs total £7,000, including £2,500 for repairs, £4,000 for improvements and £500 for maintenance, the maximum loan you are eligible for is £5,500 (i.e. i.e. £7,000 minus £1,500).

The loan must be over £500. You cannot borrow more than £20,000 (taking into account previous outstanding loans).

All figures mentioned above will be adjusted for inflation by reference to the retail price index for January 1993 and each January thereafter. Your landlord will be able to provide you with up-to-date figures.

What will be the terms of the loan?

You will be required to repay the loan in equal installments of principal and interest over three years for loans of less than £1,500, five years for loans of £1,500 or more but less than £5,000 and ten years if the loan is of £5,000. or more. You can choose to pay over a shorter period if you wish.

If your landlord is a local authority, you will pay interest at the local authority’s mortgage interest rate. Otherwise, interest will be charged at a rate determined by the owner. This price must be reasonable. The owner can also charge up to £100 to cover administrative costs.

The landlord will take a charge on the apartment to protect the loan; it is in fact a mortgage.

How to apply?

Your landlord must tell you whether or not you will be eligible for a loan when they send you a request for charges. You must notify your landlord in writing within six weeks if you wish to take out a loan.

What if I intend to dispute the charges with my landlord?

You can apply for a loan while making it clear to your landlord that you don’t agree that the charges are fair.

Help and advice

If you have any questions, you should first contact your landlord for advice. The Department of Upgrading, Housing and Communities may also be able to help or, for housing association tenants, Homes England.

Department of Upgrading, Housing and Communities

right to buy

Frying building

2 Marsham Street



Email: Telephone: 0303 444 0000

Homes England

50 Victoria Street



Email: Telephone: 0300 1234 500