The Offer Letter

Each property will have been offered for sale to the original applying tenant(s) via an offer letter – sometimes referred to as the Section 125 letter or Section 10 letter, depending under which legislation the original sale was made. Since 1980, this would have been as a result of a successful Right To Buy (RTB) application made by the tenant(s) occupying the property at that time.

The offer letter will generally contain details of the original valuation of the property at the time the application was made to buy the lease agreement or freehold. It will also contain the original discount offered to the applying tenant(s) and the purchase price offered. It may then contain details of any alterations that had been made to the property by the tenant, and will list any structural repairs or defects known at that time. It will finally list an estimate of the day-to-day service charges due at that time. Please remember that the day-to-day service charges mentioned in the offer letter are for guidance purposes only, and are not necessarily the exact charges the Leaseholder(s) would be asked for.

The structural repairs and defects are particularly important when looking at major works to be carried out to the property. This subject is dealt with more fully in a separate booklet. Depending on the legislation under which the original purchase was made, service charges for certain works schemes may be charged, but this in turn depends on the purchase date and “initial” and “reference” periods of the sale as well as the cost of the works.

The initial period runs from the purchase date onwards for a set time, and the reference period runs from the date the application to purchase was made to that same period end date. If the purchase was made under the 1980 Housing Act, those periods would normally end ten full financial years after the purchase date. If the purchase was made under the 1985 Housing Act (as revised in 1987) the periods would normally run for five full financial years after the original purchase date. In order to clarify the period end dates, the last day of the financial year within which original purchase date was made is taken, and then ten or five years is added accordingly. For instance, if the original sale was 14th November 1992, go to 31st March 1993 (the last day of that financial year), then add five full financial years. The period end date is 31st March 1998.

The significance of these dates and periods mainly concerns major works schemes and charges. Under the 1980 Act you can normally be charged for your share of the costs of any repairs to the building or estate (as defined by your lease agreement or transfer document). However, with regard to structural defects, you can normally only be charged for a share of the related costs if they have been listed in your offer letter and if they are known about by the landlord within the ten year period.

Under the 1985 Act, within the five year period you can only be charged for a share of the costs to any repairs or structural defects if they have been notified to you in the offer letter. The letter will also provide an estimated costs share for you (or “recharge”) for each item of work. You can only be charged up to that limit for the works, with the exception that a management fee can also be added. Therefore, for example, if your share calculates to £2000 but your offer letter limits your share to £1200, you can only be recharged £1200 plus any relative management fee.

It is important to remember that when the lease or freehold has been assigned to someone else, the initial and reference periods do not change, and do not start again, but continue as per the original sale.