Warning on 'Right to Buy' scams

Introduction

Tenants have been warned by the Office of Fair Trading to watch out for Right to Buy mortgage scams.

The trading watchdog has recently acted against two companies which, in a bid to obtain business, gave the impression that the Government’s Right to Buy discount scheme for council or housing association tenants was likely to end at any moment.

A Birmingham company, issued leaflets in the city at the end of last year claiming that discounts on properties would stop at the end of 1999. The leaflets asked: "can you afford to lose up to £20,000?" and encouraged tenants to request a quotation on a mortgage.

The statement in the leaflet was false – the Government has no plans to end the Right to Buy scheme. The OFT obtained written assurances from the company that it would not publish such misleading advertisements again.

Another company in Coalville, Leicestershire, gave similar written assurances to the OFT last month after the watchdog was alerted to an advertisement in a Bridgend newspaper which stated "the Government may remove your right to buy at any time".

John Bridgeman, Director General of Fair Trading, said:

"We were able to contact these companies and stop them from using misleading advertisements to gain business. Unfortunately they are not the only companies operating this or similar scams involving the Right to Buy scheme. Tenants should be aware that the Right to Buy scheme is not ending and that they should ignore any attempts to push them into long-term financial commitments."

"If they see any similar advertisements they should be reported to the local trading standards authority. Anyone who has already entered into a mortgage as a result of misrepresentation should contact a local Citizens Advice Bureau or legal advice centre."

Housing Minister Nick Raynsford said:

"We provide support for home ownership and offer several schemes to help people buy, including the Right to Buy with around 40,000 sales a year. We have made it clear that the Right to Buy will continue, with tenants entitled to generous discounts currently worth up to £38,000."

"People who say that the scheme is about to end are deceiving tenants and, if their aim is to make money out of them, I have nothing but contempt for their activities. Buying one’s home is probably the biggest investment of a lifetime. People should consider this carefully, and do it if it is right for them, not just to line someone else’s pockets."

What you can do about it:

Take a copy of any advertisement to your local trading standards authority.

If you have already been persuaded to take out a mortgage on the strength of misleading claims, then you should get legal advice as soon as possible – you may have a claim against the company.

What the law says:

Control of Misleading Advertisement Regulations: if the OFT receives a complaint about misleading advertising, it can seek a High Court injunction unless the advertiser gives a satisfactory undertaking to stop using it. This power can be used against any kind of deceptive promotional statement or material provided it is likely to affect people’s economic behaviour. Normally the ASA - the advertising industry’s own watchdog – or local authorities deal with advertising complaints. But where they have any difficulties, or if urgent action is needed, the OFT can go straight to court.
Trade Descriptions Law: traders who make false statements about goods or services in the course of business can be prosecuted by local trading standards authorities under the Trade Descriptions Act and prices legislation.
Contract law: a person who is induced to enter a contract by misrepresentation can seek to have it set aside and, unless the misrepresentation was an innocent mistake, may be entitled to claim damages.

Right to Buy

This scheme, introduced in 1980, gives people who have been secure tenants of council or other public sector landlords for at least two years the right to buy their homes at a discount. The discount varies on the type of property, its location, its value and the length of tenancy.

Tenants considering Right to Buy should ask their landlord for a copy of the booklet "Your Right to Buy Your Home" which takes them through all steps of the process. They do not need to appoint a third party to apply for a mortgage or to apply for and complete the Right to Buy application form. Tenants can do both themselves.

Confidential advice and practical help on Right to Buy and making an application is available without obligation from one of our case advisors.

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Warning on 'Right to Buy' scams

Introduction

John Bridgeman, Director General of Fair Trading, said:

Housing Minister Nick Raynsford said:

What you can do about it:

What the law says:

Right to Buy

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