How the section 125 notice caps service charges on a Right to Buy flat

Buy your council flat through Right to Buy in England and you become a leaseholder, and service charges become the figure that decides whether the purchase makes sense. The law gives flat buyers one strong protection: for the first five years, your contribution to major works is capped by the estimates in your landlord's offer notice. This is general information rather than legal advice.

What the section 125 notice is

Once your landlord agrees to sell, they must send you a formal offer notice, named after section 125 of the Housing Act 1985. For a flat, the government's guidance on the landlord's offer says it must state the price and how it was worked out, your discount, a description of the property, any known structural problems, and estimates of the service charges for the first five years. You then have 12 weeks to confirm you still want to buy, and if the landlord sends a reminder, 28 days to reply before the application can be dropped.

The five-year cap on major works

Those estimates carry legal force. Under Schedule 6 of the Housing Act 1985, during the initial period of the lease, which runs for five years from the grant, you cannot be required to pay more for works itemised in the estimates than the amount shown as your contribution, plus an allowance for inflation. For improvement works the notice did not estimate at all, you cannot be charged anything during that period.

The practical effect is blunt. If the council reroofs the block in year three and your section 125 notice estimated your contribution at £1,500, then £1,500 plus inflation is what you pay, even if the final invoice works out at £9,000 per flat. After year five the cap falls away and you pay actual costs, which on a big job can run to five figures.

Read the estimate as a forecast of the block

The service charge estimate doubles as a five-year works programme, so read it that way. A notice showing roof renewal, window replacement or a lift overhaul tells you what the council already plans to do. A suspiciously thin estimate is not automatically good news either — it protects you for five years, then leaves you exposed to whatever arrives in year six. Ask the council for the block's longer-term works programme and for the last three years of actual service charge accounts, and compare both with the estimate you have been given.

The discount arithmetic on a flat

Flats attract the higher discount rate: 50% after three to five years as a public sector tenant, rising by 2% for each further year, but capped by region at between £16,000 and £38,000.

Take a Leeds council flat valued at £150,000 with 10 years of tenancy. The percentage says 60%, or £90,000, but the cap for Yorkshire and the Humber is £24,000, so the price is £126,000. For most buyers the cap, not the percentage, sets the price, and our separate article on Right to Buy eligibility and discounts in 2026 sets out the full tables.

Remember the exit rules too. Sell within five years and some or all of the discount is repayable, and within 10 years you must offer the home back to a social landlord first, both of which we cover in our article on selling a Right to Buy home.

The section 125 notice is the one document in the process written specifically for you, and it rewards a careful reader more than any survey. A conveyancer who handles Right to Buy leases will check the estimates and the lease terms against each other before you commit, and you can compare conveyancing quotes for a Right to Buy purchase in minutes.