So how does shared ownership staircasing work? If you have bought your home via shared ownership, you will probably at some point want to start staircasing. Shared ownership staircasing is the process were you increase the percentage share of the shared ownership property you own.
There are many things to research before you decide to staircase. This includes; costs incurred such as shared ownership staircasing solicitors fees, the process, the benefits etc. To make things easier for you, we have answered the most frequent queries about shared ownership staircasing in this piece.
Is it optional to staircase with shared ownership?
You do not have to staircase with your shared ownership property. However it can bring a number of benefits. Any additional shares that you purchase are based on the current market value of the property. So, if your home is valued at £200,000 and you want to purchase an additional 25% share, the purchase price will be £50,000.
There aren’t normally any restrictions on your eligibility to staircase but you should firstly refer to your lease where the process is set out. We recommend you discuss this with a shared ownership solicitor.
What are the benefits of staircasing to 100%?
Pay no rent – As you have bought 100% shares in the property, you will no longer have to pay rent to the housing association.
More control – By staircasing to 100% the property becomes yours and when you are wanting to sell you can use whatever channel you wish. You wouldn’t be able to do this if you were selling your share of the property as the housing association gets to market it first.
Higher variety of mortgage options – If you were to staircase to 100% you can then change your mortgage to a standard mortgage which tends to be cheaper than a shared ownership mortgage.
More security – By owning 100% of the property you are no longer classed as a tenant, but a homeowner. This gives you greater security as you are not at risk of being evicted.
Benefits of staircasing if you can’t reach 100%
Lower rent – As you have bought a higher share in the property, you reduce the amount of rent that you need to pay to the housing association.
How much and how many times can you staircase?
You can typically staircase 5-10% minimum each time, this is dependent on the housing association. Some housing associations may also limit how many times you can staircase. Following our research, this is generally 3 times, with some housing associations stating that you must be purchasing 100% by the third time (this is worth checking with your provider). This may mean that you will have to save up a bit more before staircasing as you want to ensure that you will be able to reach 100% (if this is what you are wanting to do)
Each time you staircase you are reducing your rent and increasing your share in the property.
Please note that each extra share you buy is based on ‘current market value’ at the time of the application not at the time of purchasing the property. Each time you staircase there will also be legal costs and other fees.
Do you pay stamp duty when staircasing?
When purchasing a shared ownership property as a first time buyer you will have the option of paying stamp duty on the full value of the property, like an outright sale. This means that you wont have to pay stamp duty again even if you buy the property outright later at a higher price.
However, you can choose to pay stamp duty on the share that you are purchasing, which maybe less than the allowance for first time buyer. There may also be a stamp duty charge, called the net present value. This is based on the rent payable over the term of the lease (lease premium). This reduces the costs at the time of purchase, but this means the overall cost cold be higher when you purchase over 80% of the property
If you have already purchased your property and did not pay the full stamp duty then, you will not be liable for stamp duty until you share is 80% or more.
Stamp duty can be a complicated to process to try and work out so you should seek external advice. This could be from your solicitor of legal adviser who will confirm the amount you will need to pay.
Why can you not staircase to 100% on some properties?
Older Persons Shared Ownership only lets you staircase to 75%. If they have purchased a 75% share, they will no longer pay rent but may have to pay service charge.
Housing Associations may also have restrictions on certain developments and properties which may mean that you can not staircase to 100%
What is the process for staircasing?
Each housing association’s process with differ slightly, but here is the an overview of what you can expect.
- You will need to contact a RICS Surveyor (Royal Institute of Chartered Surveyors) / FRICS (Fellow of Royal institute of Chartered Surveyors) registered surveyor to perform a valuation of your property. This will ensure that the staircasing amounts is reflected from the market value of the property. This will mean that if your house increases/decreases in value, the share prices will change accordingly. You should complete your staircasing transaction within 3 months of this valuation otherwise another will need to be performed.
- Once your valuation has been performed you can then contact the housing association to put a staircasing request in along with the report.
- When the property valuation has been received, the premium of the share you don’t own will be calculated. Then the calculations and response form will be emailed to you. This form will ask you to complete the amount of shares you would like along with your solicitors details. Your application will not progress until you return your response form confirming how you wish to proceed and what shares you wish to purchase. All leaseholders named on the lease must sign this form.
- Solicitors will be contacted and they will work together to arrange a completion date.
- Completion. Upon completion of staircasing you will be in one of these positions;
Purchased 100% and currently not paying a service charge – you will no longer have to pay rent and have further communication with the housing association
Purchased 100% and currently paying service charges – You will be notified by your solicitor where you will be paying this service charge to.
Interim staircasing – Your file will be updated with your new share and rent amount.
Who else needs to be involved in the process?
Mortgage Advisor: If you are increasing your mortgage to staircase, you will need to contact your lender direct to organise the additional amount known as ‘afurther advance’. You may want to switch your mortgage to a different lender for a better interest rate, this is known as ‘re-mortgaging’. If this interests you, you can compare shared ownership remortgage options
Solicitor: As there will be an increase in the property share, you will need to amend your existing lease. This will mean that you will need a solicitor. You can use one provided through the housing association or one which you used in the initial process.
Please note: You should check that this information is correct by contacting the housing association your home is with. You should also check that staircasing is a viable option for you and the staircasing amount is affordable.