Understanding staircasing
4 min read
Bought your home through the shared ownership scheme? Discover how you can buy a greater share of your property and gain full ownership through staircasing.
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- What is staircasing?
What is staircasing?
Staircasing is the process of buying a greater share of your property in a shared ownership home. So, you start owning a share of your house, and at any time you can buy more shares and pay less rent for the remaining share. As your financials improve, you can gradually own the whole house.
What is an example of staircasing?
If you originally purchased a home with a 25% share and are now looking to staircase to buy an additional 25%, you’ll then own 50% of the property. This process enables you to increase the percentage share you own, sometimes even up to 100% ownership. Find out about exceptions here.
Why consider staircasing?
Staircasing might be a good idea if you’re looking to:
Enjoy more flexibility. Staircasing gives you more control and enables you to assess your financial situation and decide the level of ownership that’s right for you.
Pay less rent. After you’ve staircased to own more of your home, your rent will decrease as you’re only required to pay rent on the share that you don’t own. Whether you do this using additional mortgage or savings will define whether your mortgage payments increase as a result.
Own the freehold. Once you’ve staircased to 100%, you’ll be able to gain full ownership of the property and buy the freehold of the house.
Benefit from property prices increases. If the property has increased in value since your purchase, you might have built equity. This could also mean a higher resale value.
Sell easier. If you have staircased to the full 100% ownership and you decide to sell the property, you won’t have any restrictions – meaning you can sell your home without the involvement of your shared ownership provider.
How does staircasing work when buying a property?
You can buy a shared ownership homes through either buying a new build or buying a slightly older properties that had shared ownership through its original owners, who are now selling. You can usually staircase in increments of 12.5% or 25% depending on the Housing Association who own the property. Shared ownership homes are always leasehold – meaning the Housing Association owns the property and land until you staircase up to 100%, at which point the property may become freehold depending on the legal title. Read more on the difference between freehold and leasehold.
How does staircasing work when selling a property?
This happens on a sale, when you own a certain percent, however the buyer wants to own a greater share. For example, you own 25% and rent the remaining 75% from the Housing Association, however your buyer wants to own 50%. You would staircase up to 50% on completion, although your buyer is the one who actually pays the Housing Association this additional 25%, not you. This is because the additional share needs to be purchased as part of the transaction rather than after the sale.
It’s important to remember what level of Stamp Duty Land Tax (SDLT) you paid when you first bought your home – you may have chosen to pay SDLT only on the share that you first owned, meaning that even though you’re now the seller, Stamp Duty would be due from you for the remaining market value of the property if/when you staircase to own over 80%. Most people forget about this (or may not have been given full advice at the time) and it gives them a bit of an unwanted surprise. Don’t forget, first-time buyers under a certain purchase price are currently exempt from stamp duty, so this may not apply to you.
Most Housing Associations will also want to approve the additional share being bought, and some Housing Associations will have a limit that a maximum of 75-80% of the property can be owned, although you should be aware if this applies as it would have been part of the terms when you purchased.
You may also be required to obtain a valuation report to send to the Housing Association at your expense, which usually costs around £200. A RICS valuation is a survey of the property to understand the property’s true current value.
What are the common pitfalls?
A third solicitor will enter the usual mix of two (the buyer’s and the seller’s). This third lawyer represents the Housing Association as they have a stake in the property. This can sometimes slow things down a little as it brings an extra party into the process, and more paperwork.
The seller will usually find themselves responsible for paying the legal fees for this third solicitor at the request of the Housing Association (although this is usually a reasonable fee around a few hundred pounds.)
Staircasing tips and advice
Understand your shared ownership agreement. Carefully read the terms and conditions of your shared ownership agreements and look for any restrictions as well as costs involved in the process. Communicate with your Housing Association or shared ownership provider to discuss and clarify any uncertainties.
Understand resale restrictions. Some versions of shared ownership leases provide that the landlord has a right of first refusal if the property is sold, even though the leaseholder may have purchased 100% of the property.
Financial assessment. As your ownership percentage increases, your responsibilities and expenses may also increase. Familiarise yourself with the costs involved in the process, such as the legal and valuation fees, and additional responsibilities (e.g. maintenance charges) and assess your finances. Think about your income, expenses and make sure you can afford the increased mortgage payments.
Talk to a professional. Consult a conveyancer who can explain every step of the process and help you with the legal aspects of staircasing. At My Home Move Conveyancing, we are always available to answer your questions and guide you through the staircasing process. Get in touch.
Staircasing FAQs
Explore answers to the most common questions around staircasing.
Can I staircase multiple times?
Since September 2011 – there are no restrictions on the number of staircasing applications that can be made. If you purchased before this date, you’re allowed three purchases and the final one must result in you owning 100%.
Each time you staircase, you’ll pay the current market value for the share percentage you wish to buy.
How much does staircasing cost?
The cost of staircasing can vary depending on several factors, like the amount of shares you’re buying, property type, location, etc. However, the typical costs for staircasing include:
Surveys. You’ll need to get a valuation report before you staircase, this is because you pay the current market value for the additional shares. Find out more about valuation surveys and the cost or get a valuation survey quote today.
Legal fees. You’ll also need to cover your conveyancer fees for dealing with the legal process of staircasing.
Stamp duty. If you’re purchasing property shares over a certain value, you may also have to pay stamp duty, check stamp duty rates.
Mortgage fees. Whether you decide to remortgage or use your existing mortgage, you’ll still need to pay fees. These will vary depending on your provider and the amount you’re staircasing by.
Housing Association fees. Your Housing Association might charge administration fees for your staircasing transaction.
Can I get a staircasing mortgage?
If you meet the eligibility criteria, you can get a mortgage specifically for staircasing in a shared ownership property that could enable you to buy more shares in your home. Find out how to get a mortgage.
Are there any restriction to the amount I can staircase?
According to gov.uk, in some places called ‘designated protected areas’, you may only be able to buy a share of up to 80%. However, for most shared ownership homes you can gain complete ownership.
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