Staircasing is the process of buying a greater share of your property in a
shared ownership home. After you have staircased to own more of your home, the rent that you pay will decrease as you are 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.
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 probably allowed 3 purchases and the final one must result in you owning 100%).
Each time you staircase, it’s important to note that you will pay the current market value for the % share you wish to buy.
Staircasing when buying
Shared ownership homes can be either a new build, or a slightly older property that had shared ownership and the original owners are now selling. You can usually buy 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 own the property and land until you staircase up to 100%, at which point the property may then become freehold depending on the legal title. Understand the difference between freehold and leasehold.
Staircasing when selling
This usually happens on a sale when you own a certain percent but your buyer wants to own a greater share. For example, you own 25% and rent the remaining 75% from the Housing Association, but 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 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 full RICS valuation to send to the Housing Association at your expense, usually around £200. That is, a full structural survey of the property so that the Housing Association understand the true current value.
What are the common pitfalls?
A third solicitor has to enter the usual mix of just two solicitors or conveyancers, i.e., the buyers and the sellers. 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.) This won’t be a fee charged by us so we wouldn’t be able to advise further on this other than give an estimation based on fees we’ve seen on historic cases.
Disclaimer: This article is for informal and general advice regarding staircasing.