A Shared Ownership property is a property where you own a percentage and rent on the un-owned share from a housing association. The process of buying more shares in your property is known as "staircasing". When you staircase to 100 per cent, you will own your property outright and will not need to pay rent to the housing association any more. You may, however, need to start to pay ground rent.
The property will either be a new Shared Ownership property or an existing Shared Ownership property, also known as a “resale”. On a resale, it is common that the seller had already purchased extra share(s) from the housing association and you are therefore buying a higher share in the property than stated on the lease. This means that the seller “staircased” during their period of ownership.
So, what is the difference between a first purchase and a Staircasing transaction? How does it impact you, as a buyer now and later in the future? One of our panel solicitors, Norman H Barnett, explains:
Shared Ownership – initial purchase
If you are purchasing a new build property, you and the Housing Association (like Peabody) will agree on the initial percentage you can purchase. The housing association will assess this depending on your financial circumstances.
If you purchase a resale property, you will be purchasing the current share the seller owns. You cannot buy a lower share than what the current owner is selling.
Solicitors are the key to ensuring you get the knowledge of how the transaction works and what the lease actually means. We are trained professionals who have a duty of care to ensure you are buying your first property (and hopefully not your last) free from any issues or concerns, both legally and practically. Your first purchase is going to be the most important one of your life. Buying your first property involves you getting a mortgage, which is a big financial commitment.
The timescale from being accepted to buying the Shared Ownership property and to moving in can vary depending on the development. It is difficult to determine an exact timescale and as such an estimate cannot be provided. Once you have purchased your initial share of a Shared Ownership property, what is the next step?
Buying more shares – staircasing
This is the process whereby you purchase more shares from the housing association. Staircasing is simply a step closer to owning the property outright and becoming a full owner.
The more shares you buy, the less rent you pay.
Your lease usually determines the minimum share you are allowed to purchase. After you have approached your financial advisor/mortgage company to see how much they can lend you, you will need to contact the housing association who will then send you the staircasing information pack. The pack will advise you to get a valuation to determine the current market value of your property. The valuer will be independent and RICS approved. This valuation is valid for three months and you must complete within this timescale.
There are two types of staircasing transactions. One is an Interim Staircase and the other is a Final Staircase. The transactions are exactly what they say they are!
An Interim Staircase is when you purchase an extra portion of your property. You will then continue to pay rent on the remaining un-acquired share you do not own. If you purchase all of the remaining shares of the property, you will become an outright leaseholder. This means you will own 100% of your Shared Ownership property. You no longer have to pay specified rent. However, depending on the terms of your lease, ground rent or minimum rent may be payable.
Don’t forget that Stamp Duty Land Tax may be payable on staircasing to the HMRC (which is another topic in itself).
In conclusion, Shared Ownership properties are a great way for first time buyers to get on the property ladder. The scheme allows you to buy additional shares throughout your period of ownership or sell your existing share to another buyer.
Find out more about Staircasing