If you bought your home through shared ownership you may be considering Staircasing. Staircasing is where an owner of a shared ownership property purchases further shares of the property from the housing association that owns the remaining percentage.
An owner can usually purchase in tranches of 10% or more. However, as there are valuation and legal fees to pay, the owner would be well advised to buy the largest additional share they can afford at the time of Staircasing. There are many benefits to buying more shares of your home.
Isabel Guerin-Trickey, Head of Staircasing at one of our panel solicitor firms Direction Law, gives an overview of the different options available when Staircasing.
This is the purchase of a share that increases the amount owned, but not to 100% (e.g. Staircasing from 50% to 75%). After intermediate Staircasing the owner will still be known as a 'shared owner.'
A valuation is carried out and the price payable for the share is based on the value of the property. Once the share has been bought there is a corresponding reduction in the amount of rent paid to the housing association, as you only pay rent on the share you do not own.
Once the final share has been purchased, the owner will own 100% of the property and will no longer be a shared owner.
If the property is a house then the former shared owner will become the owner of a freehold property. If the property is a flat, it will still be leasehold which means that service charges continue to be payable.
However, there is no longer any rent to be paid to the housing association, although in some cases you may still need to pay ground rent. When you own 100% of the flat, the terms of your lease will change and it will no longer be a 'shared ownership' lease.
As with intermediate Staircasing, the price paid for buying all shares is based on the current market value of the property assessed by a valuer.
How do I pay for my Staircasing?
If you want to buy more shares in your home, the additional share can be bought either with your savings or with the assistance of a mortgage. If paying for it with a mortgage, then this may be either by further advance from your existing lender or a remortgage eg. a new loan from another lender.
In the case of an interim Staircasing, the mortgage offer must be approved by the housing association and the additional borrowing must be no more than the amount being paid for the additional share. With a final Staircasing the mortgage does not have to be approved by the housing association and there are no rules limiting the amount you can borrow.
Stamp Duty Land Tax on Staircasing
Stamp Duty Land Tax (SDLT) is not payable on intermediate Staircasing unless the percentage owned is over 80%, in which case the transaction is treated for tax purposes as though it were a final Staircasing.
For a final Staircasing transaction, the SDLT premiums paid for the initial share, any intermediate shares and the final share are added together to determine the rate of tax payable on the final share. Duty is then paid at the applicable rate proportionate to the amount being paid for the final share.
However please speak to a solicitor who can advise further on your specific situation.
If you're thinking about owning more of your home through Staircasing, please email our Staircasing team at firstname.lastname@example.org who will be able to guide you through the steps.