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Shared Ownership Staircasing Solicitors provide advice on Staircasing

by Tarjinder Rayat — Posted on 20 November, 2019

Starck Uberoi conveyancing solicitors explain staircasing to increase your shared ownership in a property and the benefits this can bring.

Starck Uberoi Shared Ownership Staircasing Solicitors explain Staircasing to increase your Shared Ownership in a property

Purchasing a shared ownership home can bring many advantages. Some see it as a more secure form of renting. It also allows you to get on the property ladder if you couldn’t otherwise afford it. Your initial share of the property could be anywhere between 25-75% of the property, whilst you pay rent on the remaining portion owned by the housing authority.

The benefit of purchasing a shared ownership home is that it gives you the opportunity to gradually increase your equity in the property. This is done through a process called staircasing.

 

What is the staircasing conveyancing process and how does a Shared Ownership Staircasing Solicitor help?

  • Step 1 – Decide how big a percentage you can afford to staircase.
  • Step 2 – Contact the housing association and give notice that you intend to staircase.
  • Step 3 – If you think you need a mortgage to purchase the shares, speak to a mortgage advisor to find out what your options are. Starck Uberoi Mortgages can help.
  • Step 4 – Order a RICS current market valuation of your property – Shares in the property are sold at their current market value.
  • Step 5 – Instruct a conveyancing solicitor. Starck Uberoi’s experienced Shared Ownership Staircasing Solicitors can assist with staircasing to increase your shared ownership
  • Step 6 – The housing association instructs their solicitors to send the legal packs to your solicitor
  • Step 7 – The housing association will send a Memorandum of Staircasing once the valuation is confirmed. This document confirms the amount you need to pay to staircase. You must sign and return it to your housing association.
  • Step 8 – Your solicitor completes the legal work and sets the completion date with the housing associations solicitors
  • Step 9 – Complete the staircasing transaction before the 3-month expiry of your valuation

 

What is staircasing to increase your shared ownership?

This is the process of purchasing further shares in your property, so you own more of it.

Your lease may contain a term stipulating that you will need to have owned your shared ownership property for a certain period before you can purchase further shares in your home; this is usually one to two years.

For example, you could initially buy 25% equity in your shared ownership property and rent the remaining 75%. Then 2 years later decide to purchase another 25% share, bringing your total interest in the property to 50%, thereby reducing the rent you owe to the housing association.

You may be able to use staircasing to acquire 100% of the equity. However, some housing associations may limit the number of shares you can staircase up to, so check the terms of your lease to see if there is a clause on this.

 

What are the benefits of staircasing to increase your shared ownership?

  1. Reduced Rent.

Owning a higher percentage of your home means the amount you owe the housing association is reduced. Therefore, the rent you pay each month will decrease when staircasing to increase your shared ownership.

  1. Benefit from house price increases

If house prices increase you will benefit from the value of your property increasing. The more equity you own in the property, the more you will benefit from the increases.

  1. Better Mortgage Options.

If you use staircasing to own 100% of your home, you’ll then be able to apply for a standard mortgage instead of a shared ownership mortgage. Standard mortgages tend to be cheaper which is where the benefit lies.

If you’re looking at mortgage options on you home, Starck Uberoi can help. Starck Uberoi Solicitors works in a joint venture relationship with Starck Uberoi Mortgages to intorduce you to a mortgage advisor that suits your requirements. Our dedicated mortgage advisors work with a wide range of lender panels in order to find the best mortgage option for you. To speak to our Senior Mortgage Advisor, Sam Thomas, give us a call on 020 8840 6640.

  1. Increase your prospects of selling

If you own 100% of your property you can sell your property on the open market.

If you own less than 100% and the property is still on a leasehold, your lease may include a clause that your housing association has the right to nominate a new buyer to take your share of the property. Check your lease to find out if this is required.

  1. Security

If you own less than 100% of the property, you are legally classed as a tenant. Therefore, if you don’t keep up the rental payments you could lose your property. Staircasing up to 100% of your property gives you security as you won’t have to worry about missing rental payments.

 

How can I pay for the additional shares of my shared ownership property?

  • Use your savings

If you have savings, you could use these to buy the shares in your property outright when staircasing.

  • Remortgage

If buying the shares outright is not an option, and you need a mortgage to staircase, you’ll need to contact your mortgage lender and possibly remortgage. We recommend speaking to an experience mortgage advisor at Starck Uberoi Mortgages in order to find the best deal for a shared ownership mortgage.

 

What costs are associated with the staircasing process?

1. Surveys

You’ll have to pay for an independent surveyor and the valuation report. Valuation reports only last for around 3 months, so to avoid paying for more than one valuation, it’s important to get the staircase conveyancing process completed quickly. Read our blog on “How Starck Uberoi Solicitors offer Quick Conveyancing and Fast Exchange of contracts” for more information on how we can ensure a speedy conveyancing process for our clients.

2. Administration fees

Each time you staircase there will be an administration fee to pay. Therefore, it makes sense to buy as big a chunk as you can afford each time to limit the amount you pay in admin fees.

3. Legal fees

A conveyancing solicitor is needed to staircase to increase your shared ownership. All legal fees will be your responsibility, the cost won’t be shared with the housing association.

4. Stamp duty

When first purchasing a shared ownership property, there are two choices on how you can pay off the stamp duty

5. One off payment – this payment is based on the total market value of the property. If you choose to staircase later, you won’t have to pay any additional stamp duty. This could be beneficial if you think the value of your property will rise substantially before you buy further shares.

6. Pay in stages – you pay what is owed on the initial share you buy, then pay again if you buy more shares.

You can use HMRC’s stamp duty calculator to work out how much tax you would have to pay if you buy a shared ownership home.

7. Mortgage fees

Any fees associated with securing a mortgage to pay for the shares will be payable by you if staircasing to increase your shared ownership.

 

How many times can I staircase to increase my shared ownership?

Ultimately the answer depends on what is in your lease. Leases usually allow for you to staircase up to 3 times to take you to owning 100% of the property. Check the terms of your lease to be certain.

 

What happens when I own 100% of the shares in my property?

If you staircase to increase your shared ownership to 100% there are 3 possible scenarios:

  1. You own the flat with a leasehold – You won’t have to pay rent anymore, but there could still be ground rent and service charges payable because of the nature of a leasehold.
  2. You own the house and staircasing results in you purchasing the freehold – you no longer pay rent, ground rent or service charges
  3. You own the house but not the freehold – The property has remained a leasehold so even though you own 100%, ground rent and service charges are still payable

For more information on ground rent on leaseholds, read our blog “Purchasing a leasehold property”.

How Starck Uberoi can help

Our experienced mortgage and Conveyancing team will deal with your matter efficiently to ensure you fully understand how to increase equity when you are purchasing a Shared Ownership property. Our experienced conveyancing solicitors work closely with the mortgage team to provide the most efficient service. For more information, please visit our mortgage or Conveyancing pages, or to book an appointment please call 020 8840 6640. We are based in Brentford, Ealing, Canterbury and London Victoria; our West London Ealing office is located 10 minutes from Ealing Broadway station; our London Belgravia office is located a few minutes from Victoria Station. For an appointment at any of our offices, email us at solicitor@starckuberoi.co.uk.

Further Reading

About Tarjinder Rayat

Tarjinder is a qualified Solicitor and heads the landlord and tenant department. She has a strong local reputation for dealing with landlord & tenant matters including possession, unlawful evictions and disrepair claims as well as conducting general litigation matters.