Everything you need to know about taking a step up the shared ownership ladder
By Samantha Eaton - Associate solicitor in the residential property team at Gorvins Solicitors
What is staircasing?
Staircasing is the process of purchasing further shares of a shared ownership property you already own.
Depending on the terms of your lease, once you have lived in your property for a certain period of time you will be eligible to staircase.
Staircasing enables you to own a greater proportion of your home as your circumstances improve. If you choose to increase your share up to 100% of the property you will become the outright owner. The more shares you buy in your home the less rent you will pay and the more profit you will make if you come to sell the property in the future.
How much will the new shares cost?
Additional shares of your property are purchased at a price equal to the relevant proportion of the current market value of the property. You will need to obtain a valuation from a Royal Institution of Chartered Surveyors (RICS) accredited surveyor (this is important, a valuation from a surveyor who isn’t a member of the RICS will be void). Be sure to ask the surveyor to disregard any increase in the property’s value as a result of any home improvements you have made, this is so you don’t end up paying for the added value of any improvements that you have paid for.
What additional costs are involved?
You will be required to pay the valuation costs and any other costs incurred throughout the staircasing transaction, including legal fees, mortgage arrangement fees, additional valuations if there are disputes etc... In certain circumstances, you may also be required to pay stamp duty.
How many times can I staircase?
Typically you are allowed to staircase up to three times, with the third time taking you up to 100% ownership. There is a minimum percentage share you must increase by each time - this information should be in your lease.
Also, If you staircase up to 100% ownership, you may still be obliged to offer the social landlord first refusal of any offer to sell for the first 21 years after staircasing, this will also be detailed in the lease.
How to get the process started.
If you decide you would like to increase your share in the property you will need to contact your housing association, you may also want to consider speaking to a mortgage broker if you need to borrow more money to purchase the additional share.
Arranging the funds can be done in one of two ways:
Re-mortgage - A re-mortgage will allow you apply for a larger loan with a new lender, you can then repay the mortgage to your existing lender and have enough remaining cash to pay for the additional share.
Further advance from your current lender – Your existing lender may be able to provide you with the funds necessary to staircase, they will need to value your home to make sure there is sufficient equity. You may also need to pass an affordability assessment to make sure you can afford the total repayments.
Staircasing involves changes to your existing lease so you will need to instruct a solicitor so that you are ready to act when you receive the valuation report (the valuation report will be valid for three months). If you use the solicitor who originally dealt with your purchase as they will most likely have a lot of your details regarding your property already.