The Ultimate Guide to Shared Ownership Staircasing

But what exactly is shared ownership staircasing, how does it work, and should you do it? Join us as we explore the concept and explain everything you need to know to make an informed decision about what to do next.

What is Staircasing in Shared Ownership?

After you become a shared owner of a property, it’s possible to purchase more shares in your home using a process called staircasing. This not only increases the percentage of the property you own, but will also reduce rent payments. You may even be able to buy out all of the remaining shares and achieve full ownership.  

Shared ownership staircasing can be achieved in two ways; interim or final staircasing. The former involves gradually increasing the amount of the property you own, while the latter gives you full ownership of your home and reduces your rental payments to zero. 

How to Staircase Shared Ownership

There are several steps to staircasing your shared ownership property, ranging from notifying your housing association and sourcing a surveyor, to instructing a solicitor and receiving a new mortgage offer.  

The key elements in the shared ownership staircasing process are:

• Seek Advice: Given the financial implications involved, it’s a good idea to speak to a shared ownership specialist to ascertain whether it’s the right move for your circumstances and if you’ll be able to afford the new payment structure. 
• Inform Your Housing Association: Speak to your housing association and let them know you’d like to purchase more shares. 
• Find a Surveyor: Select a surveyor to provide a valuation of your property. Note that your housing association is only likely to accept a quote from a Chartered Surveyor, while some associations may even have their own preferred supplier. 
• Obtain Memorandum of Staircasing: Once the valuation has been received and approved by the housing association, they will provide you with a Memorandum of Staircasing. You must submit the valuation within three months or it will expire. 
• Arrange a Mortgage: Take out a mortgage on the percentage of the property you will own. This can be done with an existing or brand new provider. 
• Send for Approval: When you’ve received your mortgage offer, you should send it to your housing association for approval. This is only the case if you’re not going to be purchasing 100% of the property. 
• Instruct Your Solicitor: Ask your solicitor to facilitate the transaction with your housing association’s legal representatives. 
• Complete the Purchase: With everything taken care of, you can then complete the transaction and own more, or all, of your property. 

If you end up owning 100% of your property once the process has been completed, your solicitor will register the transaction with the Land Registry. In the case of a house, you may be able to transfer to a freehold. Flats or apartments, meanwhile, will still be leasehold and may incur regular costs such as ground rent and service charges. 

The Benefits of Shared Ownership Staircasing

There are many plus points of shared ownership staircasing. Not only will you own more (or all) of your home, but you’ll also have more freedom to sell and could even arrange a cheaper mortgage if you purchase 100% of the property. Additionally, you can benefit from increases in the housing market if the value of your home goes up.

Here are the benefits of shared ownership staircasing in more detail:

• Increasing the amount you own will result in a reduction in rental charges. Although your mortgage payments will increase in tandem, you’ll be more shielded from the ever-rising cost of renting.  
• Purchasing 100% of your property enables you to access regular mortgages, rather than those specifically for shared ownership. Standard mortgages tend to be cheaper. 
• The more of the property you own, the more benefit you’ll see if its value increases.
• If you get to the point where you own 100% of the property, you’ll likely have more freedom when you decide to sell. This may not be the case in all situations, so it’s important to check your lease.

Ultimately, whether to go down the shared ownership staircasing route should depend on your own circumstances. It’s therefore important to contact a specialist who can go through your options and enable you to make an informed decision. 

How Much Does it Cost to Staircase Shared Ownership?

As is the case with many residential conveyancing transactions, shared ownership staircasing comes with additional costs you’ll need to take into account. These range from surveys and solicitors fees, to administration and mortgage charges. As a result, it’s a good idea to seek advice to ensure this is the right course of action for you. 

The most common costs you’ll incur when staircasing shared ownership are:

• Survey & Valuation Fees: You’ll need to pay for the surveyor’s service and their final valuation report.
• Administration Charges: Your housing association will levy additional costs on you for administering your transaction. 
• Legal Costs: It’s necessary to seek legal representation during shared ownership staircasing. 
• Mortgage Fees: Payable if you need to remortgage your property in order to buy the additional shares. 
• Stamp Duty Land Tax: Dependent on the level of ownership you have over your home.

The actual cost of the shared ownership staircasing process depends on a number of factors, such as location, the value of your home, and the size of share you are purchasing. 

You should also be aware that the majority of these additional costs are payable every time you purchase more shares in your property. This could have an effect on the number of times you choose to go through interim staircasing.  

Shared ownership staircasing is a multifaceted process with several elements to take into account. Each of these will have an impact on whether you choose the interim or final route, or if you even go through with it at all. The main points for you to consider are:

How Will You Afford It?

One of the first things you’ll need to think about is how you’re going to fund the purchase of the additional shares. The three main methods are to use your savings, extend your existing mortgage, or remortgaging the property. 

Are Shares Always the Same Price?

It’s often thought that additional shares can be purchased for the same price as the original ones you bought. However, this may not be the case, and the actual cost could be higher or lower depending on the market value of your home.  

Stamp Duty on Staircasing

When and whether Stamp Duty is payable on shared ownership property depends on the value of the home and if you are a first-time buyer. This is because people who are just starting off on the property ladder are entitled to a tax exemption on the first £425,000 (as at February 2024). 

If the levy is chargeable, you’ll be given the choice of making a one-off payment based on the value of the property, or doing it in stages. Should you decide to do the latter, you’ll need to pay Stamp Duty when you initially purchase the property and then again if you staircase past 80%. 

Stamp Duty is another factor to consider when deciding how many times you should staircase. As an example, if you elected to pay the levy in stages, staircased once to 85% and then again to 90%, you’d be charged on three separate occasions. Making a lump sum at the beginning means you won’t get charged anything extra, no matter how many times you staircase.  

Staircasing and Your Mortgage

Unless you have the means to pay for your increased share through savings, shared ownership staircasing will usually involve taking out an additional advance from your existing mortgage lender, or remortgaging completely. 

Any change to the product you take out could result in you being charged a higher level of interest, thereby increasing the overall cost of your borrowing.  

How Many Times Can You Staircase?

The vast majority of properties will have no limits to the number of times you can staircase. This is not a hard and fast rule though, so you should make sure to check your lease to see if this applies to you and your home. 

Deciding how many times to staircase really comes down to your own financial position. If you’re able to keep up with the payments, as well as cover the administration costs and Stamp Duty charges listed above, you should be able to increase your ownership as many times as you like. Of course, it’s recommended to seek specialist guidance before any such decisions are made. 

Limitations to Staircasing

Some properties may be subject to restrictions, such as how much of the home you can own. Rural properties, for example, can have a staircasing cap of 80% to ensure the building is retained for local people. 

Downward Staircasing 

If you’re struggling to keep up with your mortgage payments, it may be possible to sell back some of your shares to the housing association — a process known as “downward staircasing” or “flexible tenure”. This is extremely rare and you would need to speak to your association to see if they’re willing to do this. 

Buildings Insurance

All shared ownership properties are leasehold, meaning it’s up to the housing association to take care of buildings insurance. Provided you’re in a flat or apartment, or don’t choose to buy the freehold of your house, this will not change — even if you staircase to 100%. 

If you’re staircasing a house to 100% and decide to buy the freehold as well, you’ll need to take out a buildings insurance policy that covers you from the date your transaction completes. 

Selling Your Property

It should be possible to sell your shared ownership property, regardless of whether you have 100% ownership or not — although the process will be different. If you don’t fully own your home, your housing association will have a set period of time (usually around eight weeks) to market the property and find a new buyer. Should this not be possible, you’ll then have the opportunity to sell it privately or via an estate agent of your choice.

Once you have staircased to 100%, your property will no longer fall under the shared ownership rules, and you should therefore be able to sell your home however you wish. Some housing associations may have a “first refusal clause” built into the lease, so it’s important to check this beforehand. 

Another option is to staircase to 100% and then try to sell your property straight away — known as “back-to-back staircasing” or “simultaneous selling”. This is particularly useful if your share of the property would be too expensive for other potential shared ownership buyers, or you believe the valuation you obtained is too low.

Specialist Shared Ownership Staircasing Advice

If you’re thinking about staircasing your shared ownership property, it’s essential to obtain targeted and tailored legal advice at your earliest opportunity. With so much to consider and large financial implications, you need to be able to make an informed decision about how, when, or even if, you should go about it. 

The residential property team at Thursfields have a high level of expertise in the field, and can advise you on all aspects of staircasing. Because we’re a law firm that’s built around you, we’ll also take into account your unique circumstances and goals, before developing a completely bespoke solution. With us, you can be confident you’re in safe hands. 
To find out more about how we can help, get in touch today.