What is staircasing?
Staircasing is the process by which an owner of a shared ownership property can buy additional shares in their property from the housing association.
Under a shared ownership scheme, a homeowner initially buys a share in the property (e.g. 25%), and then pays rent on the share owned by the housing association.
Homeowners can then buy additional shares in their property, in increments (interim staircasing), until they potentially own the property outright (final staircasing).
What are the financial benefits of staircasing?
Each time you buy more shares, your rent decreases proportionally since you're renting a smaller portion of the property. Once you own 100% of the shares, you'll no longer have to pay tenancy rent to the housing association.
If you're buying shares with a repayment mortgage, you can work out whether staircasing makes financial sense by considering the:
- Mortgage interest rate - Compare the interest you will pay on the additional mortgage borrowing, with the amount you will save in rent.
- Capital repayment - If you take out a repayment mortgage, more of your monthly payment goes towards building equity in your home rather than paying rent. Calculate how much equity you could potentially build over time with increased ownership.
- Capital appreciation - Owning a larger share of the property means you'll benefit more from any increase in its market value.
Can I afford to staircase?
Once you know how much the housing association is going to charge you for the additional share, you will need to work out your new monthly costs by adding the new increased monthly mortgage payments to the new reduced monthly rent.
You'll also need to consider any fees or costs associated with staircasing, such as property valuation fees, legal fees, housing association admin fees, mortgage arrangement fees and Stamp Duty (if applicable).
What is the minimum share I can buy?
In April 2022 the law changed and the Affordable Homes Program (AHP) came into effect. If you purchased your initial share before this date under the 'original model', with most housing associations, the minimum incremental share you can buy is 10%.
If you initially purchased after this date under the 'new model', tenants also have the option to buy 1% additional share each year for the first 15 years based on the original purchase price adjusted for the UK House Price Index (HPI). You can also buy further shares, and the minimum incremental share you can buy has been reduced to 5%.
How many times can I staircase?
Prior to changes in the law , shared ownership tenants could staircase 3 times, and the last time had to be the purchase of all remaining shares.
Since the changes, many housing association properties have no restrictions over the number of times you can staircase. You will need to contact your housing association and check the terms of your lease for clarification.
How much will the additional share cost?
The cost of buying additional shares will depend on the current market value of the property, meaning the cost per share could be more or less than you paid when you originally bought your property.
Do I need a solicitor?
You will need to instruct a solicitor to carry out the staircasing conveyancing process, including overseeing the modifications to your existing lease, handling the remortgage formalities, and ensuring that all steps are correctly executed.
What is the staircasing process?
Step 1. Work out an approximate value of your home
Before you get a formal RICS valuation, you should get a rough idea of what your property is now worth. We recommend reading 'How to accurately value a home in 4 easy steps'. You can also check recently sold house prices in your area.
Step 2. Work out what percentage share you want to buy
Once you have an idea of what your property is worth, you should consider the financial implications of buying additional shares, including what you can afford, what mortgage terms are available, and any other costs including fees and Stamp Duty.
Step 3. Check your lease and contact your housing association
Read your lease to see whether there are any specific terms relating to staircasing. It's also a good idea to contact your housing association to confirm your eligibility, notify them of your intention to purchase additional shares and to request a staircasing application form.
Step 4. Arrange a RICS valuation
You will need to obtain and pay for a property valuation from a RICS surveyor.
The housing association may recommend a surveyor to you, but you can choose your own. We recommend that you get a quote from an independent RICS valuer which may be cheaper and will give an independent appraisal of the property's value.
Make sure that you are able to proceed quickly after ordering the valuation, as they are only valid for 3 months from the date of the valuation report. If you don't complete in this 3-month timeframe, you'll need to get another valuation.
Step 5. Complete the staircasing application form
Complete and return the staircasing application form to the housing association, together with the RICS valuation and a copy of your lease agreement.
Step 6. Memorandum of staircasing
Your housing association will confirm in writing in a 'memorandum of staircasing' how much you will have to pay for the additional shares.
Step 7. Instruct a solicitor
You will need a solicitor to handle the conveyancing process. We recommend that you find a solicitor as early as possible in the process, as any delays in the process after the valuation could prevent you completing before the valuation expires.
Your housing association will instruct a conveyancing solicitor to represent them.
You can get an instant quote fixed fee conveyancing quote from our panel of specialist shared ownership solicitors
Step 8. Mortgage offer
The mortgage offer won't be formally issued until the housing association issues the memorandum of staircasing - confirming how much you'll need to pay for the additional share. It is recommended that you speak to your lender as early as possible in the process to avoid delays. Ideally you could ask for a decision in principle (DIP) before ordering the valuation.
Step 9. The legal work is completed
The legal documentation is then drafted and approved by each side’s solicitor. This documentation includes the memorandum of staircasing which records your new shareholding. The lease will also be updated if you staircase to 100%, and if the property is a house, the freehold may also be registered in your name.
Step 10. Pay the Stamp Duty (if applicable)
When you first bought your property, you would have had the choice to either pay Stamp Duty on the full market value of the property, or on just the share that you purchased.
If you paid Stamp Duty on the full market value at the time of purchase, there will be no additional Stamp Duty to pay when you buy additional shares.
If you paid Stamp Duty on the just the share you purchased, you will only need to pay additional Stamp Duty if your total share reaches or exceeds 80%. Stamp Duty will be calculated on the transaction that took you to or above 80% ownership, and you will have to pay Stamp Duty on any additional staircasing above 80%.
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Step 11. Completion and registration
Your interest in the property is then updated at HM Land Registry (HMLR) and if you took out an additional mortgage, a charge is registered on behalf of the lender.
FAQs
How long does staircasing take?
Staircasing can usually be completed in 1 to 3 months of the date of valuation. As the valuation expires after 3 months, solicitors and housing associations are familiar with the need to complete quickly.
Can I staircase with a remortgage?
Yes. You can finance the staircasing purchase from your own savings or with a mortgage.
Will I own the freehold?
If you staircase a leasehold property (flat) to 100%, you will still be a leaseholder. If it's a freehold house, the freehold will be transferred to you when you you buy 100% of the shares.
Is there a limit to the amount I can staircase?
Some shared ownership properties are subject to staircasing restrictions. For example, although most shared ownership leases allow staircasing to 100%, some may have a staircasing cap of 80%. Such restrictions are likely due to local planning restrictions put in place to ensure housing association properties remain in local ownership and don’t end up as second homes.
Do I need to staircase to 100% ownership before selling my home?
No. You can sell your share under the terms of your shared ownership agreement, allowing another eligible buyer to purchase your stake.
What is back-to-back staircasing?
Also known as a simultaneous sale, back-to-back staircasing is when a shared ownership property owner staircases to 100% ownership at the same time as selling the property. This approach is often used by owners to facilitate a smoother sale process, or to maximise the property's value. It also allows the owner to avoid the complexities and restrictions sometimes associated with selling a shared ownership property.
