What is Staircasing?
In simple terms, staircasing is buying further shares in a shared ownership property to enable you own a greater percentage in your home. The more shares you own the less rent you will have to pay to the housing association.
Types of Staircasing
There are two types of staircasing under shared ownership transactions, Interim Staircasing and Final Staircasing. Stamp Duty Land Tax (SDLT) is normally not payable, but there are exceptions. Staircasing above 80% but below 100% will still attract SDLT even though it is an interim staircasing.
Interim Staircasing
Interim staircasing, otherwise known as partial staircasing, involves purchasing further shares in the property below the 100% threshold. For example:
- Ben currently owns 25% in 12, Example Way and wants to purchase a further 30% to take his total share to 55%. This is an interim staircasing that will not attract SDLT, regardless of the value.
- Amy currently owns 60% in 22, Example Way and wants to purchase a further 30% to take her total share to 90%. Though an interim staircasing, SDLT is applicable here as Amy’s total share in the property is over 80%.
Final Staircasing
This is when a leaseholder purchases the 100% interest in a property to own the leasehold or freehold interest. Staircasing provisions in the lease usually dictates if a leasehold or freehold interest will be obtained after final staircasing. Final Staircasing usually attracts SDLT payment depending on leaseholder’s status at the time of the initial purchase.
The Process
When the Leaseholder contacts housing association with a view of purchasing further shares in the property, a Valuation is carried out to determine the current market value. The Valuation is carried out by an approved RICS Surveyor, and the fee is payable by the leaseholder. The Valuation is normally valid for 3 months and completion of the staircasing must take place within the period.
SDLT Implications
SDLT is usually payable when a leaseholder staircases to 100%. However, SDLT may not be applicable and is dependent on the leaseholder’s status at the time of the initial purchase. The leaseholder has the option when purchasing to pay SDLT on the premium share they are buying or the full market value.
Examples
John purchased 50% in 10, Example Way for £100,000 in 2019. The full market value was £200,000. John intends to purchase the remaining 50% to own the 100% leasehold interest. John elected to pay SDLT on the full market value when he purchased the 50% in 2019 as he was a first-time buyer.
Lucy, who is not a first-time buyer, purchased 25% in 8, Example Way for £100,000 in 2019. The full market value at the time was £400,000. Lucy elected to pay SDLT on the premium. Lucy intends to purchase the freehold interest for £300,000 which is the remaining 75% interest. SDLT is now payable on the £300,000.
Final Thoughts
A new model share ownership lease is currently being adopted by a number of housing associations allowing purchasers to increase the shares they own in lesser increments than the standard percentages of 10% and 25%. If you plan to Staircase, whether you have done so previously or not, our dedicated Staircasing Team will be more than happy to help with any questions. Give us a call on 01489 864 131 or email newhomes@lawcomm.co.uk for a quotation.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
