Staircasing – the ups and downs
Created on Tuesday, August 15th, 2017
by Kathryn Shaw
There’s lots of jargon to dig through when it comes to buying a home, which can be a little confusing at times.
In an effort to untangle this web of words, we’re going to explain what it means to “staircase” a shared ownership property.
First things first – what is shared ownership?
For those of you who may not have heard of this before, shared ownership homes are provided by housing associations up and down the country.
They work by offering first-time buyers a share of the property with a smaller deposit, which makes it more affordable than buying a property outright. You can buy a share of between 25% and 75%, and then pay rent on the remaining share.
Whether you’re currently a shared owner or you’re considering buying a home under the shared ownership scheme in the future, it’s worth knowing how increasing your share works.
So what is staircasing?
After an initial period of three months, if the shared owner’s circumstances improve and they decide they would like to increase the percentage of the property they own, they can do this through a process called staircasing.
For example, if Alex owns 50% of their home, then Derwent Living owns the other 50%.
Alex has enough money to buy a further 25%, increasing their share of the property to 75% and reducing Derwent Living’s to 25%.
How to staircase
To purchase more shares or the remaining shares, however much that might be, you need to contact Derwent Living by telephone or email to inform us of your intention to staircase and we will ask you to pay a £150 valuation fee. This can be paid by telephone via a card payment or by sending a cheque payable to Derwent Living to the sales team.
We will then arrange for an independent chartered surveyor to contact you and arrange an appointment to carry out a valuation report.
Once we have received the report, we send this to you by email along with a confirmation of how much Derwent Living requires for the shares.
If you wish to go ahead with the sale, then you will need to confirm this via email or post and provide your solicitor details and the percentage you wish to purchase. We will then formally instruct both solicitors with our requirements. Please be aware you will be responsible for your own solicitor fees.
Please note: the initial valuation is only valid for 3 months (this is due to the way the housing market changes) and if it expires prior to instructing solicitors, then a £75 revaluation fee is required.
If you wish to buy some of the shares remaining but not all of them, the process is the same as already mentioned but you will also need to fill in an application form to Derwent Living.
Staircasing via Resale
This is when a current shared owner wishes to sell their own shares and Derwent Living’s shares to another person. So Alex, instead of increasing their own 50% share, would like to sell it to someone who intends to buy 100% of the property.
You can sell 100% of the property on the open market via an estate agent of your choice but when you get an offer you need to explain that you can only provisionally accept it. This is because you are not only selling your own shares but Derwent Living’s, too.
You will then need to call and pay the valuation fee as mentioned, and when you receive the valuation report from Derwent Living you need to share this with the purchaser.
Once you have confirmed that you are happy to go ahead with the sale, Derwent Living will need the Memorandum of Sale (MOS) from the estate agents (it needs to state the 100% selling price).
Derwent Living will then formally instruct solicitors for all parties and again, you will be responsible for your own solicitor fees and estate agent fees.
Sellers may be required to pay for leasehold enquiries requested by the purchaser’s solicitors and for Derwent Living to provide these the cost is £120.00 including VAT.
If you’d like to know more about staircasing or becoming a shared owner, you can contact Lisa Spencer, Derwent Living’s sales advisor, by emailing email@example.com or calling 01332 346 477.