Increasing your stake: How shared ownership staircasing works

Shared ownership has opened up doors for many aspiring home buyers in the UK, providing an affordable and accessible way to step onto the property ladder. One unique feature of shared ownership that sets it apart from traditional homeownership is "staircasing."

In this blog, we will explain how shared ownership staircasing works, empowering you to make informed decisions and achieve greater homeownership flexibility. 

What is shared ownership staircasing?

Shared ownership staircasing is the process through which you, as a shared owner, gradually increase your stake in the property. Initially, you buy a percentage (usually between 25% to 75%) of the property and pay rent on the remaining share owned by the housing association or developer. Staircasing allows you to purchase additional shares in the property, which decreases the amount of rent you pay and increases your overall ownership percentage.

The shared ownership staircasing process

Before you begin the staircasing process, it's essential to assess your financial readiness. Determine whether you can afford the potential costs associated with staircasing, such as valuation fees, legal fees, or mortgage advice.

Shared ownership prior to April 2021

Shared ownership buyers who purchased prior to April 2021 can usually buy shares of 10% or more at any time. Some newer leases will allow you to buy shares of 5% or more. It will usually say in the documentation you received when purchasing what you’re able to do, but you can also contact your housing provider and explain that you wish to staircase.

You will then need to arrange for a Royal Institute of Chartered Surveyors (RICS) valuer to visit the property so they can work out its current value. You will receive a copy of the valuation and be asked to confirm that you would like to proceed with the process, with most valuations being valid for three months (If you take longer than this set period to complete on the transaction, you will be required to arrange for a new valuation to take place).

Shared ownership from April 2021 onwards

For newer shared ownership buyers (as of April 2021) you have the option to staircase by 1% each year for 15 years from the date of purchase. If you wish to take up the option of the 1% staircasing you will not be required to pay for an independent valuation and the fees will be heavily reduced, although some legal fees are likely to be incurred.

Getting a valuation

To begin staircasing, you'll need to get a current valuation of the property (unless you’re using the 1% staircasing option). A RICS surveyor will assess your property’s market value, considering factors such as property prices in the area and any improvements you've made to the home. The cost of the valuation is typically borne by you, but it's a crucial step to ensure you pay the market price for the additional shares.

Depending on the terms of your shared ownership agreement, you may have the opportunity to negotiate the purchase price of the additional share – although they can challenge if they believe it is not in-line with market value. This negotiation can be beneficial, especially in a changing property market. Once the price is agreed upon, you can proceed to secure the financing for the increased share.

Financing

Financing your staircasing can be done through either a mortgage or personal savings. As you'll be buying a larger share of the property, you can apply for a mortgage to cover the cost of the additional shares. It's essential to compare mortgage offers from different lenders and consider seeking advice from a financial broker, such as our sister company Mortgage Scout, to choose the best option for your situation.

Alternatively, if you have sufficient savings, you can use them to buy the extra shares outright – this is what is typically expected if you’re under the new shared ownership model and staircasing by only 1%.

Legal process and updates to lease

You'll need to inform both the housing association or developer and your solicitor of your intention to staircase. Your solicitor will handle the legal process, updating the lease to reflect your increased ownership percentage.

Remember to keep a record of all relevant documents and communications throughout the staircasing process for future reference!

Enjoy the benefits of increased ownership!

Congratulations, you've successfully completed the staircasing process! With a higher ownership percentage, your monthly rent will decrease. Plus any future property price appreciation will directly benefit your increased share, potentially boosting your overall profit if you choose to sell in future.

Shared ownership staircasing is a fantastic opportunity to gain more shares in your home and achieve greater financial stability. Remember to plan carefully, assess your financial readiness, and seek professional advice when needed. With staircasing, you're well on your way to ascending the property ladder and embracing the benefits of shared ownership to the fullest!

Get in touch with the SOWN Team if you have any questions about shared ownership staircasing.