Understanding the Conveyancing Process for Staircasing and Resales in Shared Ownership

Shared ownership is a great option for those looking to take their first steps into homeownership. Coralie Phelan, Partner and Head of Resales and Staircasing at Prince Evans Solicitors, looks at the conveyancing process for Resale Purchase and Staircasing

Background – What Is Shared Ownership?

Shared ownership allows you to buy a home through the shared ownership scheme if you meet the eligibility criteria. You buy a share of the property and pay rent on the part you do not own.

The eligibility requirements for the scheme are as follows:

• You must have a combined annual household income of under £80,000, or £90,000 in London
• You must not own or part-own another property on completion
• You cannot afford all of the deposit and mortgage payments for a home that meets your needs.

Next Steps

• You will need to meet the scheme’s affordability criteria
• You need to apply for a mortgage (unless you are a cash buyer)
• You will be required to purchase the maximum share you can afford.

What Are The Advantages?

• Low deposit – this could be 5% rather than the traditional 10% of the purchase price if agreed
• Your landlord will be under an obligation to act responsibly and ensure it only allows you to purchase the property if you can afford to keep up with the repayments on your mortgage and the rent you pay it and other associated outgoings. This is due to the scheme being Government-backed with the associated reassurances that there are certain rules that your Landlord must abide by.
• You can then decide whether resale shared ownership is right for you.
• Resale shared ownership being a pre-loved property with the seller already in occupation.

How Does Shared Ownership Resale Work?

• You can purchase a share of the property, usually between 10% and 75% subject to eligibility criteria
• You pay rent to the housing association on the percentage you do not own
• You will have to a pay a service charge to cover any shared services or estate maintenance
• You will not be able to rent out or sublet until you own 100%
• Your lease will outline your repair and maintenance responsibilities
• The lease will provide for annual upwards-only rent increases.

What Are The Advantages Of Resales

• Resale properties are often more affordable than new build
• The rent may be less on a resale property than on a new one
• You will be moving into an already established neighbourhood
• Older buildings may have original features that are appealing.

What’s The Legal Process For A Resale Purchase?

The resale conveyancing process at a glance:

1. Instruct your conveyancer – you and the seller will need to instruct separate conveyancers. It’s advisable to obtain at least two or three quotes.
2. Once instructed, your conveyancer will request certain information and you will need to fill out initial questionnaires and provide evidence of your identity and source of deposit by way of bank statements and other evidence.
3. Contract papers – your conveyancer will confirm instructions with the seller’s solicitor and request draft contract papers. The seller’s solicitor will supply the draft contract papers consisting of the draft contract, transaction or sales forms and other supporting documents such as the lease and planning consents or warranties relating to the original construction of the property.
4. Title investigation – once your conveyancer receives the draft contract pack, the papers will be reviewed and enquiries raised to ensure you receive a good and marketable title to the property. Your conveyancer will use the title plan to order searches, which usually consist of a local authority search, a drainage search, an environmental search and a chancel check.
5. Mortgage – your conveyancer acts for both you and your lender and will both review your mortgage offer and report to you on the terms. The title review is also for the benefit of your lender.
6. Report on title – your conveyancer will prepare your report on title once they have the results of your searches and replies to enquiries. This report is the most important document of all and will explain the terms of the contract and lease and supporting documents. You will be invited to sign the contract once you have read the report. You will be asked to pay your deposit at this stage.
7. Exchange of contracts – once you have signed the contract, all parties in the chain can discuss a completion date and you will be asked to provide your authority or consent to exchange of contracts. Once exchanged, the contract becomes legally binding and the completion date fixed.
8. Completion – your conveyancer will send you a completion statement between exchange and completion and collect in the balance of funds due from you in order to complete your purchase.
9. After completion – your conveyancer will apply to the Land Registry to register your ownership.
10. You can then consider staircasing in the future.

What Is Staircasing?

Once you have owned your property for a certain period of time (as specified in your lease) you can consider purchasing additional shares or staircasing.

Staircasing is the process of buying additional shares in the property you own with a corresponding reduction in specified rent. You are basically purchasing more equity in your home.

There a number of advantages to staircasing as follows:

• Most leases allow you to purchase 100% of your home
• You may benefit from more mortgage choices as you are not limited to shared ownership products
• It may be easier to sell the larger the percentage owned
• You have increased security with more equity
• You pay less rent
• The greater the percentage owned, the more you benefit from any property price uplift
• You can sell your property on the open market once you own 100%.

What’s The Legal Process For Staircasing?

Second Stage – arrange a valuation.

• Once it has been established that the transaction is affordable you can then liaise with the housing association to arrange a valuation
• You usually have 12 weeks to complete before the valuation expires.

Third Stage – instruct a solicitor.

• Once the valuation has been arranged you should then instruct a conveyancer who specialises in staircasing such as Prince Evans Solicitors
• The housing association’s solicitor will issue the draft memorandum of staircasing to your conveyancer.

Fourth Stage – review the memorandum of staircasing.

• The memorandum of staircasing is the document that records the purchase of the additional shares
• Your conveyancer will check the terms of the memorandum and then report to you regarding the terms and enclose the memorandum to sign
• If you are remortgaging, your solicitor will also deal with the remortgage element and ensure all your lender’s requirements are met.

Fifth and Final Stage

• Once you have signed the documents your solicitor can fix a completion date
• Your solicitor will then produce your final invoice for payment before completion
• Your solicitor will deal with the post- completion requirements including registering the Memorandum at the Land Registry.

Final Thoughts

In summary, the process for both resale purchase and staircasing can be successfully navigated with the correct advice from a conveyancer specialising in this area.