Less than 3% of homeowners belonging to shared ownership schemes staircase each year…
Earlier this year, the government recently announced a new plan to enable leaseholders to staircase a minimum of 1% instead of the current 10% dictated by most leases.
This change could increase affordability of staircasing, as a property valued at £150,000 would result in a leaseholder raising £1,500 for a 1% share instead of £15,000 for a further 10% share.
But what does this mean for the housing associations?
The housing association is responsible for its own legal fees every time a leaseholder staircases as these can’t be passed onto the leaseholder. This means increased annual costs for the housing associations if it takes off.
New valuations are required if any previous one is more than three months old. The cost of a valuation by a RICS surveyor is currently in the region of £250. Housing associations can extend a valuation for up to a further three months but this depends on the individual policy of each association. This cost is the responsibility of the leaseholder. If the plan were to succeed then possible changes to the validity of valuations would be required without losing the reliability of the data contained in the report.
The administrative costs of staircasing for a housing association include leaseholder enquiries, documentation and changes to the rent account (to reflect the change in rent, for example).
Finally, we must consider the effect on the association’s asset log. Every staircase reduces the value the housing association has available for charging and administering the changes of such log when a leaseholder could staircase multiple times over a short time period with the 1% change.
However, by reducing the rental liability, the association is able to reduce their risk on unpaid rent and the possibility of having to litigate to recover those rent arrears.
Will the change to percentage really alter the number of owner’s staircasing? When leaseholders still have valuation fees, legal fees and lender fees to consider, is the prospect of a reduced rent and increased percentage owned, however small, attractive enough?
Shared owners are unlikely to staircase unless surveyors, lenders and leaseholder solicitors can agree to reduce their fees in line with the amount being staircased. These costs are currently around £2,000 for the leaseholder (which when offset against the rental saving is unlikely to be sufficient to encourage them to staircase any further than at present.