When a shared ownership home is bought from a housing association, the new leaseholder is given plenty of advice on stamp duty land tax (SDLT). But associations often forget how this works when their leaseholder or, in cases of repossession, their lender wants to buy the home outright, or ‘staircase’. The rules can be summarised as follows:
- when the shared ownership lease is granted, the buyer pays SDLT on the total value of their new home - known as the ‘market value election’ - or of the share they have purchased
- when the buyer opts for the market value election, no further duty is payable on final staircasing
- but where duty is only paid on the share, final staircasing will trigger SDLT at the appropriate rate.
This does not just affect the leaseholder, it also affects associations. Where a lender repossesses, they will often staircase to 100 per cent when selling the property so they can claim their losses under the mortgage protection clause in the lease.
Where there is no market value election, further SDLT may be payable by the leaseholder or lender. This gets more complicated when the home is worth less now than when the original mortgage was signed. Under the ‘mortgage protection clause’ (MPC), lenders in this position can claw back some of their losses by reducing their final payment to the housing association. Associations should check statements to ensure they include the correct amounts of losses which the lender is entitled to claim under the MPC in the lease, including any payments of SDLT; and to ensure they receive valuations and best price certificates.