Shared Ownership and back-to-back staircasing advice needed

takewhatyoucan

Hi,

I have been trying to sell my 50% share in a shared ownership property for a while but haven't had much interest, let alone any offers.

I feel the property may attract more interest from investors given it's location and rental potential, but I do not want to buy the additional 50% share so am considering back-to-back staircasing and sale so that I can market the property at the full 100%.

I was just wondering if anyone has experience of this, good or bad? I will obviously need to look into the details more carefully but would appreciate any general advice at this stage so that I can get a feel as to whether it's worth continuing down this route.


A couple of specific questions which come to mind are:

• Would any buyer in this scenario face the same kind of restrictions as a normal staircaser, e.g. 21 year 'right of first refusal' for the housing association? Obviously this would put off any investors.
• Is the housing association likely to pass on their costs to me? I know I will have to pay for a RICS valuation but will they also make me pay legal costs, for example?
• What are the consequences of a potential buyer pulling out, over and above what you'd expect with any normal property sale?

As this is my first time selling a property there's probably loads more I haven't considered, especially with the intricacies of shared ownership rules.

Any advice would be much apprecited though!

Richard_Webster

The detailed points will depend on the precise nature of the scheme - the SO lease formats keep changing - and we can't really answer the question without looking at your particular lease.

One thing that might be a problem is that some leases contain booby traps requiring a potential extra payment from the buyer if the seller sells the 100% within 3 months of having acquired it - effectively stopping back to back transactions. This is often hidden deep in difficult to follow wording.

jonas123

you should check all terms on the lease and with the HA.

I know that with my scheme, if you can't find a buyer for your share after 4 weeks, you can put the whole flat on the market, with the sale proceeds split 50:50 with HA.

I believe when the flat is staircased to 100%, it normally removes restrictions such as inability to sublet etc. (i.e. the bugbears of a shared ownership house).

It's worth speaking to your HA to see what your options are.

Richard_Webster

They seem to be tightening up what they say - so one I have now where you have to offer the flat back to the HA even once you have staircased to 100% and also the flat can only be used as flat to be occupied by the lessee and his family - so that effectively prevents subletting.

Some of this is political. Local authorities want make sure that the properties remain "affordable housing" but if the restrictions are too tight their mortgageability is questionable so there is a continuing fight between the HA's solicitors and the Council over what restrictions are put in. I can't imagine the HA will have the money to buy at 100% in Z years time but putting the clause keeps the Council happy AND will worry potential buyers.

takewhatyoucan

Thanks for the responses so far. They're at least helping me to make a bit more sense of the lease.

@Richard - I think my lease does contain the booby trap you mention in your first post. As far as I can tell it's basically saying that if the leaseholder changes within 3 months after final staircasing, then the HA will make the leaseholder pay any difference between the current market value and the value at the time of final staircasing.

There is one caveat in that this provision has no effect "in the event that a mortgagee of the Leaseholder of whom the Landlord has received proper notice pursuant to Clause 3.18 hereof exercised the right to complete the Final Staircasing".

Now, I can just about make sense of that but clause 3.18 is not so clear:

"Within one month of any assignment mortgage charge or devolution of the Leaseholder's interest in the Premises to give notice of it together with a certified copy of the instrument effecting the assignment mortgage charge or devolution to the Landlord and to pay a reasonable fee to the Landlord for the registration of the notice"

I think my best bet at this stage is, as Jonas suggests, to get in touch with the HA and see what they say about it. Interestingly it was them who suggested the back-to-back staircasing to me, so it would be frustrating if they then penalised me or a potential buyer for doing so.

Thanks again.

[Deleted User]

Keep a record of any conversations, ask them to write to u and confirm what they say AND consult a solicitor. Worth the fee to get them to look at the lease and give you their understanding of it. It could save you thousands later on.

Richard_Webster

I think my best bet at this stage is, as Jonas suggests, to get in touch with the HA and see what they say about it. Interestingly it was them who suggested the back-to-back staircasing to me,

HAs often don't understand their own paperwork!

jamesd

One possible approach may be arranging to have a bridging loan for 50% to be cleared at sale and funds advanced only on exchange with completion to follow in no less than three months. Gets you the 100% profit less bridging cost.