Selling shared ownership, Staircase, Stampduty

nronchetti

Hi all,

We are in a position where we need to move due to a new little person in the family. About 5 years ago we bought 55% of a flat in London on a shared ownership scheme. We now need to sell.

I under stand that if we sell our share through the HA (which we have to attempt to do for 6 weeks) that we will take our % of the profit and there will be no stamp duty to pay, simple. The same applies if they cant sell it and we find a suitable buyer for our share on the open market, we just have to pay higher EA fees. I get all that (I hope).

The bit that is confusing me is selling the whole property on the open market. I am told that to do this we will need on the day of sale to staircase up to 100% ownership and then sell to the new buyer, using the buyers funds to pay off the HA share. This incurs the wrath of the tax man in the form of Stamp duty. In our case about £5k! for the remaining 45%. I understand that you pay the stamp duty on the amount you are staircasing with the % worked out on the total amount paid, so initial share + staircase share. from my rather dodgy excel sheet it just looks like we will get the same profit as selling just the share but minus the stamp duty. So losing out on £5k.

I am trying to work this all out to see what kind of deposit we can take away to invest in our new property but seem to be going round in circles. Can someone give me an example of selling to the open market with staircasing so I can try to get my head around it.

Thank you so much for any advice!

kingstreet

You need to investigate how your initial share was purchased.

Did your solicitor make a "market value election?"

http://www.hmrc.gov.uk/sdlt/calculate/shared-ownership.htm#3

nronchetti

Did your solicitor make a "market value election?"

I think not, we only paid stamp duty on the part that we bought. We just paid 1%.

Example:

£300k property we bought 50%, so 1% of £150k was paid at purchase.

We now are looking to sell. If we sell on the open market we have been told we might need to stair case up. If the house is now £350k it will be 3% of £200k. I think?

So if we just sell our share through the HA we take 50% of the difference between the buy and the sell... But if we sell on the open market we take 50% of the difference between the buy and the sell minus the Stamp Duty of £5,250? This is the bit I am confusing myself with. :huh:

Thanks for you help!

colindkavanagh

We done the same recently and were advised by the HA that we would have to staircase to 100% which in our case would have meant paying about £10k stamp duty. Our solicitor got on the case and eventually the HA (Notting Hill) agreed to allow our buyer to staircase to 100% on completion day. It may depend on how your lease is worded but Notting Hill and their solicitors were completely incorrect to try and insist that we needed to staircase to 100%. You will need to get your buyer onside but for us we agreed to pay the legal fees in the staircase transaction which was less than £500 and saved us paying the £10k.

confusedhelp

Hi. I am a bit confused about this (sorry).

Say for example I purchased a 50% share in a shared ownership property. In years to come, when i wanted to sell, if the new prospective purchaser wanted to buy 75% rather than just my 50%, how does this work?

Mandog

Confusedhelp: you wouldn't be able to sell 75% of the property because you only own 50%.

You can sell that 50% through the housing association and your buyer could later buy further shares.

Or - as this thread is addressing = you can sell on the open market. To sell on the open market you usually staircase to 100% and sell simultaneously.

The housing association generally has the right to find a buyer first - typically they get two months. They want to do this to keep the property as social housing.

confusedhelp

thanks Mandog.


i have seen one particular property that had 3 separate adverts on rightmove (it did not sell via HA within 4 weeks) - one advert was to purchase a 50% share, one to purchase 75% and one to purchase a 100% share.

The the current SO owner only had 50% themselves, how does this work if someone put in an offer for a 75% share? Would they simply buy the 50% from current owner and 25% from HA or would the current owner have to staircase up to 75% by buying a further 25% from HA in order to sell 75% to the purchaser?

I really appreciate you explaining. Thanks

Mandog

No idea, sorry. The owner staircasing to 75% seems more likely, as otherwise there would be lots of extra costs and bother on the buyer. Sounds like they may be struggling to sell.

Maybe you could call the agent and ask how it would work, even if you're not really planning to buy it? And let us know as I'm curious too now!

nronchetti

colindkavanagh wrote:

We done the same recently and were advised by the HA that we would have to staircase to 100% which in our case would have meant paying about £10k stamp duty. Our solicitor got on the case and eventually the HA (Notting Hill) agreed to allow our buyer to staircase to 100% on completion day. It may depend on how your lease is worded but Notting Hill and their solicitors were completely incorrect to try and insist that we needed to staircase to 100%. You will need to get your buyer onside but for us we agreed to pay the legal fees in the staircase transaction which was less than £500 and saved us paying the £10k.

colindkavanagh, we are also currently though Notting Hill. After the buyer they found for us failed to complete we have now just accepted an offer on the open market for 100% of the property. If possible could you PM me the solicitors details who you used? We currently have a solicitor but they have not returned my calls in 2 1/2 weeks so I was looking to move any way and to save £5k in stamp duty would be a bonus.

Many thanks!

EddieD86

Currently in the same process, staircasing to 100% for completion day and trying to avoid stamp duty.

Could someone please advise me on the solicitor used in this thread?

I believe it is possible for me to pay a staircasing fee and the new buyer to pay the stamp duty on the 100% of the property.

Many thanks in advance

Eddie