Lucy Owen, Partner and Head of Resales

As a solicitor specialising in resales shared ownership, pretty much since I qualified some 16 years ago, I have long felt that resales transactions are treated as the uglier, less sexy (as far as conveyancing goes) branch of shared ownership and frankly I’m fed up with it!

New build shared ownership has always been the flagship of affordable housing with its brand new buildings, quirky radiators, and smell of new paint, however resale shared ownership properties have a lot to offer and it’s time for this to be recognised.

Pre-loved shared ownership properties are incredibly varied in the form they come in, thanks to various schemes that have run in the past.  Not only are there relatively new properties, but older, more characterful properties as well, thanks partly to the old do-it-yourself shared ownership scheme (DIYSO scheme) where a housing association would buy a chosen property on the open market and grant a shared ownership lease to the lucky buyer.  Not everyone wants a new build property, and this is where resales really come into their own offering flats and houses of all shapes and sizes including maisonettes and coach houses.

Practically speaking, conveyancing of resale properties is quite different to new build shared ownership properties.  With new build shared ownership properties, once the draft Contract package for one plot is reviewed and any necessary enquiries satisfactorily responded to, this information can be relied on for all the other plots on that new build development and therefore they can move to exchange extremely quickly once the mortgage offer has landed.  However, with resale properties, each set of draft Contract papers are individual to the property and therefore must be considered individually as well.

In addition, management packs (sometimes 2 or 3 different packs from separate providers) have to be obtained together with at least a Local Search from the council, and perhaps other necessary searches according to the area the property is located -these can sometimes take at least a few weeks to issue.  This means that a resale transaction can take 8-10 weeks from the date the draft Contract package is received to exchange, followed by another 1-3 weeks to completion (if there are no unexpected issues), which is a similar timescale to buying on the open market.  In addition, there may be a chain involved as the owner of the shared ownership property may be buying another shared ownership property or they are buying on the open market.

I appreciate this timescale may put some buyers off resale properties, but really it makes the conveyancing process as individual as the property they are purchasing.  As resale properties are generally a bit older, they have their own sense of character.

Personally, I feel there is also the benefit that you are buying a property that already exists.  Often new build properties are sold off plan i.e., they haven’t been built yet, however the bonus with resale properties is that you get to view them in person and get a feel for the local area and sense of community.  If you live locally anyway, you may even know someone who lives around there anyway, which is always good for an emergency cup of prosecco…I mean sugar.  Plus, you can move in straightaway, you don’t have to wait for the property to be built!

From this article, I guess you can gather than I am all about the resales. For me they have it all – colourful, sometimes off-beat and just a bit more about them than your average new build.  And the slightly longer conveyancing time makes the wait for the property even more worth it, so if you are after something a bit different, they are definitely worth considering over the many new build developments around.

Repeat after me, “Resales, Resales, Resales”.  New Build, move out the way, we are coming through!

Andrew Theoff

Andrew Theoff, Managing Partner of Direction Law explains why you should use a specialist solicitor when purchasing an affordable housing product.

Walk down any high-street and you will find a firm of solicitors offering conveyancing services.  However, the vast majority of these will have little or no experience of affordable housing schemes.

Although it has been around for many years, it is only in more recent years that shared ownership has become more prevalent.  Likewise in recent years, various equity loan and discount purchase price schemes have been introduced.  However, affordable housing is still only a comparatively small proportion of the overall housing sector, and most solicitors still see affordable housing conveyancing as more complex than “ordinary” conveyancing.

Indeed, those solicitors aren’t wrong, affordable housing conveyancing can be more complicated for a number of reasons:

• Shared ownership leases contain many provisions that you won’t find in other leases.
• Mortgages must be approved by the housing association the property is being purchased through, and lenders have more detailed requirements.
• Equity Loan schemes have complex procedures and require the solicitor to liaise with the Help to Buy Agent as well as the developer/housing association and their solicitors.
• Discount schemes, such as developer-led schemes and the government scheme, First Homes, which was only launched in summer 2021, are not acceptable to all lenders and can be so new that very few lenders, or solicitors, will have dealt with them before.
• The legal paperwork for new build properties is extensive. However, it tends to be similar for all plots, so it is more efficient for a solicitor to act for multiple buyers on a development.

There are some mortgage lenders who only have a limited number of conveyancing firms on their panel that they trust to act for them on shared ownership cases.  If a buyer instructs a firm of solicitors who doesn’t specialise in affordable housing they may end up paying two sets of legal fees – their own solicitor’s fees for the conveyancing and their lender’s legal fees too.  Housing associations, and the mortgage brokers they work with, will also often have panels of solicitors that they recommend who specialise in affordable housing.

Buyers can be distrustful of using a firm of solicitors who has been recommended, fearing that they won’t be sufficiently independent. Although this is a natural concern and people may often wish to use a more local firm, buyers should understand that their solicitor is duty bound to act in their best interests and is acting for them not the seller.  Buyers should also keep in mind that as not all regular high-street solicitors are familiar with affordable housing products, that they will probably charge more for the conveyancing and generally take longer when dealing with such cases.

Therefore, in conclusion, using a firm which specialises in affordable housing or one which is on a “panel” as explained above, such as Direction Law, means that you will be looked after by an expert who will most likely charge less and generally proceed quicker than if you used a conventional high-street solicitor; in keeping with the housing association or developer’s purchase timelines.

For an instant quotation call 0800 158 82 81 or get an instant quote online.

As the UK’s largest specialist affordable housing solicitor, we have many clients using Lifetime ISAs and the Help to Buy ISAs to help buy their first home. However, it is useful to know there are some important differences between them, and special rules apply for buying a shared ownership property.

Help to Buy ISA

With a Help to Buy ISA you can save up to £12,000 and if used to buy your first home the government will add a 25% bonus to your savings (maximum £3,000). The Help to Buy ISA closed to new applicants in November 2019, however if you already have an account, you can continue saving up until November 2029.

To qualify for the bonus, the property you buy must be worth £250,000 or less, or up to £450,000 in London. If you are buying through shared ownership (where you buy a percentage share of a property and pay rent on the remaining share) the purchase price is assessed against a 100% share of the property and not the value of the percentage purchased. Your solicitor will need to make a calculation based on the percentage share price and rent payable during the life of the lease to confirm that you qualify.

The bonus is paid on the completion of a house purchase directly to your solicitor, which means that it must be used towards the acquisition of the property.

In order for solicitors to apply for your Help to Buy ISA Bonus, you must close your Help to Buy ISA account and provide them with a copy of the Closing Statement and a completed First Time Buyer Declaration form.

The latest you can claim the government bonus is December 2030. You can also withdraw the money if you are not buying a house, but you wouldn’t receive the bonus.

Lifetime ISA

Lifetime ISAs (LISAs) were launched in April 2017 and are available for UK residents aged between 18 and 39. As with the Help to Buy ISA you are entitled to a 25% government bonus, if it is used to buy your first home or to pay for your retirement at the age of 50.

You can save up to £4,000 each year and the government bonus is applied monthly rather than at the end. You can use the money for your deposit and mortgage, as long as the property is worth £450,000 or less. If you withdraw money for reasons other than buying your first home or for retirement, it is subject to a 25% charge.

As with Help to Buy ISAs, if you are buying a shared ownership property, the price cap applies to the full sale price rather than the share you are buying and your conveyancer will calculate your eligibility for the bonus based on the price paid for the equity share you are buying, plus the net present value of rental payments due over the term of the lease.

All companies that provide LISAs have slightly different ways for you to get your money and claim the bonus. However essentially you will need to complete and return your client declaration to your solicitor with confirmation of when you want the funds for, as it can take up to 30 days to get the funds from a LISA account.

Your solicitor will liaise with your LISA provider and funds will go directly to your solicitor who will hold them until completion.

Things to note

If you have both a Lifetime ISA and a Help to Buy ISA you can only receive a government bonus on one of them, rather than both. However, if you are buying with someone who also has their own Lifetime ISA or Help to Buy ISA, they can use their savings and government bonus as well.

If you have any queries about the ISAs either visit https://www.gov.uk/lifetime-isa, a LISA provider or your solicitor.

Buying a new home is a very exciting time but can also be quite daunting as there is a lot of legal paperwork to sort out and understand.

When you instruct a solicitor to act on your behalf, one of their first jobs, which is required by law, is to verify your identity, and in the case of a purchase, details of your source of funds. This is required by all solicitors as they must comply with the law about money laundering and proceeds of crime, in particular The Proceeds of Crime Act 2002.

The rules are not prescriptive, but all solicitors are required to take reasonable steps to verify where the money you are purchasing your property with is from.  Therefore, you will be asked whether money you are contributing is from your savings, being gifted to you or loaned to you from a third party (separate from your main mortgage lender), and whether any of the monies are from overseas. If so, you will also be asked to supply supporting documentation to prove the source of the money, such as:

1. Money being provided by you from savings

Solicitors will need to see copies of bank statements showing the monies being used for your house deposit.  They will also need to know how this was accrued, for example regular savings, inheritance, property sale, divorce settlement, etc, and will request evidence to support this.

2. Gifts from Third Parties

Solicitors will need to see the original of a letter, addressed to your mortgage lender, which has been signed and dated by the person making the gift confirming information such as the property address the gift is for, the amount of money being gifted, the relationship of the people to you, that the money does not have to be repaid, plus other questions. Evidence of how this gift money was accrued will also be requested, plus copies of bank statements showing the money.

3. Monies being loaned to you

If you are borrowing any monies towards the purchase, in addition to any mortgage, then your solicitor is required to report this to your mortgage lender. It is worth noting that this may affect their decision to lend.

If you do not have a mortgage but are borrowing monies privately, then you will need to provide details of any arrangements that you have agreed with any private lender.

4. Monies coming from abroad

You will need to provide details of any money that is coming from abroad, whether this be your own savings or monies that are being gifted to you, and confirmation of which country it is coming from.  Depending on which country the money is coming from there may be some additional requirements and be prepared to provide translations of bank statements and other documents.

It is possible that your deposit may come from more than one of the above categories, in which case, it is important to provide everything that is relevant for each part.

With regards to proving your personal identity, your solicitor will provide you with a list of documentary evidence that they require, which includes a passport, photocard driving licence, National ID card with photograph or residence permit issued by the Home Office, plus others. You will also be asked to prove your current address with evidence such as recent utility bills, council tax bill for the current year, or a recent mortgage statement.

As well as it being a legal requirement, it is important to remember to satisfy your ID, proof of address and source of funds with your solicitor as soon as possible, as they will be unable to proceed to exchange without them.

Arash Remasi, Partner and Head of New Build Outright

The positive impact over the years on the lives of many homeowners that Homes England has achieved though their equity loan assistance scheme is undeniable. It has helped so many people get onto, and indeed even move up, the property ladder earlier than they may have otherwise been able to, in the main due to the larger deposits required by lenders that has, sadly, become the norm in today’s lending market.

The current incarnation of this, the Help to Buy Equity Loan: 2021-2023 scheme, will certainly be no different.  The scheme however does undoubtedly have certain strict requirements and complexities that need to be fully understood and embraced in order for a matter to reach a successful exchange and completion.  That said, these should be for a buyer’s professional advisors to undertake diligently behind the scenes (hopefully utilising all their knowledge and experience!) rather than for a buyer to have to think about as, in essence, a legal advisor’s job is to make the transaction as approachable and simple as possible for a buyer.

When we as a firm started out on the equity loan “journey”, the scheme was known as HomeBuy Direct, which I am pleased to (just about!) recall, worked by way of the government and the housebuilder providing two separate equity loans to a buyer of a new home. This then evolved into to the FirstBuy scheme, which gave a single equity loan from the government to a first time buyer of a new home. It then became Help to Buy Equity Loan: 2013-2021, changing the eligibility criteria to allow existing homeowners to also benefit from a single equity loan from the government when buying a new home to live in.

At Direction Law we have acted for thousands of buyers purchasing under the various equity loan products above, and so we share the positive view held, no doubt, by those of you reading this article who intend to benefit, or indeed may already have, from Homes England’s latest equity loan product, the Help to Buy Equity Loan: 2021-2023 scheme.   On this, some key information and considerations for buyers is available online in a really approachable format at https://www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide.  To summarise, some key parts of the latest scheme are that it:

• Reintroduces the requirement for the equity loan to only be available to first time buyers.
• As with the previous HTB product, no interest is payable for the first 5 years of the equity loan.
• Allows a buyer to borrow between 5% and 20% (or 40% if in London) of the market value of their new home, subject to new regional maximum price caps.
• Stipulates that a buyer must arrange a mortgage with a bank or building society of at least 25% of the purchase price of their new home.
• Specifies that a buyer must pay off the equity loan when paying off their main mortgage, selling their home or reaching the end of the equity loan term, which is normally 25 years.
• Requires that applications made by a buyer that is married, in a civil partnership, or in a co-habiting relationship, either now or on legal completion of their purchase, will have to be a joint application with any such partner or spouse.

The key message I really want to get across, particularly if you are reading this as a potential buyer, is the importance of instructing professional advisers to act for you who specialise in equity loans, whether that be your legal advisor acting for you on your conveyancing, or your mortgage broker in relation to applying for the loan.  In short, when appointing a professional advisor to act on a Help to Buy equity loan matter it is their experience that counts, now more so than ever before!

For more information about the Help to Buy purchasing process, and general conveyancing process, please take a look at the links below for useful information on timescales, what information you will need to provide, and more:

• Guide for HTB buyers
• Specialist New Build Solicitors
• Conveyancing Process video

Stamp Duty Land Tax to give it it’s full title (generally shortened to SDLT) is a tax payable on the purchase of a property.  On 8th July 2020 the Chancellor announced a “Stamp Duty holiday”, which as of the budget on 3rd March 2021 has now been extended beyond its original deadline.

SDLT is currently not payable on all purchases up to £500,000 and reduced on higher priced properties, meaning that the tax payable on property purchases completed prior to 30th June 2021 is much less.

For purchases which complete between 1^st July 2021 and 30^th September 2021, the nil rate band is reduced from £500,000 to £250,000, and from 1^st October 2021 SDLT rates will revert to those previously in force, meaning that only the first £125,000 is exempt from SDLT.

How does this affect different types of shared ownership purchase?

Resale purchase

SDLT is paid on the price of the share you buy. With the new changes this means that you now pay zero duty if your share price is less than £500,000 (which will generally be the case).  This is therefore good news for many resale buyers and will remain good for many such buyers between July and September if their share price is below £250,000.

New Shared Ownership Lease

If you are purchasing a new build property or if you are being granted a shared ownership lease of a previously rented property, the stamp duty changes are more significant.

When purchasing a new shared ownership lease, you can pay SDLT either on the full market value or on the share premium and the rent you are paying. If you pay on the full market value, you are exempt from paying SDLT on any future staircasing transactions (staircasing is when you buy further shares in the property). However, if you pay SDLT only on the premium/rent, you may have to pay SDLT in the future when you staircase.

With the changed rules, there will be many more buyers for whom the full market value option is now affordable, or even free if the full value of the property is less than £500,000 and you complete before the end of June.

The big change therefore is not just that buyers will pay no SDLT, but that they will be able to benefit from an exemption on future staircasing transactions. This is most relevant in the period to the end of June, making buying a new build shared ownership property before then an even more attractive proposition than it was before, but in some areas may continue to be a benefit through until the end of September.

Staircasing

The Stamp Duty holiday also affects how much SDLT is payable by shared owners who are staircasing.

For interim staircasing transactions (the purchase of any share up to 80%) no stamp duty is paid, nor on a final staircasing (the purchase of any share more than 80%) if it was paid on the full market value basis when the lease was first granted. However, if you are final staircasing where SDLT was only paid on the share when the lease was first granted, you are liable to pay SDLT on the final share price.

Where SDLT is applicable, the calculation of the amount due on staircasing transactions is very complex as it depends the price of the initial share, any intermediate shares and the final share and the proportion that each bear to the other. However, the temporary ‘stamp duty holiday’ means that many shared owners who staircase will end up paying less or no duty when some would have been paid before.

As such, now would be a really good time for anyone who can afford to do so to staircase, as the old rules will come back into play from 1^st October 2021.

However, it is worth noting that due to the high volume of buyers and sellers in the UK right now, as well as the effects of the pandemic, there is a significant backlog in arranging mortgages and valuations and most local authorities are taking longer than usual to process searches, and therefore transactions are taking longer than usual to process.

When purchasing a shared ownership property (or any property for that matter), you will need to instruct a solicitor to act on your behalf.  It is worth getting a few quotations from different firms for a comparison of costs, but it is important to look beyond the “headline fee” to find out what each solicitor is actually charging for their services. 

What fees should you expect in your quotation?

Legal Fees – this is the fee the solicitor charges for their services. This can differ depending on the purchase price of the property and whether it is leasehold or freehold. A leasehold purchase tends to be charged more as there is more work involved.

Bank Transfer fees – this is a fee for organising the bank transfer of the purchase monies to the seller.

Preparing Stamp Duty Land Tax (SDLT) form – HMRC must be notified about property transactions on a Stamp Duty Land Tax (SDLT) return. This must be within 14 days of the date you complete your purchase, even if you do not owe any tax.  Your solicitor will do this on your behalf and charge a fee for doing so.

Mortgage lender fee – This is the fee a solicitor charges for acting for the mortgage lender.

These are all fees charged by solicitors for various aspects of the work they do for you. Most firms charge for the above items, but the amounts vary from firm to firm, resulting in very different final charges.

Some firms charge other fees for dealing with other aspects and some of the fees charged by a firm of solicitors may not be immediately obvious from their quotation and may be contained in their Terms of Service, so make sure that you get a copy of these before deciding who to instruct.

What about “disbursements”? 

These are expenses payable to third parties as part of the conveyancing transaction. They are paid via your solicitor to the third party; however, they can still vary from firm to firm.

Bankruptcy search fee – this costs £2 per name searched and should be the same irrespective of which firm you instruct.

HM Land Registry Search fee –This is another low-cost search and irrespective of which firm you instruct, the fee payable to the Land Registry will be the same.

Search fees – There are also searches that the solicitor needs to do as part of the conveyancing process, such as local search, flood search, water and drainage search, environmental search and chancel repair search. Depending on which provider a solicitor uses and which searches they choose to do, the amount quoted may vary from firm to firm. The searches are sometimes supplied by the Housing Association’s (HA’s) solicitors at a minimal cost if buying a new build property.

Land Registry registration fee – This is a fee for the registration of your title to the property.  There is a prescribed fee scale, based on the purchase price of the share, plus rent. Irrespective of which firm you instruct, the fee payable to the Land Registry will be the same.

Stamp Duty Land Tax – as this is a tax there is no flexibility here and the rules are the same irrespective of which firm does the conveyancing. The amount is calculated based on factors such as the price of the property, the share being purchased, and whether you are a first-time buyer.

Finally, there are some other things which a buyer of a new build shared ownership property ought to budget for:

1. It is standard practice for the HA’s solicitors to charge certain fees to the buyer. These vary depending on which firm of solicitors the HA uses and at the time of contacting a prospective solicitor for a quotation they will not know the level of those fees.
2. It is possible that there may be further fees payable to a superior landlord or managing agent.
3. HAs generally ask buyers to pay on completion the rent and service charge up to the end of the month of completion and for the whole of the following month. This could amount to paying nearly two months up front if you complete at the beginning of the month.

These expenses will be the same irrespective of which firm of solicitors the buyer instructs as their solicitor has no means of influencing them whatsoever, however many firms fail to mention these items in their quotation and so these costs can come as a nasty surprise.

In conclusion, when looking at quotations, it is important to make sure you read the quote carefully and don’t be afraid to seek clarification.  Be careful of cheap headline fees because often they aren’t as economical as they seem.  There is lots of legal jargon used by solicitors and quotations are often presented in a confusing way with lots of hidden charges.

Although this article focuses on fees, it is worth noting that price is only one factor. Buyers should also consider experience, expertise, recommendation and customer service when choosing their solicitor.

We are so pleased to have been awarded ‘highly commended’ for ‘The Best Law Firm for Conveyancing’ award at this year’s First Time Buyer Readers’ Awards. We are delighted to have won this in what has been such a challenging year not only for the other companies shortlisted but all our clients as well.

We would like to thank all who voted for us, whether that is clients or business clients in the industry, and for everyone’s continued support seeing us through the years of growth and changes.

Thanks to our staff at Direction Law in each and every role, without which this would not be possible.

Lastly, we would like to thank First Time Buyer for their momentous efforts in organising this year’s awards, albeit in an alternative format than hoped; we look forward to the time we can all come together and raise a toast once again.

This year has truly shown what we can all achieve as a sector, and we are immensely proud of us all.

Buying a new home is an exciting time but can also be overwhelming as there is a lot of legal paperwork to organise. In this article we aim to give you an idea of what happens in the conveyancing process and the timescales involved.

When you purchase a property there are usually a number of people involved, such as an estate agent, developer or housing association, a mortgage broker, a surveyor, a mortgage lender and a solicitor.  Each person taking part in the process is working towards the same goal….to get you moved into your new home.

When you instruct a solicitor to work for you, one of their first jobs will be to verify your identity, which is required by law, and if you are purchasing a property, they will also need details of your source of funds. In addition to this they will also need to collect payment for items they will need to buy on your behalf.

Most transactions take between 10 and 12 weeks from instruction to completion, especially if there is a chain. However, newbuild purchases usually have to proceed much quicker as housing associations impose a 28-day deadline for exchange of contracts, although if you are buying a resale property it can take a little longer as there is a lot more information required.

Following the initial identity and source of funds checks, the conveyancing process begins when the seller’s solicitor obtains a copy of the title to the property from the Land Registry and prepares a contract pack.  This pack is sent to your solicitor and includes the contracts, title and an official plan of the property, along with some information forms about the property and what is included which the seller has completed.  In the case of newbuild properties the contract pack will also include planning permissions and other documents regarding the construction of the development.

When your solicitor receives the contract pack, they will order searches, which are a standard set of questions sent to a number of different authorities. Your solicitor will then check the answers when they come back, although it is worth noting that some searches take a few weeks to process. For this reason, on some newbuild developments in order to speed the process up the seller’s solicitor will provide searches relating to the whole development.

After going through the contract pack and checking the title and other documents, your solicitor will raise any enquiries they have with the seller’s solicitor. It can often take a number of weeks before satisfactory replies to all these enquiries are received.

Most buyers will need a mortgage in order to buy their property. Your Lender will want to value the property you are purchasing before issuing you with a mortgage offer. Copies of the mortgage offer are sent to you and to your solicitor, who will double check that the offer complies with the Lender’s requirements. If you are purchasing through shared ownership, your housing association will also have to approve the offer.

Once your solicitor’s enquiries have been answered and they have received the search results and a mortgage offer, they will send you the contract for signing. At this point you will be asked to provide an exchange deposit. The seller’s solicitor will also send their client a contract for signing, and exchange of contracts will take place once everyone in the chain is ready.

Prior to exchanging contracts all the parties involved in the transaction need to agree a completion date.  However, if you are buying a newbuild property that isn’t ready yet, you will exchange on the basis that completion takes place once the property is built.

As we mentioned earlier, all of the different aspects of the conveyancing process can take several weeks, plus there is no set order in which the elements above are done. This is why some transactions take longer than others and why you need to be patient throughout the process.

Once contracts are exchanged and the deposit has been paid, everyone in the chain is legally bound to complete and can start to get ready for their move.

In the period between exchange and completion, your solicitor will arrange for your Lender to send them the mortgage monies and collects the final balance due from you. On the day of completion the money is sent to the seller’s solicitor and at the point it arrives the purchase officially completes. The seller’s solicitor calls the agent to release the keys and then you can finally move into your new home.

Find out more about the conveyancing process, by watching our short animation.

Andrew Theoff, Managing Partner:

This month Andrew Theoff, Managing Partner, looks at how the “Stamp Duty holiday” announced on 8^th July by the Chancellor works and how it affects purchasers of shared ownership properties.

What is Stamp Duty?

Stamp Duty Land Tax to give it it’s full title (generally shortened to SDLT) is a tax payable on the purchase of a property. Until 8^th July 2020 the rates were:

The change announced in the “summer statement” was to make the first £500,000 zero rated for all buyers, with 5% being charged only on the portion above that (higher rates are payable on higher priced properties but those rates are unlikely to be relevant to those buying shared ownership).

The Stamp Duty holiday only applies to property purchases completed prior to 31^st March 2021, after which the SDLT rates revert to those previously in force.

How does this affect different types of shared ownership purchase?

Resale purchase

SDLT is paid on the price of your share. Therefore, the change means that you pay zero duty if your share price is less than £500,000 (which will generally be the case) whereas previously you would have to pay SDLT on any purchase above £125,000 (or £300,000 if you were a first time buyer). This is therefore good news for many resale buyers.

New Shared Ownership Lease

If you are purchasing a new build property or if you are being granted a shared ownership lease of a property that had previously been rented, the stamp duty changes are much more significant.

When purchasing a new shared ownership lease, you can elect to pay SDLT either on the full market value or on the premium paid for the share and the rent you are paying. If you pay on the full market value, you are exempt from paying SDLT on any future staircasing transactions (staircasing is when you buy further shares in the property). However, if you pay SDLT on the premium/rent you may end up having to pay SDLT in the future when you staircase.

Under the old rules there were many purchasers who paid on the premium / rent, which in the case of many first time buyers would have been nil if the premium was under £300,000, but could not afford to pay on the full market value. With the changed rules, there will be many more buyers for whom the full market value option is now affordable, or even free if the full value of the property is less than £500,000.

The big change for many new build buyers therefore is not just that they will pay no SDLT when they buy, but that they will be able to benefit from an exemption on future staircasing transactions. This makes buying a new build shared ownership property before 31^st March 2021 an even more attractive proposition than it was before.

Staircasing

The Stamp Duty holiday also affects how much SDLT is payable by shared owners who are staircasing.

No stamp duty is paid on any interim staircasing transaction (the purchase of any share up to 80%), nor on a final staircasing (the purchase of any share more than 80%) if it was paid on the full market value basis when the lease was first granted. However, anyone final staircasing on a property where SDLT was only paid on the premium when the lease was first granted is liable to pay SDLT on the final share price.

Where SDLT is applicable, the calculation of the amount due on staircasing transactions is very complex and is something outside the scope of this article, as it depends on how much was paid for the initial share, any intermediate shares and the final share and the proportion that each bear to the other. However, the temporary ‘stamp duty holiday’ means that many shared owners who staircase will end up paying less or no duty when some would have been paid before.

As such, now would be a really good time for anyone who can afford to do so to staircase, as the old rules will come back into play from 1^st April 2021.

What to do next?

If you are thinking of buying a shared ownership property or are an existing shared owner thinking of staircasing, please contact us for a quotation. You can obtain an instant quote by clicking here or you can contact our new business team by calling 0800 158 8281 or emailing enquiries@directionlaw.co.uk.