Memorandum of Staircasing
09/09/2019
5,360
8 min read
A Memorandum of Staircasing is a document which your housing association issues to you and confirms the amount you need to pay to staircase to the increased percentage ownership you've chosen and needs to by signed by you and returned to your housing association.
The memorandum of staircasing represents a critical stage in the broader shared ownership staircasing process (click to find out more) and comes just before you finalise your funding for the staircasing and move to completion of the process.
In this article we examine:
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Your RICS valuation kicks off your process - and we recommend you choose our RICS valuers for their experience and availability. And our experienced shared ownership conveyancing solicitors know about the tight time frames involved with staircasing. And most of all, we're here to hand-hold you through the whole process.
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What do you have to do to get the Memorandum of Staircasing stage?
1. Initial form/fees
Different housing associations have different exact procedures for co-ownership staircasing, however you'll normally start the whole process by applying directly to your housing association using any set format they require - most often an online form you send back to them - and paying any requisite fee. Make sure you've paid off any arrears before you apply!
Your housing association won't let you staircase unless you've paid off any outstanding debt you owe them, whether this is for e.g. rent, service charges or major works fund for example.
In this form, you'll have to state the percentage you wish to staircase (if you're staircasing to below 100%, it's called partial staircasing, if you're staircasing to 100%, it's known as full staircasing) and you'll have to state how you intend to pay for the staircasing.
2. Housing Association replies - RICS Valuation and Instructing a Solicitor
Your housing association then replies, informing you that you need a RICS valuation and you'll need to instruct a solicitor and send on the details of both back to them.
Strictly speaking you should not have to choose a RICS valuer only from a list of valuers approved by your housing association although some will state that you have to.
You'll have to give details of any improvements you've made to your valuer, so they can work out two current market valuations, one with the improvements and the other not including the improvements. The value the housing association uses is the the one that doesn't include any improvements you've made.
Once you've received the valuation report you send this back to your housing association.
Depending on the housing association and how you've stated that you'll pay for the staircasing, the association might well also ask you to provide further details as part of a financial assessment that you can actually pay for your staircasing.
3. Your Solicitor requests various details from you, your housing association contacts them
After you've instructed your solicitor, they initially want proof of ID and address from you after which they'll need to check how you're getting your funding for the staircasing.
If you're paying with cash or savings, you'll have to provide bank statements and if you're getting a remortgage, your solicitor makes contact with the lender because they'll be acting for the interests of the lender as well.
A remortgage is a whole process in itself (click to find out more!)
The housing association appoints their own solicitor and this solicitor will contact yours according to the details you've given.
The housing association's solicitor contacts your solicitor to request a number of documents; these concern things like ID checks, scrutiny/due diligence of any savings you're intending to pay for the staircasing with and/or details of the mortgage lender.
Once your solicitor has returned these items to your housing association's solicitor, the housing association's solicitor then drafts the memorandum of staircasing and sends it to your solicitor.
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What does a Memorandum of Staircasing document consist of?
The Memorandum of Staircasing document itself consists of the following:
- Premises address
- Date of lease
- Leaseholder name
- Landlord name (housing association name)
- Amount of payment for staircasing (the staircasing premium)
- Date paid over
- What extra percentage of the whole property the premium buys
- The total share the leaseholder holds after payment (percentage of whole property)
- The specified rent
- Signatures of both leaseholder and landlord
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What is the next stage in the staircasing process?
Your housing association's solicitor sends the draft memorandum of staircasing to your solicitor for approval, then your solicitor passes a copy to you for signature.
Your solicitor sends this back to your housing association's solicitor, for signature by the (representative of the) housing association. The housing association's solicitor then sends a copy with both signature back to your solicitor. Your solicitor should provide you with a copy of the doubly-signed memorandum.
Your solicitor should also register the memorandum of staircasing with the Land Registry and confirm with you that this has been done.
If you are paying for your staircasing with cash and your solicitor is satisfied with the provenance of your funds, then you progress to final staircasing completion.
If, however, you are using a mortgage (normally a remortgage) to pay for your staircasing, which most people require, the mortgage in turn has to be approved by the housing association's solicitor.
The use of a staircasing mortgage to pay for your staircasing is covered in the next article in our staircasing process series (click to read).
Once your funds are in place, then your solicitor proposes a completion date on your behalf and then the housing association's solicitor checks with the housing association that they can complete on that proposed date and you progress to staircasing completion.
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Is there Stamp Duty to pay when staircasing?
The short answer here is possibly!
You cannot claim Chancellor Hammond's first time buyer stamp duty relief because you are no longer a first time buyer.
You'll have no stamp duty to pay if, when you bought your first share (also known as a premium), you opted to pay stamp duty on the full (100%) value of the property in one go, known as a Market Value Election.
If you didn't make a market value election, you only have to pay stamp duty if, after staircasing, you own more than 80% of your property.
For additional information, please read our article Stamp Duty Land Tax for Staircasing (click to find out more) and/or consult HMRC, telephone 0300 200 3510 (opening times: 8.30am to 5pm, Monday to Friday (closed weekends) if you are still unsure about your individual position. Always bear in mind that ultimately you are yourself responsible for paying any stamp duty which the law states you should pay.
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Do you have to register memorandum of staircasing with the Land Registry?
Your solicitor should do this on your behalf and regardless, you are always advised to staple your copy of the memorandum of staircasing to your lease which provides proof of your increased ownership.
There is no legal reason to register the memorandum with the Land Registry but you are well advised to ensure that this is done. A missing or lost memorandum of staircasing, if the staircasing wasn't registered, might create complications when it comes to selling up or having to prove your increased ownership for other purposes, even if ultimately the 'audit trail' (solicitor, housing association, mortgage lender) would prove that you had done so.
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How long does staircasing take?
Your valuation lasts for 3 months so the whole staircasing should take place within this time frame at the very longest - if it doesn't, you'll have to pay for a valuation retype or a fresh valuation entirely, as well as possibly other fees (solicitors etc.).
If you're using cash/savings, this will be quicker than using a remortgage, because the remortgage process is likely to take perhaps a month or slightly longer. Bearing this difference in mind, the whole process might on average take between 5 and 8 weeks.
Staircasing Shared Ownership? Choose our expert RICS Valuers and Shared Ownership Property Lawyers
Your RICS valuation kicks off your process - and we recommend you choose our RICS valuers for their experience and availability. And our experienced shared ownership conveyancing solicitors know about the tight time frames involved with staircasing. And most of all, we're here to hand-hold you through the whole process.
*RICS Surveyors – Local Knowledge – Same Week Availability
** Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels
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