Whether a shared owner is carrying out the final staircasing of a property or they are staircasing a further percentage (interim staircasing) there are requirements all registered providers (RP’s) need to adhere to within the lease. This becomes more complex if the shared owner is also reselling the property at the same time.
Understanding the differences between interim and final staircasing and how valuations apply is essential to ensure compliance and for the RP to protect their financial interest and prevent delays.
Interim staircasing
An interim staircasing occurs when a shared owner increases their ownership share but does not purchase 100% of the property. The RP retains a remaining share, and the lease continues, including rent obligations on the unsold equity.
If the shared owner is also reselling their share, the resale price is not necessarily linked to the staircasing valuation and the two can differ.
Final staircasing
Final staircasing occurs when the leaseholder purchases the RP’s remaining share, resulting in full ownership. In this scenario, the RP’s proceeds must use the approved staircasing valuation, even if the resale to a third party is at a higher market value.
The model lease states that when staircasing (whether interim or final) takes place a Royal Institution of Chartered Surveyors (RICS) valuer must undertake a valuation and the value of the staircasing must be based on the RICS valuation.
RP’s need to ensure that if the shared owner is reselling the property and staircasing that there is not a difference in the valuations. This is due to the fact that when reselling a property, without staircasing, a RICS valuation is not usually required and, therefore, the valuation of the property may not be the same as that if a RICS valuation was undertaken.
If there is a difference in the valuations, and the shared owner is staircasing, then the RP must ensure that the valuation used is the RICS valuation, to accord with the provisions of the model lease. You should first ascertain if the estate agents who valued the property for sale undertook a RICS Valuation. If they did not, then the value of the property should be based on the RICS valuation, and the estate agent will need to discuss the correct value with the buyer and seller to ensure that the sale price is as per the RICS valuation.
If, however, the estate agents undertook a RICS valuation which differs from the RICS valuation for the staircasing aspect then the RP needs to decide with RICS valuation to use.
It is imperative that the RP’s resales team and staircasing team are in communication with each other to ensure that the RICS valuation is used thereby ensuring the RP’s complies with the terms of the model lease.
If you have any queries in relation to resales and staircasing please get in touch with our Social Housing team to discuss.