“I have a 50% share in my flat with MTVH. I’m retired, so I’m unlikely to get a mortgage for the remaining 50%. I’d like to find out if my son can staircase to the other half? (Although he’s not on the tenancy he does help me out financially).“
Zahrah Aullybocus is a Property Partner with Nexa Law (and Shared Ownership Resources sponsor). The following represents Zahrah’s personal opinion in respect of this circumstance. It’s important to seek your own independent legal advice when assessing the requirements for your own specific situation.
Zahrah says: ‘There are a number of issues shared owners would need to consider if another member of the family buys shares in their flat. I’ve outlined some key matters below based on the information you’ve provided. I’d recommend seeking further advice from a solicitor who is experienced in shared ownership. It would also be beneficial to discuss the matter with your housing association first.
Talk to your housing association…
Essentially you cannot just transfer your existing 50% share as the incoming owner would need to live in the property and pass affordability checks. In addition, you have to give the housing association the right of first refusal to either find a buyer for you, or to repurchase the property (which is, however, unlikely). If it is agreed after discussion with the housing association, then you would need to do a simultaneous Staircasing and Transfer of your property.
This would create a potential Stamp Duty Land Tax (SDLT) liability on your son for the remaining 50%. He could be liable for a higher rate of SDLT if he already owns another property. These are issues a specialist solicitor could assess and explain. You would probably want to take advice on inheritance planning at the same time.
Mortgage matters
Your son would need to be added to your legal title if he is taking out a mortgage to buy the remaining 50%. You will need to consider if you want it in your son’s sole name or in your joint names.
If you are to remain as a joint legal owner, your son will need to discuss this with a mortgage advisor. Again a solicitor could advise you on the timing for this. For example, you might want to add him as an additional owner sooner rather than later (especially if he pays for the staircasing). This would ring-fence 50% of your home to his ownership in the event of your death or if you go into care.
Cash payments and tax implications
Different issues arise if your son already has the cash to pay for the staircasing, so doesn’t need a mortgage. In that case, he should seek independent legal advice, for example, on what would happen in the (hopefully unlikely) event of your bankruptcy, and any other potential tax implications for his or your estate (in the event of either of you dying).
For example, ‘no legal protection’ would mean that your son ‘gifts’ you the money but may not get the same amount back via inheritance if you go into care and the costs of the property are swallowed up by care home fees. Another example would be if your son ‘gifts’ you the money but is made bankrupt shortly thereafter, the trustee in bankruptcy could seek to recover the gift.
You could consider the option to have a charge/restriction so that when the property is eventually sold, whatever he has put into the property is paid back to him (assuming you do not have any outstanding mortgage on your existing share).
Don’t forget to make a Will!
I would recommend a tenancy in common and having a Will done for both of you. Tenants in common means that the property cannot be sold by one person alone. It also means that upon one person’s death, the share is passed under that person’s Will (a useful tool if you have other children).
You could also consider a Declaration of Trust setting out your respective shares and who is responsible for bills and looking after the property. (Otherwise you would both be jointly responsible for service charges and other bills for the property).
Zahrah Aullybocus, Property Partner, Nexa
Mobile: 07740 775 345 | zahrah.aullybocus@nexa.law
Shared Ownership Resources continues to exist thanks to the generosity of supporters.
If you found this content useful, please consider making a donation. Many thanks!
Thanks for this very informative feature, Zahrah. If anyone reading this is in a similar situation, but has fewer than 80 years remaining on their lease – or will have fewer than 80 years remaining in the foreseeable future – please make sure to mention this when you seek legal advice.
Many thanks, Zahrah.
This information was extremely useful in helping me to come to a decision.
I am staying as I am at the moment. However, I am becoming more informed regarding shared ownership. I look forward to the next newsletters.
Thank you.
Me and Andre (my brother) got 2 properties from our mom. It is paid in full. I live on the one property. Am I responsible to pay the levies and maintenance only because I live on one property? The properties are next to each other, but not joined.
Thanks for your comment, Maryna. You don’t specify whether one or both of these properties are shared ownership (SO) – per the definition of SO homes per UK government policy and legislation. I’m imagining that at least one of these two properties isn’t SO given that shared owners wouldn’t be permitted to own more than one SO property at a time.
Either way, you will need to check your lease on each property to establish any liabilities for that property and talk to your landlord, or LEASE, if you’re unclear about any particular aspect.
Am I able to put my daughter on the rent portion of the shared ownership property as well as myself? Even though I alone am paying the 60% share mortgage? I would like to do this so that in the event of my death she can remain in the house and purchase the remaining 40% at a future date.
Thanks for your query, Sally. Zahrah says:
“For the purposes of this response, the assumption is that your daughter is 18 or over and living with you in the property. If this is the case, check with the housing association as to their requirements. You will be adding her to your 60% share (as this is what you want to pass to her on your death). If you have a mortgage on your 60% share, then you will need permission from your lender to add her to the mortgage and to the title. You can then contact a solicitor to arrange for a “Transfer of Equity” for the shared ownership lease title.
If your daughter does not live in the property, you will need to check with the housing association whether or not you can do this as normally shared ownership is for owner-occupiers.
There may also be stamp duty implications for you and your daughter as ‘adding’ a person to your title means that the incoming person is effectively purchasing ‘half the value’ of that share from you for stamp duty purposes.”