“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.
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).
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