A transfer of equity is usually a transfer of a property from joint names into a sole name of one of the owners, for example, change of ownership following a relationship split or the formation of a new relationship. It may be a transfer between family members such as gifting property / transferring ownership of a property from parent to child or when a trust comes to an end on the coming of age of a minor child. Often a transfer of equity is combined with remortgaging the property. Sometimes transfers of equity take place for tax planning purposes.
There can be tax implications of carrying out this type of transaction and you should seek financial advice.
How can we help with the transfer of equity?
This is where our property solicitors step in. Our job is to remove the stress from you to ensure your transaction proceeds quickly and smoothly every step of the way to achieve your goal.
We have Tax & Trust Planning specialists who will be able to assist you with tax planning issues arising on the transfer of property into or out of joint names.
Depending upon the type of transfer of equity will determine what we have to do for you to complete the transaction.
Transfer of equity process
If you are combining it with a remortgage, we will probably be acting for your new lender as well. Although you already own the property, we will have to carry out our “due diligence” on behalf of your new lender. We will check the legal title to the property and carry out various searches. We will liaise with your mortgage lender regarding your mortgage offer and their requirements.
If your property transfer is part of a divorce, there may be strict timescales to adhere to contained within the court order. It may be that one party is being released from the mortgage and the remaining party continues to service the mortgage payments alone. We will liaise with your mortgage lender to ensure the transfer of equity meets their requirements and obtain their consent to the transaction. They may wish to be a party to the transfer.
If a new party is being added to the title and there is an existing mortgage, the lender will wish to ensure the new party is added onto the mortgage and a new mortgage deed may need to be signed. We will check with your lender what they require.
Stamp Duty Land Tax (SDLT) is not usually payable on a gift of property between parties or where the transfer results from a matrimonial court order. Where there is a transfer of equity and the incoming party is paying for their share, or where there is a current mortgage on the property, SDLT may be payable (if the amounts involved exceed the SDLT threshold). The SDLT is calculated on the amount paid or the share of the mortgage debt being taken or, if applicable, both.
We will keep you informed as the transfer of property progresses. Once the transfer and remortgage (if applicable) are completed we will arrange to send the necessary funds to the Revenue to pay the SDLT (if applicable) and will arrange registration of the transfer (and new mortgage) at the Land Registry. Once registration at the Land Registry is complete we will let you have a copy of the new title entries showing the new registered proprietors’ names.
How long does a transfer of equity take?
This is the ultimate “how long is a piece of string” question. Every transaction is different with its own challenges. Some will proceed quickly where there is no lender involved or others may take much longer due to the requirements of the lenders. Where there is a court order in place we will endeavour to adhere to the time frames laid down by the court.
Our wealth of experience over many years enables us to assess how long a transfer of property will take. On average we advise our clients that it will take approximately four weeks from receipt of instructions to complete the transfer of equity and apply for registration of the title at the Land Registry.
If you do have a particular timescale that must be met, we will seek to achieve that for you.
Frequently Asked Questions
Firstly, establish what is important to you. This may be cost or it may be the speed the transaction will progress. The reputation of the lawyer will be important. Where ever possible you should seek recommendations from family and friends. Do some research online for good reviews and testimonials from past clients. Make some phone calls and obtain fee quotations. You will get a feel for the type of person you are talking to. They should make you feel at ease, explain how the transaction will progress and deal with any initial queries you have.
It is possible, but you should discuss the implications of gifting property to children with a legal advisor first. You will lose control of what happens to the property. You may have to leave the property if your children become bankrupt, die, divorce or sell the property. There will be tax implications for your children in the future.
No, if the transfer is as a result of a court order, no Stamp Duty Land Tax is payable.
The incoming party will be assumed to be taking over half of the mortgage debt. If this exceeds the Stamp Duty Land Tax threshold, then the tax will be payable on that sum.
Yes, if you have a mortgage on the property your lender will need to consent to any other parties becoming legal owners. They will require the incoming party to become a party to the mortgage as well.
If a property is “gifted” for less than its full value it is considered to be a transfer at undervalue. If the person gifting property becomes bankrupt within three years of the transfer of equity, the transfer at undervalue may be void and the property will revert to the original party and form part of the bankrupt’s assets.