A transfer of equity in conveyancing has numerous moving parts that people do not realise. This guide will help you understand the process involved with in a transfer of equity.
What is a Transfer of Equity?
A Transfer of Equity means ‘transferring’ full or part ownership of a property to yourself or another person. This can be accomplished by creating a co-owner, taking a name off the lease or transferring it altogether.
There are many reasons as to why you wish to Transfer of Equity, some are listed below:
– Separation/divorce from a Partner
– You have just married and want to co-own the property
– You wish to give ownership/part-ownership to a child or family members
So, how does it work?
If the terms and conditions are clear between the people transferring to or from the property, then the process can be simple. So, for example, if a couple is divorcing, one person is leaving the home, and the other is buying them out, and there is no mortgage, a transfer of equity is simple.
A form is completed by the person staying in the property. It is sent on to the person whose name will be removed. Both parties sign the document; this is filed by a solicitor and sent to the Land Registry.
A Transfer of Equity becomes more complex when there is a Lender (Mortgage) registered against the property. Any Alteration to a title where there is a charge registered needs to be approved and/or consented by the lender. If you have a mortgage, it is imperative to inform the lender if the names on the deeds are changing – you cannot change a name on the mortgage without changing the deeds, and vice versa. The Lender will either provide their consent or most probably you will be required to obtain a new mortgage offer for the party who is remaining on the title.
It is good to be aware that transfers can have an impact on Capital Gains Tax, Stamp Duty Land Tax (SDLT) and depend on different factors if mortgage lenders are involved. We advise that you obtain independent financial tax advice on the implications of a Transfer of Equity prior to instructing your Solicitor.
Please note that due to conflict of Interests that arise in these matters, we can only act for one party in the transaction, each party will require their own independent legal advisor. In the event the second party does not want separate legal representation we will require them to confirm that they have received Independent legal advice on the matter.
How long does it take?
This depends on your situation.
If you are transferring equity without a lender being involved, the process can be incredibly quick and we aim to turnaround these matters within the month. The drafted transfer deed is sent to the person who is being added or removed to sign in the presence of a witness. Thereafter we will make the required application to the Land registry to make the required change of title.
If, however, you are separating from a spouse who does not give consent to the transfer, or there are issues with mortgages and payments, this can prolong the process. If both parties are agreed and can sign the document promptly, it can go through smoothly.
Where a lender is involved, the matter can take more than four weeks to complete as the consent and possible execution of the transfer deed is required.
Each case is different and time estimates can only be given when assessing each particular case and scenarios.
How much does a transfer of equity cost?
The cost of a transfer of equity varies depending on your circumstances for example adding, removing or replacing someone on the deeds, and whether the property is leasehold or freehold. Other factors, like the number of mortgages on a property, can also make a difference.
It is good to note that a transfer of equity can incur additional costs such as Stamp Duty Land Tax implications.
When does stamp duty have to be paid?
Depending on your circumstances, the following criteria may apply:
– With or without a mortgage – if you do not have a mortgage, you will not have to pay SDLT.
– Divorce – if you are divorcing, you are unlikely to pay SDLT. If you are transferring the mortgage to one person instead of two, the mortgage lender will have to agree.
– Separating but unmarried – if you are not married or in a civil partnership, and are transferring to one person, you may have to pay SDLT.
– From parents to children – If you have inherited a property in a will, even if it has a mortgage you will not pay SDLT. If you are gifted a property and there is a mortgage on it, even if the mortgage payments do not transfer to you, you will have to pay SDLT on the portion of the mortgage that you now own.
– To spouse – If you are buying a portion of the equity and the mortgage, in order to transfer, you will need to pay SDLT. Even if no money changes hands, if you now pay the mortgage along with your spouse, the ‘consideration’ will be half of the outstanding mortgage. If this is over the SDLT threshold, you will be expected to pay.
– Taking a name off – if there is a mortgage, the lender has to be happy that the remaining named owner can keep up payments. If this is confirmed, a transfer instruction is sent to the solicitor, and a transfer deed is signed by both parties.
We strongly advise on you obtaining independent tax advice on the implications of the transactions as we are not Financial advisors and unable to provide the same.
Are you thinking of pursuing a transfer of equity?
Contact our Transfer of Equity Solicitors in Ruislip, Middlesex
The locally-based lawyers at The Sethi Partnership Solicitors have been providing specialist legal advice for a diverse range of clients since 1994. Whatever your circumstances, speak to one of our trusted solicitors today to discuss your case.
To arrange an initial appointment, call us today on 020 3856 8156 or complete our online enquiry form and we will be in touch.