Transfer of equity

A Transfer of Equity is where a jointly owned property is sold or transferred to one of the other owners or when more or one persons are added to the ownership of a property by a single owner. Equity is the usual legal term for how much of the property you own which would be its value minus any outstanding mortgage.

Transfer of Equity Involving a Mortgage

If a property is to be transferred from one to two names for example where two parties come together and decide to live together, if there is a mortgage on the property already, the mortgage lender i.e. the Bank or Building Society have to provide consent and that lending institution will need to be contacted first before any legal work is done for that consent to be provided. They would then write to Fishers directly with their instructions and the legal process can begin.

Where a property is owned jointly with a mortgage, then again the Bank or Building Society need to be made aware and consent obtained. Usual credit checks for the intended sole owner would be carried out to check affordability. Sometimes at this point a re-mortgage could also be considered i.e. the party staying in legal ownership pf the property decides to move to a new mortgage lender.

Moving to a Jointly Owned Property

When a new party is added onto a property title, the matter of joint ownership then has to be considered. Everyone’s circumstances are different and there is no one size fits all; you could elect to hold as Joint Tenants or Tenants in Common in equal or unequal shares. Following on from that, a Declaration of Trust maybe appropriate and you should also consider whether this change in property ownership means you need to consider a changes to your Will or whether a Co-Habitation Agreement is also necessary.

Do I need Legal Representation for a Transfer of Equity?

In any mortgage lender is involved for consent to an existing mortgage or at the same time a re-mortgage, you will need a Solicitor. It is essential for the party or parties remaining on the legal title to the property. It is sometimes possible for an outgoing party not to be legally represented although, they would normally have to see a Solicitor to fill in and complete a Land Registry ID1 form which is Land Registry requirement for registration purposes.

How long does a Transfer of Equity Take?

Depending upon the circumstances, a transfer or equity could take approximately 4—6 weeks if straight forward, but every transaction is different and can take a different amount of time. The process does take longer if a mortgage is involved. If the property happens to be unregistered, it will have to be presented to the Land Registry for first registration as a result of the transfer of equity.

Transfer of Equity and Separation

Often the reason for a transfer of equity results from a divorce or separation if your relationship has broken down. Some couples chose to remain joint owners and sell the property whilst others may choose to remove one party so that the other can keep the house to live in, perhaps with children.

When it’s time to move on and you start a new relationship, you might want to consider adding your new partner onto the title to the property through a transfer of equity.

Transfer of Equity for Tax purposes

Another reason for a transfer of equity may be because of tax efficiency. A property transfer could be treated as a gift minimising the tax owed when transferring it. If you are considering transferring equity for tax reasons it is highly recommended you seek advice from your Accountant or expert Tax Solicitor before taking any action.

Do I have to pay Stamp Duty Land Tax (SDLT) on a Transfer of Equity?

You may need to pay Stamp Duty Land Tax when transferring land or property. A number of factors are considered including the type of transfer and your marital status. HMRC provide guidelines on this topic in terms of amounts but if the transfer equity is a result of a divorce or legal separation or the dissolving of a civil partnership either by private agreement or Court Order, Stamp Duty Land Tax will not apply. However, if an unmarried couple separate and one party takes a larger share of the property or buys out the other completely, then they will have to pay Stamp Duty Land Tax on any chargeable consideration above the £125,000 threshold. If the transfer is gift, there would be no consideration as the receiving party is not exchanging anything for their equity share, so Stamp Duty Land Tax does not apply.

What does a Solicitor have do for a Transfer of Equity to take place?

The first step involved in the legal process for a Transfer of Equity to take place is for the Solicitor to obtain a copy of the Title Deeds, most commonly up to date copies of the title registers to the property from H M Land Registry. Those title papers are then reviewed to check the current legal ownership, check any for mortgages and in particular any Restrictions on the property which may stop a disposal of the property.

When all is in order and understood such that the matter can go ahead, the form of Transfer Deed is drafted. This is the legal document which is needed to change the property ownership. If any third party Solicitor is involved, they will see the draft for approval. When it is in agreed form, it will need circulating to all parties for signature. Once it is signed by the individual parties any third party such as a mortgage lender, bank or building society will also have to execute the document. This is then signed in conjunction with any other documents needed for example, a Mortgage deed, a Declaration of Trust, a Form JO, a Cohabitation Agreement, ID1 Forms and an SDLT declaration form. Also at this time, depending upon the circumstances, mortgage monies may need to be drawn down, mortgage redemption figures obtained, final searches and checks done at the Land Registry and a date agreed for completing the transfer.

How much does it cost to do a Transfer of Equity?

As described above, there are a lot of varying components and considerations such that a fixed price cannot always be given but tend to start at Fishers from £725 + VAT. Our team at Fishers Solicitors are experienced to help you get the best outcome possible. Our expert property lawyers are here to help, click here to make an enquiry, request a call back, or call us on 01530 412167.