The transfer of equity in a property refers to transferring ownership. This often includes changing joint names into a sole name and vice versa. It is important to be represented by experienced transfer of equity solicitors to ensure that your rights and interests are protected.
As well as looking after your assets, a solicitor can deal with other issues, such as explaining the different types of joint ownership and releasing you from a mortgage if this is part of the transaction.
If you are remortgaging simultaneously, your new lender will need solicitors to represent them. We can carry out a transfer of equity and remortgage together. We will need to do the same due diligence work as required on a purchase, as your new lender will need us to confirm that the property is good security for their loan.
Want help with a transfer of equity? Our solicitors can help you – to handle this kind of work all the time. Just call us on FREEPHONE 0800 1404544 or one of our local office numbers [see below] for a FREE conveyancing quote and FREE initial phone advice with no strings attached.
What is transfer of equity?
Transfer of equity refers to the legal process of transferring property ownership. Equity refers to the share of the property owned after taking into account the mortgage and any other charges.
When might I need a transfer of equity?
If a couple who owns a property together separates, one party may agree to buy the other out. They will each need their own solicitors. The solicitors for the person buying the other’s share will draft the transfer document to be signed by the seller and will also need to carry out some legal checks.
If the property is subject to a mortgage, the lender’s consent to the transaction is needed.
The court often orders a transfer from joint to sole names as part of a divorce settlement.
- Living together
If a couple intends to live together and one already owns a property, they may want to transfer it into joint names.
It is crucial that both parties have independent legal advice before doing this. If one has put in more money than the other, this should be reflected in the property ownership.
There are two ways of jointly owning property:
· Joint tenants; and
· Tenants in common
- Joint tenants
When two people own a property as joint tenants, neither owns a specific share and they both own the whole property. This means that should they separate, one party will find it difficult to claim a larger share.
If one of the owners dies, the other automatically owns the whole property and it will not pass under their Will.
- Tenants in common
If two or more individuals own a property as tenants in common, each owner will have a specified share. For example, one person might own a quarter and the other three-quarters. If one person were to die, their share would pass according to their Will. But, if they do not have a Will, it will pass under the Rules of Intestacy.
It is important to take independent legal advice on joint ownership to make sure that your contribution to a property is protected. You are also strongly advised to put a Will in place, and to make sure that will is kept up-to-date, especially after any major life changes.
Click here to read our Will Writing Solicitors can help you
- Passing a property to a relative
If you want to pass a property to a relative, for example, to a child or grandchild, you do this by can signing a transfer of equity.
Again, it is important to speak to expert transfer of equity solicitors as there are several essential issues to consider. These include:
· Inheritance Tax implications
· Capital Gains Tax
· Stamp Duty
· Deliberate deprivation of assets – see below
Inheritance Tax and transfer of equity
If you die within seven years of making a substantial gift, Inheritance Tax (IHT) is payable on the amount given away if your estate is above the IHT threshold. HMRC charges tax on a sliding scale depending on how long ago you gave the gift. This is known as taper relief:
Years between gift and death Rate of tax on the gift
3 to 4 years 32%
4 to 5 years 24%
5 to 6 years 16%
6 to 7 years 8%
7 or more 0%
Inheritance Tax is not payable on gifts to a spouse or civil partner.
IHT is a complex subject, and your solicitors will be able to go through the implications with you before carrying out the transfer.
Here at Bonallack & Bishop we have a highly specialist and experienced solicitor who handles trust creation and administration, family wealth planning and inheritance tax planning. Why not give us a call for some free initial phone advice?
Click here to read more about Inheritance Tax Planning
Capital Gains Tax on transfer of equity
If you transfer a property that is not your main home, known as your principal private residence, you may need to pay Capital Gains Tax (CGT) on the value of the equity transferred. You need to calculate this by looking at the property’s market value.
For example, if you purchased a second home or investment property and it has increased in value since you bought it, CGT may be payable on the difference between the purchase price and the full market value now.
You can deduct certain costs from the gain, including the cost of major improvements, estate agent’s fees and solicitors’ fees.
Capital Gains Tax is not payable on a transfer to a spouse or civil partner.
Stamp Duty issues?
Stamp Duty Land Tax (SDLT) may be payable on a transfer of equity if the value of the share transferred exceeds the SDLT threshold. Where someone is acquiring an interest that is above this threshold, they must pay SDLT before the transfer is registered.
Deliberate deprivation of assets and transferring equity
There are strict rules aimed at preventing someone from simply giving away their property to try and avoid paying care home fees. This is known as deliberate deprivation of assets.
Care costs are means-tested, and the local authority has the power to investigate when a property is gifted. There is no time limit for this. The test is whether someone knew that they might need care and support in the future at the time the transfer occurred and transferred the property with the intention of avoiding paying for this.
The local authority can require the person who received the property to pay the shortfall in care fees.
If you are found to have the really deprived yourself of assets, that can have significant issues for care home fees. Again this is something our specialist team can advise you on. Why not give them a call?
How long does a transfer of equity take?
The time taken to complete a transfer of equity depends on what else is involved in the transaction. For example, if you are also remortgaging your property at the same time, it can take three or four months for your solicitor to receive a mortgage offer and carry out searches or put search insurance in place.
If the transfer is part of a divorce settlement, you must wait for a final order before completing the transaction.
If only two parties are involved in the transfer, it is usually quicker to deal with. The solicitors will simply need to agree on the transfer details, secure cleared funds for completion and agree on a completion date.
What is the transfer of equity process?
The first step is to instruct transfer of equity solicitors to represent you in the transaction. There are several legal implications to be wary of and it is crucial to have expert advice before you proceed.
· If you ask us to represent you, we will advise you of your rights and take steps to protect your position.
· We will obtain your title deeds and contact the solicitor for anyone else involved in the transfer. We will draft or approve the transfer document and liaise with the other side over issues such as payment and completion.
· When a mortgage lender is involved, we will also deal with this aspect of the transaction, explained further below.
· If you are adding your name as a property owner, we will check the legal title and give you any information you need before you become a joint owner.
· We will also discuss what type of ownership is right for your circumstances and ensure your contribution is adequately protected.
· Completion is relatively straightforward. One solicitor sends the money to the other, who sends the signed transfer back in return.
· Following completion, we will arrange to register the change in ownership at HM Land Registry.
Do I need a solicitor for transfer of equity?
In theory, you can complete complete a transfer of equity yourself and without a solicitor. But it’s really not a good idea. When you are transferring equity in a property, it’s easy to make mistakes or not safeguard your assets. Experienced conveyancing solicitors will ensure that you fully understand the transaction and that your interests are protected.
And in any event, if you have a mortgage, then your lender will insist on a solicitor’s involvement. Conveyancing solicitors are able to represent both property owners and mortgage lenders. What’s more, in certain circumstances where there is no conflict-of-interest, solicitors may be able to act for both sides when simply transferring equity.
Transfer of equity and your mortgage
If the property for transfer is subject to a mortgage, then you will need the lender’s consent.
If you are adding someone to the mortgage, the lender will need to vet them in the normal way to satisfy themselves that they can afford the monthly payments. The result, adding someone else to the mortgage is not always straightforward or even possible.
The lender may impose further conditions on the mortgage and issue a new joint mortgage offer for both parties.
If you are transferring the property to someone’s sole name, the lender must approve this. Again, they will check to ensure the individual can meet the repayments.
Removing your name from the title
If you are removing your name from the title entirely, you must ensure that you are no longer on the mortgage. Removal of your name from the mortgage will take place on completion.
You may be remortgaging at the same time as transferring the property. If so, we will do the usual remortgage work, checking the legal title and obtaining searches for the lender or putting search insurance in place.
This will allow us to report to the lender on the property, confirming that it satisfies their criteria. We will obtain a figure from your existing lender showing how much they need to redeem their charge. We will let you have a statement showing the breakdown of figures before completion.
Following completion of the transfer, we will register this at the Land Registry and also register any changes to the mortgage.