Changes in property ownership happen all of the time. Perhaps you want to add your partner or child to the title of your house, or maybe you want to remove your ex-partner from it.
Either way, a Transfer of Equity is the most popular method of doing so.
In her latest article, Licensed Conveyancer Julia Gaunt outlines how a transfer of equity works and the process involved.
Can you transfer ownership of a property in the UK?
Yes, it is possible to transfer ownership of a property in the UK. You can either add or remove an owner of a property, in various different ways.
You can gift full or part ownership of a home to someone by adding them to the title deeds of the property as a joint owner
You can have up to four joint owners of a property whose names will show on the register held by the Land Registry. If there are more than four legal owners, then the extent of their ownership should be recorded in a separate document (a declaration of trust).
A declaration of trust can also be used to specify each owner’s contribution to and share in the ownership of a property. This is particularly important if there are unequal contributions to the acquisition of a property.
Related: What is a declaration of trust and why do I need one?
What is transfer of equity?
Transfer of equity is where a property owner adds or removes a person to the title of their house, changing the legal ownership of the property.
Usually, where a person is being added to the title, they would buy their share in the property’s value (typically 50%).
And where a party is being removed from the property, the remaining owner will need to buy the other person’s share out.
How do I remove my ex-partner from house deeds?
The process for removing someone from the house deeds, whether your ex-partner or not, begins with your lawyer reviewing the title deeds to find the details of the mortgage, if applicable, and the parties involved.
They can then get permission from the lender, again where a mortgage exists, as the party being removed from the title of the property will need to be released from the mortgage; and draft a transfer document which will legally remove the individual and transfer ownership.
How do you transfer a house to a family member?
Transfer of equity can be used to transfer full or part ownership of a property from you to another person, whether this is a family member or partner etc.
Transfers of this type can involve the family member buying their share of the property from you. Or, alternatively, you can choose to simply gift someone a share in the property with no money changing hands.
Gifting a property in this way can be beneficial as stamp duty will not apply.
The transfer of equity process will start with a valuation of the property and end with parties signing the legal documentation and registering the transfer with HM Land Registry.
Related: How can parents protect the bank of mum and dad?
How much does a transfer of equity cost UK?
The main cost involved for a transfer of equity is legal fees. You’ll need to instruct a solicitor to complete the legal process for you and provide you with tailored advice.
At Frettens, we are always up front and transparent with our fees, with no hidden costs. You can call us on 01202 499255, or fill out the form at the top of this page, for a quote.
If you have a mortgage on the property, you may have to pay extra charges to the lender. There can often be a ‘change of parties’ fee involved in such transfers. Also, if the property is leasehold, it is likely that Landlord’s consent will be required, for which there will be a charge.
And lastly, depending on your circumstances, Stamp Duty Land Tax (SDLT) may be payable, the rules are fairly complex but essentially, unless the transfer of equity relates to a divorce, SDLT will need to be examined to ascertain whether it is payable.
If there is a mortgage on the property, then the SDLT implications can be significant.
Conveyancing: How much does it cost?
How much stamp duty do I pay on transfer of equity?
When buying a share in a property, the person doing so will have to pay SDLT on that purchase if they pay more than £125,000 for that share.
For example, if the property Is worth £400,000 and you are buying a 50% share in that property, you’ll have to pay stamp duty.
How much SDLT is payable can be quite complex on a transfer of equity, especially where a mortgage is involved, and really depends on your individual circumstances.
To get a better idea of how much SDLT you’ll need to pay, please call us on 01202 499255 for a free initial appointment.
Related: What is Stamp Duty and what are the current rates?
How do you avoid stamp duty on transfer of equity
SDLT is payable when you provide consideration for the share, consideration also includes the assumption of a mortgage.
If there is no mortgage and no money is being paid for the share, as it’s a gift then SDLT may not be payable. There are exceptions to this and SDLT is a complex tax, so it is better to check the position carefully before proceeding.
In addition to this, where a Court Order has been given in divorce that enforces transfer of property ownership; stamp duty is usually not payable. You can download our free guide to a good divorce, which includes financial and property advice, here.
You can also be exempt if the property has been left under the terms of a Will. Read our advice for including property in a Will here.
How long does it take to complete transfer of equity?
The time period for completing a transfer of equity depends on many factors, including whether:
- Multiple owners or tenants are involved,
- The transfer is tied to a relationship breakdown or divorce
- There is a mortgage involved
- Lender backlog can cause delays
- A Court Order has been made
- Leasehold property
- Landlord’s consent is required
Usually though, the process should take anywhere from 4-6 weeks.
Do I have to pay tax on a transfer of equity?
It does depend on the nature of the transfer as to whether tax is payable (i.e. Capital Gains Tax (CGT), Inheritance Tax (IHT) or Stamp Duty Land Tax (SDLT)).
Our Wills and Tax team can advise on CGT and IHT. SDLT advice can be provided once we have full details of the transfer and the circumstances of the parties.
Do I need a solicitor for a transfer of equity?
Most of the time, you’ll need a legal representation to complete a transfer of equity. However, it isn’t always a requirement.
Despite this, it is still highly recommended to have legal representation, even where it isn’t a requirement, as a transfer of equity can be a complex legal procedure.
A solicitor can help you understand the process and your requirements, draft the transfer document and advise you on potential tax implications.
On top of this, if a conflict arises say between you and your ex-partner who you are trying to remove from the property’s title, having a lawyer on side to assist you and resolve any dispute is crucial.
Transfer of Equity Solicitors
At Frettens, our bright Property Lawyers would be happy to assist and advise you in a transfer of equity transaction.
We can make sure that all of the legal aspects of the transaction are completed legally, correctly and according to your wishes.
To get in touch, call us on 01202 499255 or fill out the form at the top of this page.
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