Are you looking to add your partner/child to the title of your house or remove your ex-partner from it.
Either way, a Transfer of Equity is the most popular method of doing so.
In this article, Residential Property Expert, Edward Carter, outlines what a Transfer of Equity is and how they work…
Can you transfer ownership of a property in the UK?
Yes, there are many different ways to transfer ownership of a property. These involve either adding or removing people from the title of a property.
You can give someone full or part ownership of a property for zero monetary consideration, also known as gifting a property.
The Land Registry allow up to four people to be shown on the title register of a property. For more than four owners, a declaration of trust should be created to evidence the extent of their ownership.
If there is an unequal split of ownership of a property, a declaration of trust is essential to specify how much of the property each person owns.
What is transfer of equity?
A ‘transfer of equity’ is where a property owner either adds a person to the title of their house or removes a person from the title of their house.
In most cases, money changes hands between the owners of the property. Either a person buys a share in a property (usually 50%) to be added to the title or a person removes someone from their title by purchasing their share in a property they own together.
You will likely need to have your property valued before starting this process, as this willassist in calculating:
- The value of your share in the property,
- How much the Land Registry shall charge to update the title register.
How do I remove my ex-partner from house deeds?
The first stage of removing your ex-partner from your title deeds is for your lawyer to review the title register to identify the individuals involved and whether a mortgage is involved in the process.
if you have a mortgage, your lawyer will obtain authority from your lender to release the person being removed from the mortgage. Your lawyer will then draft a transfer document that will legally remove the person and transfer ownership of the property to you.
How do you transfer a house to a family member?
You can transfer the whole or part of a property from yourself to a family member, or any other person, via a transfer of equity.
You can either receive a payment from your family member for a share of the property, or alternatively, no money can change hands and you can gift them a share. Gifting property can be beneficial as it will not incur any stamp duty.
How much does a transfer of equity cost in the UK?
The main cost payable in a transfer of equity is the legal fees you will pay your solicitor to assisting you throughout the process.
In the event of a mortgage on the property, you may need to pay additional charges to your lender. This may also apply if the property is leasehold, as the Landlord may need to provide consent for a change of ownership of the property.
Depending on the transaction, Stamp Duty Land Tax (SDLT) may be payable once the transfer of equity completes. When it comes to transfers of equity, the rules relating to SDLT are fairly complex, especially if a mortgage is involved.
In the event of a divorce, SDLT may not be payable, but your solicitor will advise you on this.
How much stamp duty do I pay on transfer of equity?
If a person buys a share of a property for more than £125,000, they will be liable to pay stamp duty.
For example, if the property is worth £500,000 and you purchase a share of 50%, you will have to pay SDLT on the consideration of £250,000.
The amount of stamp duty payable varies on each transaction, but your solicitor will fully inform you of the SDLT implications of the transfer of equity throughout the transaction.
How do you avoid stamp duty on transfer of equity
If you are paying for the share, an SDLT return will need to be filed with HMRC. The amount paid, as well as any mortgage that is involved, will determine how much stamp duty is to be paid.
If no money changes hands and there is no mortgage on the property, stamp duty may not be payable due to the transaction being treated as a gift. As SDLT is a complex tax, there are exceptions to this, and it is best to check with your solicitor as to the SDLT implications before proceeding.
You will most likely be exempt from paying stamp duty where the transfer has been enforced by a Court Order, which has been granted as a result of a divorce. You can download our free guide to a good divorce, which includes financial and property advice, here.
You may also be exempt if the terms of a Will have left you a property. Read our advice for including property in a Will here.
How long does it take to complete transfer of equity?
The length of time it takes to complete a transfer of equity depends on multiple factors. These include:
- Number of individuals involved.
- Whether a timescale has been imposed as a result of a divorce.
- Whether a mortgage is involved and any delays caused by the Lender.
- If the property is leasehold, the landlord’s consent may be required, which can delay matters significantly.
Usually, the process takes anywhere between 4 and 6 weeks to complete.
Do I have to pay tax on a transfer of equity?
This will depend on the circumstances of the transaction. Most transactions may cause either Capital Gains Tax (CGT), Inheritance Tax (IHT) or Stamp Duty Land Tax (SDLT) to be payable upon completion.
Once we have the full circumstances of the transaction, we can provide SDLT advice, whilst our Wills and Tax Team can advise you on CGT and IHT.
Do I need a solicitor for a transfer of equity?
In most cases, you will need legal representation to assist you with a transfer of equity; however, this is not always required.
Even though it may not be a requirement, it is recommended, due to the complex legal nature of a transfer of equity, that you instruct a solicitor.
A solicitor will draft all the legal documentation and provide you with advice as to the tax implications.
In cases where a transfer of equity is occurring due to a relationship breakdown, it can be crucial to have a lawyer assisting you in dealing with any disputes that may arise throughout the process.
Transfer of Equity Solicitors
Our bright Property Lawyers are 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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