A Transfer of Equity is when the ownership of equity is changed. This is most common when a property is jointly owned and there has been a relationship breakdown. The person who is leaving the property is removed from the Deeds, or they transfer their share to eg a new partner or family member. They may receive a payment for their share from the other parties, or they may simply transfer the share without payment (but by being released from any mortgage on the property).
In addition, property owners sometimes transfer their share in a family home to a child or another family member for tax purposes and this may be looked upon in law as a gift. An undervalue transaction such as a gift of land in this scenario will have certain legal implications and you should obtain advice about this from a solicitor before deciding how to proceed. Property owners sometimes transfer a share in a family home to a child or another family member for tax purposes and this may be looked upon in law as a gift.
Question : I am going to live with my sister in her house. Is it possible for me to buy half of it for £190,000 and only pay 1% Stamp Duty?
Answer : If there is a lender involved they must be approached to confirm that they are happy for part of the equity to be handed over to the other person. Undertaking transfers of equity can have tax implications for you and others involved. It depends on the value of a share in the property whether Stamp Duty would have to be paid but some transfers of equity are exempt – for example – where a property is being transferred as a gift or as a result of a court order following divorce proceedings. There may also be Capital Gains Tax implications on a transfer or disposition.
Whatever the reason may be for a transfer the process is quite straightforward and involves the following :
- Obtaining the title deeds
- Seeking instructions on the terms of the transfer and the joint ownership
- Preparing a transfer for both parties to sign – note that one solicitor cannot always act for all parties
- Notifying third parties who may have an interest in the property – ie- mortgage lenders
- Complying with any lenders requirements
- Assessing whether stamp duty is payable
- Completing stamp duty land tax form if applicable
- Registering transfer with land registry and payment of fee
We have offices in the Christchurch, New Milton and the New Forest. Our Conveyancing team also cover Bournemouth and Poole. For a free initial chat, please call 01202 499255 and Mandy or a member of the team will be happy to discuss any questions that you may have.
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