Sometimes it is necessary or desirable to make changes to who owns a property. It could be that you and your partner are separating and one of you wishes to keep the property, or you own property individually and you want to add your partner to the title. Regardless of the reason, when you wish to alter who owns a property you will need to complete a transfer of equity.
Topics to be answered in this article
What Is a Transfer of Equity?
Equity in a property is the amount that you own outright. For example, if you own a property valued at £200,000, and have a mortgage of £50,000, your equity in the property would be £150,000. If there was no mortgage, then your equity in the property would be £200,000.
A transfer of equity is when you change who owns the equity in the property. This could be by adding or removing someone (or multiple people) from the property’s title. A transfer of equity does not necessarily involve any money being transferred between parties.
Reasons for Transfer of Equity
There are a few reasons why you might want to transfer equity. These include:
- Adding a partner
- Removing a partner as a result of divorce or separation
- Adding a child or grandchild
- Removing a sibling or family member from a property that was transferred because of inheritance
What is the process for Transfer of Equity?
A transfer of equity is normally a more straightforward process than dealing with a standard sale or purchase, the usual steps are:
1. If there is a mortgage on the property, you will need to contact your lender to get their authority to the transfer. Usually they will issue a new mortgage offer in the names of the new owner/s of the property. If your existing lender does not agree to the transfer, then you may need to contact a financial advisor to arrange a new mortgage with another lender.
2. Once your lender is agreeable to the transaction, your solicitor will obtain a copy of the property’s title documents from the Land Registry. The title will confirm the names currently registered and if there are any restrictions on the property’s which need to be dealt with before the transfer can proceed.
3. When your solicitor has checked the property’s title, they will then prepare the Transfer Deed (TR1). The Transfer Deed will confirm the name/s of the current owner, the name/s which the property is be transferred to, and any consideration (which includes money and mortgage debt) which has been agreed between the parties.
4. If a stamp duty return is necessary your solicitor will prepare the return and send this to you for checking.
5. Once all parties have agreed and signed the Transfer Deed it will then be formally completed and registered with the Land Registry. The Land Registry will then issue a updated title reflecting the new owners.
Do I need a solicitor?
It is not always necessary to appoint a solicitor, but we recommend that you do. If someone is being added to a property, you will both be able to instruct the same solicitor. When someone is being removed, it is advisable for both parties to have their own independent solicitor.
If you have a mortgage, your lender will insist that a solicitor is appointed to handle the transfer.
A solicitor will be able to guide you through the process to make sure all the required paperwork is completed accurately. Importantly, when a party is being removed, a solicitor will be able to ensure that the necessary clauses are added to the transfer that there are no future issues.
Transfer of Equity and Stamp Duty
A transfer of equity may give rise to a stamp duty liability and/or the need to submit a stamp duty return to the HMRC, particularly if you are paying another party for their share of a property.
It is important to point out that taking on mortgage debt in a property is seen by the HMRC as “consideration” and therefore may be subject to a stamp duty return and liability.
Transactions as a result or in contemplation of divorce proceedings are however exempt from the requirement to submit a return and any liability.
Stamp Duty liabilities are a personal liability and are dependant on your personal circumstances and the transaction you are completing. Your solicitor will be able to advise you on what stamp duty may be due in your circumstances. Further guidance can be found on here.
How long does a Transfer of Equity take?
A transfer of equity usually takes between 4 – 8 weeks to complete, dependent on whether there is a mortgag
What does Transfer of Equity cost?
Typical legal costs range between £750 – £1,250 plus VAT. There may be additional costs involved which your solicitor will be able to discuss with you. There will also be Land Registry fees for registering the transfer, which range between £150 – £500, dependent on the value of your property.
How can Goughs help?
At Goughs, we have specialist knowledge of transfers of equities, whatever the circumstances. If you are looking for advice, please call your local Goughs office and one of our Residential Property Team would be pleased to assist.
