What is the process for a transfer of equity?
- 3 days ago
- 3 min read
A transfer of equity is the legal process of adding or removing someone from a property title deeds, while at least one original owner remains. When we refer to ‘equity’ this is the portion of your property that you own outright after deducting the remaining mortgage balance. In our guide, we look at the process for a transfer of equity and what you need to know.
Common situations requiring a transfer of equity
There are several situations that can require a transfer of equity. We have listed some common scenarios below:
Divorce or separation - where one partner is removed from the title deeds, or they buy out the other party.
A new partner – where a sole owner adds their new partner to the title deeds.
Marriage, remarriage, or civil partnership - where a spouse or civil partner is added to the property title deeds.
Buying out a co-owner or changing ownership shares – where the title deeds are changed for other types of jointly owned property, such as friends, siblings, or investors.
Family or estate planning - such as transferring property between family members or to reduce the amount of Inheritance Tax or Capital Gains Tax.
What is the legal process for changing ownership on a property?
As each situation is unique to the individual, every transfer of equity is different and requires relevant property law expertise. For a transfer to occur, there must be at least one legal owner listed on the property deeds and no more than four legal owners at any time.
When you are looking to change the ownership of a property you will need to pass your title deeds and mortgage conditions to your solicitor. They will review the title deeds to check ownership and to see if there are any restrictions with the Land Registry. Your solicitor will then prepare the necessary legal documentation and draft the transfer deed for signing. This will need to be signed in front of witnesses to ensure the deed is executed correctly.
Where there is a mortgage on the property, the lender will need to approve the change. As your mortgage lender will need to check if the remaining or incoming party can afford the repayments, you will need to obtain their consent. In some cases, remortgaging might be required or a balance may need to be paid on the mortgage before the transfer can occur.
Once everything is finalised, your property solicitor will submit the transfer deed for registration with the Land Registry. The average length of time for this process is between 3 – 6 weeks, but this can vary depending on the complexity and lender consent.
Are there any tax implications for a transfer of equity?
In some instances, a transfer of equity might trigger Stamp Duty Land Tax (SDLT) or other tax considerations. A new co-owner may have to pay SDLT if there’s a mortgage and the amount of debt exceeds the threshold. Usually, there is no SDLT to pay when there isn’t a mortgage.
If the property is not someone’s main residence, then there might be Capital Gains Tax (CGT) liable on any increase of value. However, this is usually not applicable on transfers between spouses and civil partners. If the transfer of equity is linked to a court order relating to a divorce, then you would usually be exempt from paying either SDLT or CGT.
A transfer of equity can be used as an inheritance tax planning tool. It’s important to observe the 7-year gifting rule where a share of a property has been gifted, such as a family member. If the person gifting the property share dies within 7 years, the transfer value could be liable for inheritance tax. Please seek independent advice regarding any potential tax or estate planning concerns.
Your Transfer of Equity Solicitor in Leicester
If you need to add or remove ownership of a property to the title deeds, then you will need to arrange a transfer of equity. Transfers of equity are legally binding, so always use an expert property solicitor to check the title deeds and mortgage conditions. They will draft the transfer deed and arrange registration with the Land Registry.
At Salusbury Harding & Barlow, our team can help you with the process of transferring the equity of a property. Whether you are looking to change the deeds for a freehold or leasehold property, our solicitors have decades of experience and expertise. We will explain everything clearly in plain English, so you can make an informed decision.
If you need to arrange a transfer of equity, get in touch or email: adnan@shbsolicitors.co.uk to arrange a face-to-face or telephone appointment.
Sources:
https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property
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