Whether you are moving in with a new partner or separating with an ex, it is important to consider whether the legal title of your property needs updating. This can be done through a transfer of equity.
What is a transfer of equity?
Unlike most conveyances, a transfer of equity usually involves one party staying on the property, whilst another party is either added or removed from the title.
What is the process?
To update the title, the conveyancer representing the party(s) who will remain on the property title must submit an application to HM Land Registry. This needs to be signed by all parties. If you are being removed from the title, you will need legal representation from a different conveyancer.
What is consideration?
Money changing hands as part of a transfer of ownership is known as consideration. It is usually a payment made to the outgoing party for their share of the property based on the equity in the property and any contributions made by the parties. This needs to be agreed in advance of the transfer of equity and payment should be made through your conveyancer on the date of completion. The consideration may be agreed between the parties or by order of the court. Please speak to one of our Family solicitors if you need advice on making an agreement.
What if we have made unequal contributions?
Where a new party is being added to the title, it is often the case that the existing party has contributed more towards the property. This may be through the initial deposit, mortgage repayments, home improvements or maintenance. If you have made unequal contributions, you should consider making a Declaration of Trust. This specifies the proportions of the property owned by each co-owner and provides guidance on how the proceeds of sale should be divided if the property is sold in the future. Please speak to one of the team if you would like further information on co-ownership.
What if the property is mortgaged?
If the property is mortgaged, you will need to obtain consent from your lender(s) to release or add a party to the mortgage. Whether you are staying with the same lender or remortgaging with a new lender, most mortgage providers will produce a new mortgage offer detailing their requirements. We will liaise with your lender to ensure the change of parties on the mortgage and completion of the transfer of equity takes place simultaneously. We recommend that you speak to a mortgage advisor to arrange a suitable mortgage.
What if the property is leasehold?
We will review the title of the property to check if there are any additional requirements before submitting the application to HM Land Registry. Leasehold properties may contain a restriction requiring consent from the landlord to accompany the HM Land Registry application.
The lease may require notice to be served on the landlord/management company informing them of any change in ownership and mortgage. There may also be a requirement for a new party to enter into a Deed of Covenant, confirming that they will observe any covenants contained in the lease. The landlord/management company are likely to charge additional fees, which we will advise you about at the earliest opportunity.
Are there any tax implications
Stamp Duty Land Tax (SDLT) may be payable depending on the chargeable consideration, which is calculated based on the amount of consideration and the outstanding mortgage value. Your conveyancer will advise you whether any SDLT is payable upon instruction. You may need to speak to a specialist tax advisor if the transfer of equity is complex or has capital gains tax implications.
By Michael Hollingsworth
Please get in touch if you would like further information on how we can help with your transfer of equity.
