Transfer of Equity

Transfer of equity refers to the legal process of changing the ownership structure of a property, involving adding or removing individuals or entities as registered owners and giving the person leaving the property their share of the equity in the property. The most common reasons for transferring equity include:

• Adding a new family member or partner, for example through marriage
• Removing a property owner, for example following a divorce
• To alter the amount each person owns in the property, for example moving from joint owners to tenants in common
• Making a transfer to your children or another family member as a gift in order to benefit from tax efficiencies

The transfer of equity process involves several steps:

• The first and most important stage is to find the right Conveyancer to assist you with the change.
• Once instructed and the required ID and Money Laundering checks are complete, we will conduct a thorough investigation of the property’s title to check for any restrictions or issues that may affect the transfer. As an example, we will confirm that those involved in the transfer are named on the relevant documents.
• Your mortgage lender (if applicable) may require a valuation to be carried out on the property, which would need to be obtained prior to proceeding further.
• All parties involved, including third parties such as your mortgage lender and bank or building society, must then agree to the transfer and its terms.
• Once in agreement, we will prepare the necessary legal documents, including the Transfer Deed and any additional agreements required.
• If applicable, SDLT must be paid to HM Revenue & Customs. However, certain exemptions or reliefs may apply, which we can discuss with you at the outset.
• After completing the transfer, we will register the new ownership arrangement with the Land Registry on your behalf.

While it is legally possible to handle the transfer of equity yourself, it is strongly advised to seek professional assistance from a qualified Conveyancer. Property law can be complex, and any mistakes during the process could lead to costly consequences or legal issues in the future.  We can advise as to whether all parties involved need legal representation or whether we can act for both.

It is possible to transfer equity when a mortgage is still outstanding on the property. Your mortgage lenders will carry out their own investigations to ensure the new or remaining owner can afford the mortgage following the transfer.  Your mortgage lender will also need to update their documents to remove the leaving party from their documents.

If the mortgage lender does not consent to the transfer, we can discuss your options with you.

It is possible to transfer equity on a leasehold property, however it is important that this is discussed with the freeholder or management company overseeing the lease as there may be additional considerations, fees and permissions needed.

Generally, it takes around 4-6 weeks for a transfer of equity, however the timeframe can vary based on factors such as the complexity of the case, whether there is a mortgage involved, the responsiveness of involved parties, the workload of the Land Registry and the reasons for the transfer, for example if part of larger divorce proceedings.

In most cases, a transfer of equity is a permanent change in property ownership. However, certain legal procedures may allow you to reverse the transfer under specific circumstances. We can explore the different options with you and ensure you are aware of the consequences of equity transfer and any alternatives you may wish to consider.

Depending on the nature of the ownership status, transfer of equity can attract Stamp Duty Land Tax (SDLT) if the value of the share being transferred exceeds the SDLT threshold. This typically happens when there is a mortgage and someone is being added to the property ownership as they are taking on part of the mortgage responsibility.  The amount of SDLT will depend on the value of the share being transferred and the existing SDLT thresholds and rates at the time of the transfer.

Capital Gains Tax (CGT) may be applicable depending on who is involved in the transfer.  Should you be transferring the property to your spouse or civil partner you will be exempt, however when transferring to children or another individual, this could be subject to CGT.  There may be further exemptions applicable and the tax rate is different based on varying factors, so we would always recommend you seek advice from a tax professional, which we can assist with through our experienced Tax experts in our Wills, Probate and Estate Planning department.

There are various fees that are involved in a transfer of equity, including:

• Land Registry fees
• Legal fees
• Stamp Duty Land Tax (if applicable)
• Search fees (if applicable)
• Mortgage lender fees, for example a redemption fee (if applicable)
• Valuation fees (if applicable)

A transfer of equity and gifting are distinct processes. Transfer of equity involves a change in legal ownership, whereas gifting is the voluntary transfer of property ownership without any payment in return.  Each process has its own implications in terms of tax and fees, and we can discuss the best option for you based on your own particular personal circumstances.

Should you be making a gift to your children and they are under the age of 18, this can be done through a Trust deed, meaning the ownership will be managed by an appointed Trustee until the individual turns 18 years old.

Transfer of equity may have implications for Inheritance Tax (IHT), particularly if the transfer involves a gift with reservation of benefit.  We can discuss the effects of this with you in more detail, or refer you to our Wills, Probate & Estate Administration department.