A transfer of equity is the legal process of adding or removing someone from the ownership of a property. In the UK, this commonly happens after divorce, separation or when adding a partner to a home.
The transfer of equity process involves updating the title at HM Land Registry, dealing with any existing mortgage, and ensuring all legal requirements are met. Because mistakes can lead to delays, tax implications or dispute, it is recommended that an appropriate experienced Property Solicitor is instructed to handle the process correctly.
In this comprehensive guide we will walk you through everything you need to know regarding transferring equity in a property. From the basics of what a transfer of equity involves to important considerations before making the decision, we will answer all the key questions.
At Elite Law Solicitors, our team of property lawyers offer a fixed fee transfer of equity UK services, giving you clarity and certainty from the outset. If you require any advice or assistance, please get in touch with one of our Residential Conveyancing solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or completing our Free Online Enquiry Form.
In addition to office meetings, we offer remote meetings to clients via telephone and video conferencing software so can assist you wherever you are based.
What is a Transfer of Equity?
Transfer of equity is the process of adding or removing someone from the title deeds of a property – in effect, of adding or removing them as the owner of that property.
Transfer of equity is distinct from a sale as at least one of the original owners of the property will stay the same, however, the complete list of owners will change.
When might you need a Transfer of Equity in the UK?
There are many reasons why property owners might want to transfer equity. Some of the most common include:
Transfer of equity after divorce or separation
If your relationship has broken down and you and your partner own property together, a decision will have to be made on what to do with this asset. Some couples choose to remain joint owners and sell the property, while others may want to remove one party from ownership so that the other party can keep the house to live in (often the case if the relationship also involves children).
Adding a partner to a property title
If you already own property and have started a new relationship, you might want to consider adding your new partner to the deeds of the house through a transfer of equity.
Removing a joint owner from a property
It is becoming an increasingly common practice for people to pool their resources to buy property with friends or family. This is a practical way of getting onto the property ladder, but at some point later down the line, one owner may wish to buy out the others – to do so would require a transfer of equity.
Gifting property to a family member for tax efficiency
Transferring equity to children or other family members can be an effective way to increase your tax efficiency. The property can be treated as a gift, minimising the tax owed when transferring it. If you are considering transferring equity for tax reasons, it is highly recommended that you seek independent legal advice before taking any action.
Transferring equity can be a simple process when the property is wholly owned by the parties listed on the deeds and when everyone involved is in agreement, but it can become increasingly complex when factors such as mortgages, taxes, and parties in disagreement are involved. Ultimately, every transfer of equity is unique and should be treated as such.
If you are looking to transfer equity, it is advisable to obtain independent legal advice from an appropriately experienced property solicitor before taking any action. If you would like legal advice or assistance on the process of transferring equity please call us on 0800 086 2929, email info@elitelawsolicitors.co.uk or complete our Free Online Enquiry Form.
How does the Transfer of Equity process work?
Once you have made the decision to transfer equity, your solicitor will help guide you through the process. If you are transferring equity as part of the divorce process, each party will have their own solicitor representing and advising them. Regardless of the number of parties involved in the process, the key steps are the same:
Step-by-step Transfer of Equity process
1. Take a copy of the title deeds
To start the transfer process, your solicitor will obtain an official copy of the title for the property. Your solicitor will review this to check for a mortgage or any other restrictions on the property. At this point, they will also check the identities of each party .
2. Prepare the transfer documents
Once the process has begun, your solicitor will next draw up the transfer deed document ready to be signed.
3. Notify third parties
For the transfer to be completed any third party involved in the property, such as a mortgage lender, bank or building society, will need to provide their written consent. If the property is being transferred subject to the current mortgage, the lender will need to be a party to the transfer deed.
4. Sign the deed
Once your solicitor has prepared the paperwork, the next step is to meet with them and an independent witness to sign it.
5. Notify the Land Registry
Finally, the details of the deed transfer will need to be passed on to the Land Registry. This will involve a fee which can range from around £50 to nearly £1000 – the exact fee is dependent on the value of the property.
Can you Transfer Equity with a mortgage?
If you have a mortgage on your property, which most people do, there are more things to consider when transferring equity.
Do you need lender consent for a Transfer of Equity?
Since the mortgage is a credit agreement and the person leaving or joining the lease will need to be either released from or accepted into that agreement, you will need to obtain the written consent of the lender before the transfer process can be completed.
If someone is added to the title, they will become liable for the mortgage, and the mortgage lender will need to run their own checks to ensure that that person is able to meet the responsibilities of the mortgage agreement and maintain payments.
Similarly, when someone is removed from the title, they are also leaving the credit agreement that the mortgage represents. As with any credit agreement, you cannot simply step away from it: you first must resolve the debt you still owe.
If it is intended that the existing mortgage will be kept by the person whose name will remain on the property, the lender will have to be satisfied that that person will be able to make the necessary mortgage payments themselves.
If you are transferring your equity to another party and need to resolve your mortgage, there are several options available to you. You could pay off the mortgage, otherwise known as ‘discharging’ it. You could choose the aforementioned route of seeking approval from your lender to transfer your share of the property – and therefore the mortgage – as part of a buyout.
Can you remortgage instead of transferring equity?
If you want to take ownership of the property, you could re-mortgage the house with a new lender, using the funds you release to discharge the existing mortgage while using the surplus cash to finance a buyout of the remaining shares in the property.
How much does a Transfer of Equity cost in the UK?
There are two mandatory costs associated with any transfer of equity:
- The legal fees of the solicitor you contract to help process the transfer
- The Land Registry fee you must pay when notifying the Land Registry of the new deed.
Beyond that, there are many other fees that may apply depending on the circumstances of the transfer. For example, search fees if your lender requires new searches, if they are modifying the existing mortgage or if you are taking out a new mortgage.
If you are buying a share of the property or taking on a mortgage in excess of £125,000, you may also have to pay SDLT at a rate of 2% on anything above this threshold – though, as covered below, this charge may not apply in all circumstances.
If you would like a detailed breakdown of our costs for dealing with a transfer of equity, please get in touch with one of our Residential Conveyancing solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or completing our Free Online Enquiry Form.
Do you pay Stamp Duty on a Transfer of Equity?
You may need to pay Stamp Duty Land Tax (SDLT) when transferring land or property.
A number of factors are considered when determining whether you are required to pay Stamp Duty, including the type of transfer and your marital status.
HMRC guidelines state that “you may need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.”
It is important to note that “anything of monetary value” includes not just cash but also the value of any mortgage taken on as part of the transfer. HMRC go on to illustrate various scenarios in which you may or may not need to pay Stamp Duty, including:
Transfer of Equity and Stamp Duty: Scenario One
If you transfer a share in a property to a partner when marrying, entering into a civil partnership or cohabiting, you may have to pay Stamp Duty. In this scenario, you pay Stamp Duty if the monetary value exchanged for the property (referred to as the ‘changeable consideration’) exceeds the Stamp Duty threshold of £125,000. You only pay Stamp Duty, at 2%, on the portion of the consideration that exceeds this threshold. So if the combined value of the cash you pay and the mortgage you take responsibility for is £200,000, you would pay Stamp Duty at 2% of £75,000, or £1,500.
Transfer of Equity and Stamp Duty: Scenario Two
If the transfer of equity is the result of a divorce, legal separation or the dissolving or a civil partnership, either achieved by private agreement or court order, Stamp Duty does not apply. However, if an unmarried couple separate and one party takes a larger share of the property or buys out the other party completely, they will have to pay Stamp Duty on any changeable consideration above the £125,000 threshold.
Transfer of Equity and Stamp Duty: Scenario Three
If the transfer is a gift, in which case there would be no consideration as the receiving party is not exchanging anything for their equity, Stamp Duty does not apply. Similarly, if you receive property under the terms of a will there is no need to pay Stamp Duty.
The rules for when Stamp Duty is applicable, when you need to notify the HMRC of the transfer of equity and exactly how much Stamp Duty you owe are subject to consideration of many different factors.
If you are unclear on whether your transfer will incur Stamp Duty fees, it may help to talk to an experience property solicitor with expertise in this field.
How long does a Transfer of Equity take?
A simple transfer of equity can take around 4-6 weeks to complete. However, each transaction is different, and the time taken to complete the transfer can vary greatly.
If there is a mortgage on the property, the transfer will take longer as you will have to wait to receive written consent from any lenders involved. Likewise, if the transfer is required as part of a larger legal dispute – for example, a divorce that is being resolved by the Court – the transfer may be held up until all disagreements have been resolved.
Can you do a Transfer of Equity without a Solicitor?
Is it legally possible to do it yourself?
Technically you can carry out a transfer of equity by yourself. However, it is important to be aware that the process is a complicated one, particularly in circumstances involving a divorce or separation.
Risks of DIY Transfer of Equity
Several complicating factors need to be taken into account including stamp duty and tax considerations and ensuring that the properly is registered correctly at the Land Registry. Being aware of any expectations from the mortgage provided is also important.
Why using a Solicitor is recommended for Transfer of Equity conveyancing
Instructing an appropriately experienced solicitor to deal with the transfer of equity conveyancing is strongly advisable for the peace of mind, particularly when considering that the outlay for a transfer of equity is relatively modest.
Transfer of Equity UK: Frequently Asked Questions
Below are some of the most commonly asked questions about transfer of equity and how the process works when changing ownership of a property.
While this guidance provides a general overview, property transfers can be complex, so seeking advice from an appropriate qualified conveyancing solicitor is recommended to ensure the process is handled correctly.
When would a Transfer of Equity take place?
A transfer of equity can happen in any situation in which someone wishes to either leave or join a property deed. You can transfer equity to a new partner or another family member, or gift it to your children.
You can also transfer equity to an existing partner if you are separating or divorcing. It’s important to note that a transfer of equity is not the same as a sale: crucially, at least one existing owner must remain on the deed when a transfer is completed.
Can I transfer equity to someone under 18 years old?
Yes, you can transfer equity to someone under the age of 18. However, someone younger than 18 cannot legally hold the property, so to get around this you will need to set up a trust deed.
The trust deed designates a trustee who holds the property temporarily until the recipient of the transfer turns 18 and can legally receive the equity.
What is a transfer deed?
The transfer deed is a legal document which officially transfers the ownership of a property. This deed is prepared as part of the transfer process and signed by all parties.
There are several different transfer deed forms provided by the Land Registry for recording transfers of equity, the most common being the TR1 form, which covers the transfer of a whole property from one party to another.
As with any legal document, this form must be completed accurately and signed with witnesses for the transfer to be valid: an experienced conveyancing solicitor can help with this.
Do I need to contact my mortgage lender when transferring equity?
Yes. Regardless of the circumstances of the transfer, if your property has a mortgage you must contact your lender to notify them of any proposed changes and to obtain their consent.
The lender may wish to investigate the context of the transfer themselves and will certainly perform checks on the continuing owner and any new owners to ensure that mortgage payments will still be met.
Usually, the lender will contact your solicitor with a list of conditions they require to be met before they provide their consent.
Do I need to pay Stamp Duty on a Transfer of Equity if I am divorcing?
No. As covered above, SDLT is not applicable if you are transferring equity as part of a divorce, legal separation or the dissolving of a civil partnership.
However, if you are an unmarried couple separating and are not dividing the property equally, the party taking the larger share of the property may have to pay SDLT if the total consideration exchanged for that share exceeds the SDLT threshold of £125,000.
Do both parties need a Solicitor for a Transfer of Equity?
The Law Society recommends that where a possible conflict of interest could arise during the transaction or in the future, then the same solicitor should not act for both the transferor and transferee. It is generally assumed that a conflict could arise where property transfers are involved.
If the transfer of equity is for no monetary value, then one solicitor in the firm could act for both parties, or preferably two solicitors within the same firm to act for either party. However, the preference would be for the parties to instruct their own solicitors. Where there is to be any monetary consideration, the parties should instruct separate solicitors for transfer of equity conveyancing.
What happens to the property if a part-owner dies?
When a part-owner of a property dies, their share of the property usually passes to their beneficiaries, as outlined in their will or under the rules of intestacy if there is no Will. There are a few important aspects to consider when dealing with this situation, such as:
Probate process
The property cannot be transferred until the probate process is completed, which involves validating the will and administering the deceased’s estate.
Joint Tenancy vs Tenancy in Common
If the property was held as a joint tenancy, the deceased’s share automatically passes to the surviving joint owners. In contrast, if the property was held as tenants in common, the deceased’s share is dealt with according to their will or the rules of intestacy.
What is the 7 year rule for Transfer of Equity?
The 7 year rule is particularly relevant when a property or a share of it is gifted to someone. This rule is part of the inheritance tax legislation. If the person who gifted the property dies within 7 years of the gift, the value of the gifted property may be subject to inheritance tax. The tax rate decreases on a sliding scale depending on how many years have passed since the gift was made.
If the person survives for more than 7 years after making the gift, the property falls entirely outside of their estate for inheritance tax purposes.
Do you pay Capital Gains Tax on Transfer of Equity?
The tax implications associated with a transfer of equity is another important area to understand. Whether or not capital gains tax is payable in a transfer of equity depends on various factors. CGT is a tax on the profit when you sell or dispose of an asset that has increased in value.
Exemptions and Reliefs
Transfers between spouses or civil partners are usually exempt from CGT. However, if the transfer is to someone else, or if the property is not the main home of the person transferring the equity, CGT may be applicable.
Calculating CGT following a Transfer of Equity
The amount of CGT due is based on the increase in the property’s value from the time it was acquired to the time of the transfer. Various deductions and reliefs may apply, which can reduce the CGT liability.
Seek professional advice when considering a Transfer of Equity
Due to the complexities of tax implications, it is advisable to seek professional advice when considering a transfer of equity, especially in situations involving potential CGT liabilities. Speaking with a legal professional who specialises in the transfer of equity can help you better understand your circumstances. Moreover, they have the expertise that allows you to navigate the transfer of equity in a way that suits you.
Transfer of Equity Conveyancing: How we can help
Transfer of Equity Conveyancing: How we can helpRegardless of your exact circumstances, transferring equity can be a daunting and complicated process.
When factoring in the legal documentation, the need to obtain lender’s consent and the possibility of paying SDLT, obtaining expert legal advice and assistance from an appropriately qualified solicitor is highly recommended. At Elite Law Solicitors, our SRA Regulated Property Solicitors offer fixed fee transfer of equity services in the UK.
Get a Transfer of Equity quote
If you are looking to transfer equity or have any queries relating to any of the issues discussed in this article, please get in touch with one of our experienced transfer of equity solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or completing our Free Online Enquiry Form.
The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified property solicitors such as those within our firm.
