The Process of Transfer of Equity
How to change the names of owners on the land registry title deeds through a transfer of equity.
When it comes to property ownership, entering or leaving joint tenancy arrangements can seem complicated, but with a transfer of equity you don’t need to feel stuck in one place.
A transfer of equity allows you to alter the title deeds of a property in order to add or remove a joint owner to a property’s deeds, though at least one original owner must remain the same. Although possible to complete this yourself, the process requires a lot of paperwork and can be complicated – therefore, it is advised you seek the help of a transfer of equity solicitor to prevent any costly mistakes.
What is a transfer of equity?
“Equity” refers to the portion of a property that each owner holds – therefore, when you perform a transfer of equity, an owner either obtains some equity if they’re being added to the title deeds or loses their equity if they’re being removed.
The process differs significantly from that of a regular purchase because at least one current owner of the property will remain on the deeds. In cases where a previous joint owner is removed from the deed this is sometimes referred to as “buying out” someone.
The exact steps of the process will depend on a number of factors, such as whether there is a pre-existing mortgage on the property or if the person you are trying to remove wants to remain on the property’s deeds.
Individuals often seek a transfer of equity when:
- They’re getting a divorce/dissolving a civil partnership: If an individual wants to retain ownership of a jointly-owned property following divorce or dissolution, they can use a transfer of equity to “buy out” their ex-spouse. The leaving partner will usually receive a sum equivalent to the value of their share in the property in exchange for losing ownership.
- They jointly bought a home with family or friends: Buying property together with family or friends is becoming increasingly popular, as it allows groups to purchase properties they would not be able to afford individually. A transfer of equity will allow an individual to transfer the property solely into their name if they want to buy out the other owners.
- They want their significant other to have rights to the property: Adding someone onto a property’s title deeds means they can share responsibility for mortgage payments (if the property has a mortgage on it) and can give right of survivorship to the person being added should the other owner pass away. This can be a good solution for couples who don’t want to get married but still want to give their partner legal rights to the property.
Can I transfer sole ownership to someone else entirely?
If you would like to transfer ownership entirely to someone else not registered on the deeds, this would be classified as a simple transfer rather than a transfer of equity. For example, perhaps you wish to gift property to your children.
Can I use a transfer of equity to reduce payable inheritance tax?
Sometimes, transferring equity can be used to reduce inheritance tax payable on a property you would want to pass on to your beneficiaries – by transferring the property to them as a gift, it could no longer form part of your estate and would not be liable for inheritance tax. This is because if someone else becomes a joint owner of your property with you, they can be given right of survivorship and full ownership of the property would therefore be passed to them should you pass away without incurring inheritance tax.
However, this does not always work. If a transfer of equity occurs and the transferer then dies within seven years, their property will be treated as part of their estate and inheritance tax may be payable.
Whether or not a transfer of equity will improve your tax-efficiency will vary in a number of ways dependent on your circumstances. It is best you seek financial advice if you are considering transferring equity for tax-efficiency purposes; call Starck Uberoi Wealth on 020 8037 4027 for an appointment with a chartered financial adviser who can inform you of any caveats and help you maximise your tax-efficiency.
Will any other taxes be payable on a transfer of equity?
Depending on the circumstances, a transfer of equity could incur some additional taxes:
- Capital Gains Tax: If you transfer ownership of a second home or buy-to-let property to someone else, such as your child or your sibling, this could incur capital gains tax. However, transferring ownership of a second home or buy-to-let property to your married or civil partner will usually not incur capital gains tax.
- Stamp Duty Land Tax (SDLT): Whether or not you need to pay SDLT will depend on a few factors. Broadly speaking, SDLT could be payable if you gain all or part of an interest in a property or land and you give something of monetary value in exchange. This means SDLT may not be payable if a share in a property is transferred to you as a gift (unless there is an existing mortgage on the property), but it may be payable if you’re looking to buy out friends or family you purchased a property with. Usually, this is taxed depending on the value of the outstanding mortgage, rather than the value of the property. Furthermore, if someone is added to the deeds of a property and to its mortgage, they may have to pay stamp duty. This is because by they are giving something in exchange for equity being transferred to them by making mortgage payments.
You may want to try our Transfer of Equity Stamp Duty Calculator
However, there are some circumstances in which stamp duty may not be payable even if money has changed hands. Some examples in which Stamp duty may not be payable include:
- If the transfer of equity is being sought because the owners are a divorcing couple
- If the property was inherited
- If there is no mortgage over the property on the day of completion
For more information on stamp duty liability and transferring equity, talk to one of our financial advisers on 020 8037 4027.
Do I need my mortgage lender’s consent for a transfer of equity?
If your property has a mortgage over it, you will most likely need your mortgage lender’s permission before you can complete a transfer of equity.
If your mortgage lender will not allow a transfer of equity, or you cannot afford the mortgage repayments yourself, you may need to remortgage. Starck Uberoi Wealth can save you time searching for your new mortgage and find the best product for your circumstances on your behalf. Additionally, we are on the lender panel for all major high street lenders and offer a 10% discount on our fees if you use the services of Starck Uberoi Wealth. Call 020 8037 4027 to find out more.
What is the transfer of equity process?
The process will vary depending on a number of factors (such as an existing mortgage or disagreement between owners) but will usually roughly follow this pattern:
1. Your Solicitor obtains and checks the title deeds
Your solicitor will need to check whether there is anything within the property’s deeds or in the mortgage contract (if one exists) that could prevent the transfer of equity. They will also perform an identity check on all relevant parties in order to prevent identity fraud. Once this has been done, they will prepare the Transfer Deed to be signed – this will normally be a TR1 form.
2. Third Parties are informed
Next, your solicitor will ensure any other necessary third parties are informed, such as mortgage lenders.
3. The Transfer deed is signed
You and the owner being added or removed will need to sign the Transfer deed with an official witness present.
4.The land registry is informed of the changes
The information listed on the deed of transfer will then be passed on to the land registry.
How long does a transfer of equity take?
A straightforward transfer of equity will normally take some time between 2 and 4 weeks; however, the more that needs to be taken into consideration, the longer it will take. For example, if the transfer of equity is to be performed as part of a divorce and there is a mortgage to consider, it could take far longer.
At Starck Uberoi, we are dedicated to providing a fast and reliable service. We communicate with clients entirely by phone or email in order to cut out the time clients spend waiting for letters, plus we developed the Starck Uberoi app to allow clients to receive real-time updates on their matters’ progression and message their solicitor on the go.
How much does a transfer of equity cost?
Without including the cost of buying out the other owners (if relevant), the two chief expenses within this process are solicitor’s fees and the land registry fee, which will both depend on the value of the property amongst other factors. In some circumstances, you could also need to pay stamp duty.
You can receive an instant conveyancing quote on our website for a breakdown of costs, including stamp duty land tax and land registry fees.
Will each party need their own solicitor?
In cases in which both parties are in agreement and have a common interest, then one solicitor may be able to act for both. However, it is often recommended that each party instructs their own solicitor, especially if there is any risk of disagreement between them.
How Starck Uberoi can help
Our conveyancing solicitors have received accreditation by the Conveyancing Quality Scheme (CQS) and share extensive pooled experience in dealing with even the most complicated conveyancing matters. By instructing us, you can be confident that your transfer of equity will be completed efficiently and effectively.
For more information, please see the conveyancing page on our website. To book an appointment, please speak to us on 020 8840 6640 or email solicitor@starckuberoi.co.uk.
We offer legal advice in Brentford, legal advice in Ealing, legal advice in Belgravia, legal advice in Pinner, legal advice in Richmond and legal advice in Canterbury, in person or remotely.
Our partner, Raminder Singh Uberoi, can also provide a notary public service at any of our London offices.
