Transfer of Equity: Your Questions Answered

Are you thinking about transferring all or part of the ownership of a property to someone else? While the process can be quick and straightforward in most cases, certain factors, such as a mortgage on the property or disputes, may make the process more complex and time-consuming. In this article, our property team explains the transfer of equity process and answers some frequently asked questions.

 1. What is a Transfer of Equity?

A transfer of equity involves changing the ownership of a property by adding or removing someone from the title deeds of a property. Transfer of Equity is not the same as selling the property, as at least one of the property’s original owners will stay the same. It can also involve transferring ownership from one entity to another, where an entity refers to a business. Despite its apparent simplicity, this legal process requires the right advice to avoid potential pitfalls or disputes.

 2. What are the Common Reasons for Transfer of Equity?

People opt for a transfer of equity for various reasons. Common scenarios include:

• If you divide assets due to a separation or divorce – the property is often the most significant asset.
• If you are in a new relationship and you wish to add your partner to the deeds
• If you are a joint owner and wish to buy out the other equity partner
• To be more tax-efficient – you should always seek appropriate advice regarding your tax liabilities, such as transferring equity to your children or other family members.

 3. Do I Need to Pay Stamp Duty if Transfer of Equity is Part of a Divorce?

In some cases, stamp duty may not be applicable when a transfer of equity is part of a divorce. However, it is essential to seek professional advice to understand the specific circumstances surrounding your case. Read our previous article for more information: Property Settlement Agreements After Divorce

4. What are the tax implications on a transfer of equity?

If you transfer equity to your spouse, civil partner, or a charity, there are currently no tax implications for capital gains. However, the property would likely be subject to the capital gains tax (CGT) if you transferred it to anyone else, including other family members or children. Some options can help you reduce your CGT; however, speaking with a specialist legal adviser who can inform you of any liabilities and offer guidance on the most efficient way to manage your estate is essential. New rules that apply to transfers of assets between spouses and civil partners who are in the process of separating are now in place, meaning they will no longer need to settle their estates within a year and face Capital Gains Tax (CGT) bills. Find out more information about the new measures here: Capital Gains Tax: separation and divorce

5. Can I Transfer Equity to a Person Under the Age of 18?

If you wish to transfer equity to someone under the age of 18, related or unrelated, you will be required to set up a trust deed, as legally, someone who is under 18 cannot hold the property. However, this document allows a trustee to hold the property until the person turns 18 and the equity is transferred to them. It is crucial to consult with a legal specialist with experience in this complex area of law. Our team at Rose & Rose can help you navigate any potential challenges and explore suitable solutions regarding trusts, estates, and inheritance tax planning.

6. What happens if a part-owner dies?

The equity is usually transferred to the surviving owner if the property is jointly owned under the ‘right of survivorship’. As part of the transfer process, the surviving owner must complete a DJP application form and send it to the Land Registry.

7. What are the stages of the process? 

The precise stages involved in the transfer of equity of a residential property vary according to the circumstances. However, we have set out the typical stages of a standard transaction: –

• We will take your instructions and provide you with initial advice.
• Our team will undertake the required regulatory checks.
• We will obtain and review the title deeds from the Land Registry– including checks for a mortgage, obtaining a mortgage offer, and dealing with the mortgage company or any other restrictions on the property.
• Obtaining permission from the mortgage company or obtaining a new mortgage.
• Checking and confirming the identity of each party.
• Preparing the transfer deed documents for signature.
• Notifying third parties– obtaining consent from any third party involved, such as a mortgage lender, bank or building society.
• Land Registry Fee– Depending on the type of application, a fee is payable to HM Land Registry. To calculate the correct cost, see the HMLR Fee Calculator.
• Registration of the deed transfer at the Land Registry– your solicitor will send the completed forms and correct fee to the HM Land Registry.

 8. Why is it Important to Get the Process Right

As with any legal procedure, ensuring a smooth transfer of equity is crucial. Mistakes in the process can lead to unintended errors in the registration process or disputes if ownership is not clear. While it is possible to complete a transfer of equity by yourself without a solicitor (although some forms will likely need a signature to be witnessed by a notary or legal professional), it is not recommended as the transfer of equity process can be complex. You must fully understand the various implications and ensure the property is correctly registered with the Land Registry. You will also need a solicitor if there is still a mortgage on the property, as specific legal requirements will need to be met.

Transfer of Equity Solicitors

Our experienced and understanding solicitors are dedicated to achieving the best possible outcome for you. We work closely with our clients, providing the support and expertise needed for a seamless transfer of equity. For further advice on transfer of equity and other aspects of property law, do not hesitate to contact our conveyancing team today.

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