If you wish to transfer all or part of the ownership of a property, referred to as ‘transfer of equity’, typically you will need the assistance of a property solicitor or licenced conveyancing practitioner. Whilst in most cases, the process can be quite quick and straightforward, some transactions may take longer or be more complex, for example when there is a registered mortgage. In this article, we look at the transfer of equity process and some frequently asked questions.
WHAT IS TRANSFER OF EQUITY?
Transfer of Equity is the legal process required to add or remove someone from the title deeds of a property, which adds or removes them as a legal owner. Transfer of Equity is not the same as selling the property, as at least one of the original owners of the property will stay the same.
WHAT ARE THE REASONS FOR TRANSFERRING EQUITY?
Transfer of equity is used in several circumstances; the most common reasons include:
If you are dividing 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
If you wish to be more tax-efficient, such as transferring equity to your children or other family members. You should always seek appropriate advice first regarding your tax liabilities.
WHAT ARE THE TAX IMPLICATIONS ON A TRANSFER OF EQUITY?
If you are transferring equity to your spouse, civil partner, or a charity, then there are currently no capital gains tax implications. However, the property would likely be subject to the capital gains tax (CGT) if you were to transfer it to anyone else, including other family members or children. There are options available that can help you reduce your CGT; however, it is important to speak with a specialist legal adviser or tax advisor who can inform you of any liabilities and offer guidance on the most efficient way to manage your estate.
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 (a minor), related or unrelated, you will be required to set up a trust deed as legally someone who is under 18 cannot hold legal title to property in the UK. However, a trust deed allows for a trustee to hold the property for the minor until they reach the age of 18, at which point the legal title can be transferred to them.
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’. The surviving owner will need to complete a DJP application form and send it to the Land Registry as part of the transfer process.
CAN BOTH PARTIES USE THE SAME SOLICITOR?
In some cases, a solicitor can act for both parties. Usually, this will be if the transfer of equity is for no monetary value or there are no possible disputes between owners. However, the preference is for parties to instruct separate solicitors, especially in cases where there are any monetary values involved.
DO I NEED A SOLICITOR FOR A TRANSFER OF EQUITY?
In some cases, it is possible to complete a transfer of equity by yourself (although some forms will likely need a signature to be witnessed by a notary or legal professional) without a solicitor. However, this is not recommended as the process can be complex and you may end up making an error with serious ramifications. It is essential you fully understand the various implications such as stamp duty, capital gains tax, and inheritance tax, and ensure that the property is correctly registered with the Land Registry.
WHAT IS THE TRANSFER OF EQUITY PROCESS?
In most cases, you should instruct a property lawyer or licenced conveyancer who will help guide you through the process. The key stages include:
Obtaining and reviewing the title deeds from the Land Registry– including checks for a mortgage or any other restrictions on the property.
Checking and confirming the identity of each party
Preparing the transfer deed documents ready for signature
Notifying third parties – obtaining consent from any third party involved, such as a mortgage lender, bank or building society.
Land Registry Fee – a fee is payable to the HM Land Registry, depending on the type of application.
Registration of the deed transfer at the Land Registry – your solicitor will send the completed forms and correct fee to the HM Land Registry.
EXPERT TRANSFER OF EQUITY LEGAL ADVICE
Regardless of your reasons for transferring equity, even if no money is changing hands, it is important to speak to a conveyancing solicitor to ensure that everything is done correctly and that you protect yourself legally. Phillips Lewis Smith, transfer of equity solicitors in London, have many years of experience in this area of law. We will guide you through the process and explain all the requirements, offering advice on other matters such as tax and inheritance planning.