A TRANSFER OF EQUITY – WHAT IS IT?
What is a Transfer of Equity?
This is the process of transferring an interest or share in property or land by adding or removing a party from the title. Transfers can be made by way of gift, on separation or divorce, financial planning, on death or by adding a new partner. It is usually a straightforward process however, every transfer is different and timescale depends on various factors.
When a transfer is by gift, the property is mortgage free and no money passes over. If a property is gifted there are no strings attached. The transfer document will include a narrative confirming that it is by way of gift and no Stamp Duty Land Tax (SDLT) will be payable.
On Separation or Divorce
If the property is subject to a mortgage, you will need consent to the transfer from the existing mortgage lender or you will need to remortgage with a new lender. The transfer will be exempt from Stamp Duty if it is subject to a court order within family proceedings or the parties are separated, and the transfer is made prior to the court order being granted. The transfer document will confirm the date of the court order and matrimonial transfers are exempt from Stamp Duty.
On Death (known as an Assent)
If the property is held in joint names as beneficial joint tenants, it is possible to remove a party from the Land Registry title by submitting the death certificate to the Land Registry.
However, if the property is in the sole name of one person, the Personal Representative of the deceased will need to transfer the property on death. An Assent is exempt from Stamp Duty Provisions.
Removing or Adding a Person to the Title when Money is Paid.
When transferring land SDLT is payable on any consideration paid. Consideration is not only the money paid by one person to another. Consideration is money or monies worth and if there is a mortgage it includes discharge of half of the existing mortgage debt or taking on responsibility for the current mortgage debt. If the total consideration is higher than the Stamp Duty threshold which is currently £125,000 then stamp duty will be payable.
Can you Act for us Both?
Your solicitor cannot act for you both and will advise the other party to take independent legal advice on the transfer, even if there is a true gift. This is to avoid any conflict, duress or one party exercising undue influence. If someone decides not to have independent advice on the transfer, they will still need to see a solicitor to complete an identification form (ID1) and a declaration of solvency.
Can I take out an Indemnity Policy for a Transfer at an Undervalue?
A “transfer at undervalue indemnity policy” is also known as an Insolvency Act indemnity policy and is required when a house or flat has been given away or transferred at less than its true value. If the person who made the “gift” becomes bankrupt it is possible for the “gift” to be set aside or overturned and for the trustee in bankruptcy to claim an interest in the property. This policy will not protect those giving or receiving the gift but will be required if there is a mortgage.