Transfer of Equity Guide
Background
A transfer of equity is usually a transfer of property between the parties who currently own the property and a third party. Unlike a sale of a property, where the property changes ownership in its entirety, a transfer of equity is where one of the existing parties remains on the title and another party or parties are either added or removed. The situation most often arises where relationships have either broken down or new relationships have started and the current owners wish to alter the ownership of the property to reflect this.
The transfer of a property between family members, such as the transfer of a parent’s property to their children where no moneys are paid for the transfer are also often called a transfer of equity as there is no formal sale contract.
Starting things off
After your initial contact with us we will give you a detailed written quotation showing our legal fees and the fees that we will need to pay out on your behalf during the course of the transaction. We will also send you a questionnaire which needs to be completed by you. Your solicitor or conveyancer should also telephone you at this stage to introduce themselves.
How can you help us? – although the questionnaire is quite extensive, it would be very helpful if you could complete and return these to us as soon as possible.
Possible problems – any delay in returning the questionnaire documentation and quotes could cause a delay in our starting work on your case.
ID/Client Care
After you have confirmed your instructions to us and returned the questionnaire we will send out to you a request for ID information and our Client Care Letter which sets out further details of our service to you. Both of these documents are compulsory under our professional rules. We will also contact either the person being removed from or added to the title, or their solicitor, for confirmation they are willing to proceed.
How can you help us? – it is necessary for us to have appropriate ID documentation and the signed Client Care Letter on our files and it would therefore be of great help if you could return these documents to us as soon as possible.
As stated previously it is a professional rule that solicitors must have ID and Client Care information on their file and therefore the earlier you send these documents back to us the quicker we can proceed.
Possible problems – the other party or their solicitor may not respond promptly. Also, any delay by you in returning documentation could delay the transaction. In a small number of cases there may be a discrepancy between the ID information and the names on the Land Registry record of the property which may require further investigation. If there is any such problem we will contact you immediately and in nearly all cases any such problems can be resolved easily.
We check your legal title and contact the lender
We will download from the Land Registry a copy of your Title Documentation. We will also write to your lender, if you have a mortgage, asking them to confirm that they have agreed to the transfer of the property.
How can you help us? – You should contact your lender as early as possible and apply for their consent to the transfer of ownership as we cannot make any progress until this has been confirmed by them in writing.
In a small number of cases we may need additional documentation from you such as a Grant of Probate, Death Certificate or Power of Attorney. If you purchased a property before you were married and have changed your name since we may need a copy of your marriage certificate. It would be of great assistance if you could provide this documentation as soon as possible.
Lender’s consent
Once we receive this, provided we have also received written confirmation from the party to be added or removed that they are happy to proceed, we will check the terms and conditions and draw up the transfer document. This will then be sent to all parties, including the lender, for signature. In some circumstances the lender may ask a new party to the mortgage to sign a separate deed of covenant to comply with the terms of the mortgage.
Joint Ownership
If the property is being transferred into joint names then we will need to explain to you the different ways in which it is possible to own the property. We do this by means of sending you a report on joint ownership with a request that you advise us which of the various alternatives applies.
How can you help us? – When you receive our report on joint ownership you should discuss the matter with all the parties who are going to own the property and give us clear instructions. If you require further advice you need to contact us as soon as possible.
Possible problems – sometimes the joint ownership request we receive from you may be at variance with the lender’s consent and details of the joint ownership may sometimes need to be reported to the lender for their approval.
Stamp Duty Land Tax
SDLT is not usually due where there is a gift of land. However if there is a mortgage on the property then it may become payable. A party being added to the title is treated as taking over half the existing mortgage debt and if this exceeds the SDLT threshold then duty is payable. Similarly, if the existing mortgage is repaid then the incoming party may be liable for SDLT on half the amount of the mortgage.
In a situation where the existing mortgage is repaid and monies are paid for the transfer then whether SDLT is payable is calculated by adding together the monies paid for the transfer and half the mortgage amount.
Example
Peter transfers a half share in his property to Penny for no money. The property is worth £400,000. Penny pays off his existing mortgage of £300,000 and at the same time they take out a new mortgage in joint names for £350,000. The amount to be assessed as the consideration for stamp duty purposes is half the redeemed mortgage, ie £150,000.
Financial
Once the transfer has been signed by the parties we will prepare a financial statement setting out full details of the financial transaction including any moneys to be paid either by the party being added to the title, or money to be paid to the party being removed from the title, together with legal costs, stamp duty, if applicable, and Land Registry fees and giving credit for any initial moneys you paid. This statement will be sent to you with a request for you to send any balance due to us by bank transfer to our bank account.
How can you help us? – If you have any queries regarding the financial statement please contact us as soon as it is received. It is vital that you send the funds to us by bank transfer as soon as possible as without the funds we will not be able to complete the transaction.
Completion
Once we have received the transfer signed by all parties, and the funds required we will send any monies payable to one of the parties to them and will date the transfer document. We will then advise all parties and the lender of the completion date.
Registration of the Transfer
Following completion of the transaction we will register the transfer with the Land Registry and will forward a copy of the new Land Registry documentation showing the change of ownership , to you and to your lender if applicable.