Transfer of Equity

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Transfer of Equity

Marc Lansdell from Evolve Law joins the Homeowner Podcast once more, to tell us all we need to know about the transfer of equity.

What exactly is a transfer of equity?

In the simplest form, it’s a change of ownership on a client’s property. That could be adding or removing somebody – for example if you already own a property, then get married and want to share home ownership with your partner.

Equally, if you go through a divorce you can remove somebody. Or it could be adding on a brother, sister, friend, anyone who you wanted to be part of the ownership structure.

In addition you can change the equity percentage – perhaps you decide that the property won’t be split 50-50 and you want to divide ownership in a different proportion.

How does the process work?

Transfer can be quite straightforward if both parties are in a non-contentious position – that is, there’s no argument over what’s going on. In that case it’s mainly a question of us taking the client’s instructions and going through the usual compliance checks on ID etc.

Next we’ll get a copy of the ‘title’, we’ll review it to make sure there are no restrictions that might stop the client doing what they want. We look at who currently owns the title and whether there are any mortgages on it. If a mortgage lender is involved, we need to get their consent to make any changes.

If all is well and everyone’s on board, it’s a straightforward transfer deed. We would create a form for the clients to sign and then send to the Land Registry to record the change in ownership.

How long does it take to do a transfer of equity?

A straightforward transfer of equity shouldn’t take long. Assuming there’s no lender involved, it can take a matter of weeks. It’s a case of drafting the paperwork, going through compliance procedures, getting signatures and uploading the details to the Land Registry, which can be done electronically these days.

Delays can come in if there’s a lender involved. It can take months, sometimes, to get consent from lenders to a change in ownership. Leasehold transactions can make it more complex, too, as we may need to look at involving the landlord or management company.
Equally, if we’ve got contentious transfers of equity, involving parties who perhaps aren’t playing ball, it can be quite difficult sometimes to get signatures and documents. We would play a part in pushing things along.

So in the simplest form, it shouldn’t take too long, but there are some scenarios where added layers can drag that process out.

Can I do my own transfer of equity? Do I need a solicitor?

Anybody who’s looking to do any sort of legal transaction, certainly in relation to their property, should absolutely instruct a legal professional. It might be a solicitor, licenced conveyancer or a legal executive.

In theory, anybody could draft a transfer deed, but the implications of getting it wrong are quite serious. You might be transferring a portion of your equity in a property which could be worth a substantial amount. If the mechanisms for completing the transfer within the deed itself aren’t set out correctly, you could be leaving yourself open to future claims, particularly if you were made bankrupt, for example.

So if you’re looking to do anything in terms of your title or change equity, do instruct a solicitor to have a look at it because the implications of getting it wrong could be catastrophic.

Another factor is that the Land Registry will require you to have your ID confirmed by either a lawyer or somebody regulated, such as an accountant. That’s obviously to avoid fraud and to stop somebody trying to transfer a title into their own name without the other party knowing, or having their identification verified.

What is the transfer equity fee?

It’s fairly low when you compare it with property sale and purchase fees. Our basic fee is £395 plus some small disbursements, such as an ID fee. The Land Registry also charges a fee for recording the transaction.

There may be more transactions if it’s a leasehold title or where there’s a mortgage lender involved. Typically there’s often a remortgage attached to the transfer of equity, and those fees might range from £595 to £695. So it really depends on the complexity of the transaction.

Do you pay tax on transfer of equity?

We’ve got to be careful here, because we’re not tax professionals. We often get questions from clients about tax scenarios but we are not regulated by the FCA to give that particular type of advice.

My advice to clients is to seek either an accountant or a tax adviser’s professional opinion before they go ahead and do something that might affect them not only now, but in the future. You might be looking to transfer ownership or remove somebody from a title, but it might affect your estate planning or your children’s inheritance.

So it’s always good to get professional advice either before you approach us or before we complete the transaction.

When it comes to stamp duty, this again depends on the scenario. Land Registry will want to understand ‘considerations’ – if money is being paid for the transfer of share or equity. Anything under £40,000 is not reportable to HMRC. If the client is paying over £40,000, then it’s reported to HMRC and there may be stamp duty implications.

There are some mechanisms where a husband and wife or common law partners can transfer shares in properties to one another as a gift, and no stamp duty is payable.

How much does it cost to transfer deeds?

You’re looking at legal fees and minimal disbursements – third party costs, essentially, which those who have bought properties and sold properties will be familiar with. These might include ID checks, obtaining Land Registry documents and Land Registry fees which depend on the value of the transfer. If there’s any stamp duty involved, then we’ll collect that on behalf of the client and pay that over to HMRC on their behalf.

Is it better to gift or inherit property?

That question is outside our area. Anyone who’s considering their options on this should speak to an estate planner or a specialist. Our sister company Expression Wills focuses on estate planning – talk to Claire and she will walk you through the steps.

Can I transfer a property to a family member?

Yes, you can transfer your house to somebody else. Very often we have clients at a later stage in life who potentially want to transfer their property to their son, daughter or another family member.

However, you can’t transfer a mortgage to a family member – you will need to find a new mortgage. We often work on transfer of equity cases that are linked to remortgages. A typical example is a divorce, where the party who’s staying on the title needs to remortgage to be able to buy the other person out.

We also have cases where the outgoing party is released from the mortgage. In both scenarios there’s additional work involved to find a remortgage: exploring new mortgage offers, redeeming the old mortgage and registering the charge of the new lender. There’s various things we need to put on the transfer document, as well as getting various guarantees and a formal release from the mortgage for the outgoing party.

How can Evolve help?

A transfer of equity is not a basic transaction. We often have clients who want to transfer their property to somebody else without fully understanding how complex this might be, particularly if there’s a lender involved or there’s other things going on behind the scenes.

So we urge anyone considering doing this to do some research, speak to not only us, but also an accountant, tax specialist or an estate planner. But in the first instance we’re happy to have a chat about how the process works and what to consider, so just get in touch.

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