Transfer of Equity Conveyancing
Transfer of Equity explained
Property owners may wish to change the legal ownership/status (transfer equity) of their property for a number of reasons some of which are listed below:
Marriage. Following marriage the partners often wish to transfer the matrimonial home into joint names. This is called a Transfer of Equity Unless the party being added to the deeds is paying full market value for the share in the property the law will deem this transfer as a gift or transaction at an undervalue (see below).
Divorce or separation. Following divorce or separation the partners may wish to transfer a jointly owned property back into the sole name of one of the partners. This is also called a Equity Transfer and may be deemed in law as a gift or transaction at an undervalue (see below), unless full market value has been paid for the property share, or the property is being transferred as a result of a court order.
Tax planning. Property owners are sometimes advised by their tax planners or accountants to transfer a share of the family home into the name of a child or other family member. This is also a transfer of equity and may be deemed in law as a gift (see below).
Transferring or changing the financial status of shares in the property. Some property owners buy a property jointly but do not wish to own the property on a strictly 50/50 basis. If this is the case a trust deed is set up to explain the share that each partner owns. This trust deed is registered at the land registry. If the property owners later decide to change the percentages Equity Transfer would be needed plus the trust deed would need to be changed.
Whatever the reason for the transfer what may appear to be a simple arrangement can be quite complex and legal advice should be sought.
Changing a property from sole name into joint / multiple names or adding a name to the deeds.
Transfer of Equity – What the conveyancing solicitor does:
Obtains the title deeds or an Official copy from the Land Registry in readiness for an equity transfer.
Prepares the Transfer of Equity deed and arranges for the parties to sign it in the presence of a witness.
Notifies any third parties who have an interest in the property, such as mortgage lenders. If the property is mortgaged or secured to a lender they must give formal written consent to the transfer.
Assess whether stamp duty is payable.
Complete the Stamp Duty Land Tax Form, arrange for this to be signed by the property owners and submit it to the Inland Revenue.
Register the transfer at the Land Registry. A Land Registry fee is payable.
Checks the legal identity of the client (this is required by law).
Removing a name from the deeds
The same legal procedure as outlined above is followed
The conveyancing solicitor may not act for both parties as there may be a ‘conflict of interest’. Each party should appoint a conveyancing solicitor who will provide independent advice.
Transferring property and retaining the existing mortgage
If the property is mortgaged and the property owner intends to keep the same mortgage they must seek the approval of the lender to the transfer. The property owner will probably be asked to attend an interview or write a letter to explain the reason for the transfer (particularly if one party is being removed from the deeds).
If the lender approves of the equity transfer they will issue a written acceptance to the client and their conveyancing solicitor. There may be conditions to the acceptance of equity which the solicitor must ensure are met.
If an owner is being removed from the deeds the lender will want proof that the remaining owner (s) can afford to repay the mortgage. If the lender is not satisfied that the remaining owner (s) can afford to repay the mortgage they will refuse to release the exiting owner from the liability for the mortgage payments and conditions.
If a new party is being added to the deeds then the lender will require that person to sign a mortgage deed accepting liability for the existing mortgage and the mortgage conditions. The usual credit and reference checks will be made by the lender.