If you are going through a divorce, separating or wish to gift your home, you can transfer the equity in your property to another, this could be another joint owner or someone else.
A “transfer of equity” is the legal process of adding or removing someone from the ownership of a property. It is commonly used following divorce or separation, when adding a partner to a property, or when transferring ownership to a family member.
The process involves updating the property title with HM Land Registry, dealing with any existing mortgage and considering potential tax implications such as Stamp Duty.
What Is a Transfer of Equity?
A transfer of equity changes the people named as owners of a property. Unlike a sale, at least one of the existing owners remains on the title.
When Might You Need One?
There are several circumstances where a transfer of equity may be appropriate:
- Divorce or Separation
One partner may transfer their share of a jointly owned property to the other, allowing the remaining owner to retain the property.
- Adding a Partner
If you own a property and want to add a new partner to the title, a transfer of equity can be used.
- Removing a Joint Owner
Where a property is jointly owned by friends or family, one owner may later wish to leave the arrangement or be bought out.
- Gifting Property
Property or a share of a property can sometimes be transferred to a family member. However, tax consequences can arise, so independent advice should be obtained before proceeding.
How Does the Process Work?
Your solicitor will guide you through the necessary steps:
- Check the title – obtain and review the property’s official title, including any mortgage or restrictions.
- Prepare the transfer deed – the appropriate legal documents are prepared for signing.
- Obtain third-party consent – mortgage lenders and other relevant parties may need to approve the transfer.
- Sign the deed – the documents are signed by the relevant parties in the presence of a witness.
- Register the transfer – the completed transfer is submitted to HM Land Registry, with the appropriate registration fee.
Can You Transfer Equity If There Is a Mortgage?
Yes, but your mortgage lender will need to be involved.
Anyone being added to the title may need to pass the lender’s affordability and eligibility checks. Similarly, someone being removed from the property will need to be formally released from their mortgage obligations.
Depending on the circumstances, you may need to repay the existing mortgage, transfer it to the remaining owner or consider remortgaging.
What Does a Transfer of Equity Cost?
The main costs are usually:
- Solicitor’s legal fees
- HM Land Registry registration fee
- Other costs may apply, including searches, mortgage-related fees and potentially Stamp Duty Land Tax (SDLT)
The exact cost depends on the circumstances of the transfer.
Do You Pay Stamp Duty?
You may have to pay SDLT when transferring equity.
This depends on factors including whether money or other consideration is exchanged, whether a mortgage is being taken on, and the circumstances surrounding the transfer.
Transfers connected with divorce, legal separation or the dissolution of a civil partnership can be treated differently from transfers between unmarried couples or gifts.
Because SDLT rules can be complex, professional advice should be obtained before proceeding.
How Long Does It Take?
A straightforward transfer of equity can take around 4 – 6 weeks, although the timescale varies.
Mortgage lender requirements, disputes, court proceedings and other complications can all make the process longer.
Can You Do It Yourself?
Although it is technically possible to carry out a transfer of equity yourself, the process can be complicated.
There are important legal, tax, mortgage and Land Registry requirements to consider. Using an experienced conveyancing solicitor can help reduce the risk of mistakes and delays.
Frequently Asked Questions
- Can I transfer equity to someone under 18?
A person under 18 cannot legally hold the property themselves. A trust arrangement may therefore be required until they reach the age of 18.
- What is a transfer deed?
A transfer deed is the legal document used to formally transfer ownership of a property. The TR1 form is commonly used when transferring a whole property.
- Do I need to contact my mortgage lender?
Yes. If the property is mortgaged, you will normally need your lender’s consent before the transfer can proceed.
- Do both parties need a solicitor?
It depends on the circumstances. Where there may be a conflict of interest, separate legal representation may be appropriate and, where monetary consideration is involved, separate solicitors are generally recommended.
- What happens if a co-owner dies?
This depends on how the property is owned. With a “joint tenancy“, the deceased’s share normally passes automatically to the surviving joint owner(s). With “tenants in common“, the deceased’s share usually passes according to their will or the rules of intestacy.
- What about the seven-year rule?
The seven-year rule can be relevant where property or an interest in property is gifted, particularly for inheritance tax purposes. The tax treatment depends on the circumstances and professional advice should be obtained.
- Is Capital Gains Tax payable?
Potentially. The tax treatment depends on the circumstances of the transfer. Transfers between spouses or civil partners are generally treated differently from transfers to other people, and the property involved can also affect the position.
How Marlborough Law Can Help
Every transfer of equity is different. Whether you are transferring property following a divorce, adding a partner, removing a co-owner or considering a gift, getting the right advice can help ensure the process is handled correctly. Our residential conveyancing team can advise you on the legal process, costs, mortgage requirements and potential tax considerations involved in your transfer of equity.
