Transfer of Equity / Ownership of Property

A transfer of equity happens when the owner of a property wants to add one or more people to the legal register alongside themselves or they may want to remove one or more people other than themselves from the legal register.

The most common reason for a Transfer of Equity is during a remortgage. For Example: When a property is owned in a sole name and that person wishes to remortgage the property, they may at the same time wish to add a family member/partner as a legal owner of the property. This would have to be subject to the new mortgage lender being able to arrange the new mortgage in both names. A Transfer of Equity during a remortgage can also happen the other way round; if a property is owned by two or more people and they remortgage the property however at the same time they may wish to remove one name of the ownership register. Again this is subject to the new mortgage lender being able to arrange the mortgage in the remaining owner’s names.

However, a Transfer of Equity can take place without having to take out a new mortgage.  The owner of the property will have to obtain their mortgage lender's consent to the Transfer of Equity taking place.  If the lender accepts the transfer, they will issue a new mortgage offer to the client and their solicitor.  The lender will have to carry out their own reference and credit checks if a person is being added to the property. If an owner is being removed then they will want to see proof that the remaining owner will be able to afford the repayments.

At the end of a Transfer of Equity, the solicitors must carry out an application to the land Registry to remove or add the relevant names onto the deeds.

It is always advisable to seek independent legal advice during a Transfer of Equity as they can at times be quite complicated. One solicitor can not always act for both parties involved in a Transfer of Equity as may be a ‘conflict of interest’. A solicitor should then be appointed by each party, as they will be able to provide independent advice. 

Stamp Duty Land Tax (SDLT) on Transfer of Equity

Many clients are suprised to learn that a Transfer of Equity can attact Stamp Duty Land Tax even if no payment is being made by one party to another. For example, if there is an existing mortgage on the property for say £400,000 and the property was being transferred from one person into the joint names of the owner and their partner the following would apply:- The Transferee would be deemed to have assumed half of the morgage debt, being £200,000. They would therefore have to pay SDLT on that amount at 1% £2,000.

In the above example as the Transferee was effectilvely purchasing the share in the property for £200,000 both parties would need independent legal advice.

As soon as you are thinking about transferring a share in the property or carrying out a Transfer of Equity please feel free to contact us to discuss your requirments.