A transfer of equity is when there is a change in the legal ownership of a property by either adding or removing a person from the deeds.
‘Equity’ means the amount, or value, of your interest in a property after any outstanding mortgage or other debts have been discharged.
If you are seeking to add or remove one or more people from the ownership or legal title of a property, to protect your interests, it is always better to get expert legal advice.
A transfer of equity can be simple to deal with but in some situations it can be more complex. In this article we outline when you might need to transfer and what’s involved.
- When would you need a transfer of equity?
- Will stamp duty be payable?
- How do I find out if I have to pay stamp duty?
- How do you own property jointly?
- Can I transfer a share in my property to more than one person?
There are a number of occasions when you may need to change ownership of a property:
- following the breakdown of a relationship in order to remove an ex-partner from a registered title
- to add a spouse or new partner to a title where property is originally registered in a sole name
- to meet the requirements of a lender if the property is being re-mortgaged
- to add other people to the deeds who have or intend to have an interest in the property
- for tax planning purposes, taking into account for example potential capital gains tax or inheritance tax liabilities
Stamp Duty Land Tax (SDLT) is a tax charged upon the transfer of land and is calculated on the consideration, or price, which is paid for that land.
When a transfer of equity takes place where there is a current mortgage ‘consideration’ will include a share of the outstanding mortgage debt secured on the property being transferred. This means that Stamp Duty may still be payable even if nothing is being paid for the share in the property being transferred.
Stamp Duty is calculated at the same rates as it would be for a residential purchase and will be payable when the ‘consideration’ exceeds £125,000.00. Alternative rates exist where the person acquiring a share in the property already owns another property.
For example, if you transfer 50% of your property to another party which still has a mortgage of £400,000.00 outstanding, stamp duty will be payable upon 50% of that outstanding mortgage, being £200,000.00.
Where Stamp Duty is payable this may be paid within 14 days of the transfer of equity being completed.
The guidance provided surrounding this can be quite confusing. Our residential property team here at Tees will be able to advise you how much will be payable based upon your transaction. Alternatively, they may refer you to a stamp duty specialist to provide comprehensive advice if necessary.
When undertaking a transfer of equity there are certain circumstances where Stamp Duty will not be payable;
- If the property is a part of matrimonial proceedings and is directed by a court order
- If the property has been inherited under a will
- If the property is a ‘gift’ and there is no outstanding mortgage on the property
There are two ways in which ownership at the land registry can be recorded:
As ‘joint tenants’ you are each seen as owning the property as a whole. With joint tenancy there is a ‘right of survivorship’. This means that if one joint owner dies their share would automatically pass to the remaining joint owner or owners.
Tenants in common
As a tenant in common you are each seen as holding separate shares in the property. There is no right of survivorship and therefore any shares held by any owner who were to die would pass in accordance with that person’s will or under intestacy rules if there was no will
It is possible to have up to four people registered as the owner of a property at one time. Each person must be over the age of 18.
It is also possible for each party to receive a different share in the property.
Change affects all our lives. When big changes happen, you’ll need to act to protect your property. Getting married or ending a relationship, welcoming a new child into your family or losing a loved one. They can all lead to a need to transfer equity in your property.
Our Residential Property Team are experts in dealing with every aspect of property ownership and are members of the Law Society's Conveyancing quality scheme. We take care of all the legal formalities and take some of the pressure off you.
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Chat to the Author, Marie Rodgers
Associate, Residential Property, Bishop's Stortford officeMeet Marie