A Transfer of Equity is used when an owner wants to add or subtract people from the ownership of a property, as long as it is not the owner themselves.
The main difference between a Transfer of Equity and a sale and purchase is that for a Transfer, at least one of the original owners must remain on the title. Generally, with a Transfer of Equity there isn’t a contract and searches may be performed if there is a mortgage and the lender requires it.
Transfers of equity are common when relationships change. This might be at the start when an owner wishes to add their partner as an owner of their property or at the end when a couple splits up. Often one party wishes to remain in the property and may “buy out” their former partner by giving them cash in exchange for their equity. The remaining partner would take on the full responsibility for any mortgage.
If there is to be more than one owner after the transfer is completed, the owners need to decide whether the property will be held as tenants in common or beneficial joint owners.
Transfer of Equity process
By law we have to check the identity of the involved parties.
We’ll get the official copies of the Register of Title from the Land Registry and check the property owners, any restrictions and charges. Any third parties with an interest will be notified (i.e. a mortgage lender). Any mortgages or remortgages involved will be dealt with. We will prepare the Transfer of Equity Deed for signature and then once signed will register it at the Land Registry.
If there is any consideration being contributed for the equity, then Stamp Duty Land Tax might be payable. We’ll let you know and file this at the end.
If the property is mortgaged and this is going to carry on after the transfer, the lender needs to provide written consent before the transfer can be completed. New owners become jointly liable for the outstanding balance of the mortgage. For owners being removed from the title, the mortgage lender needs to provide consent again as they need to make sure the remaining owners can afford the mortgage.
If the mortgage is to be repaid as part of the transfer, either by a remortgage or through a consideration from the new owner, it needs to be repaid on completion. If this doesn’t happen, the lender will not allow the transfer to be registered.
Beware when trying to escape care home fees
Sometimes elderly clients ask whether they can transfer their equity to family in order to escape potential care home fees. Whilst the local authority can’t stop you doing a transfer, if they suspect you have tried to offload your assets in order to avoid fees they may means test you as if you still have the equity.
If you’re in a position where you need to conduct a Transfer of Equity, please contact us. Note that we are not allowed to act for both incoming and outgoing owners in a transfer.