Home > Legal > Transfer of Equity - your questions answered

Transfer of Equity - your questions answered

Added: (Wed Feb 17 2010)

Pressbox (Press Release) - Why are your prices a quote and not fixed?
As part of most transactions we have to do searches e.g. at the Local Authority to check for new road schemes near to the property you are buying. Each Council charges slightly different fees for that information (usually called 'Disbursements'). Therefore whilst we can give a promise on our own fees,the disbursements are a guide as it is impossible to predict what the particular council in your area charges for the information.

What hidden extras do other firms charge?
Sometimes firms charge a contribution towards their legal professional costs, we don't. Other firms also charge for postage of items to you, again we do not. In any transaction there is usually a requirement to send money electronically, since we complete thousands of cases a year, our fee is very competitive as we benefit from economies of scale. If your case is slightly more involved, for example it is leasehold, there will be a small incremental fee.

However we can detail all this with you so you are totally clear on the fees before you proceed.

Why is it difficult to agree a fixed completion time for my transaction?
There are many variables outside our control which we would tell you at the start of the transaction so you are fully informed but over which we may have little or no control. For example your transaction may be within a chain and the other parties are not ready. Or your purchase is dependent on a mortgage offer from your new lender and that has not arrived as swiftly as perhaps anticipated.

Can I track my case on line?
Many of our large lender Clients require this facility because of the volume of cases they have with us. However, we have found that individuals usually prefer to call and speak to the case handler concerned. Please feel free to discuss this with us as we welcome any feedback.

Do you correspond by email?
If that is the most efficient way of dealing with your case, then of course we shall oblige.

Will I be able to speak to the person dealing with my case?
Yes. We have support staff who can look at the database to see the current situation on your file and give you a general update. However there is also the opportunity to speak to the actual case handler dealing with your case so that you may enquire about any detailed requirements or legal questions.

What if my case handler goes on holiday?
Not a problem. We operate on a team basis so that if your actual case handler is not available someone from the team will deal with your enquiry.

When is a transfer of equity exempt from stamp duty?
Not a problem. We operate on a team basis so that if your actual case handler is not available someone from the team will deal with your enquiry.
1. Following a divorce, as a part of a court order
2. A divorce or the dissolution of a civil partnership resulting in an equity transfer
3. A transfer of equity of freehold or leasehold land where no money (consideration) is to be paid from the original owner to the new owner. This would include
the gift of a property from a parent to a child.

Can I transfer equity to someone under 18 years old?
If you want to undertake a transfer of equity of your property to a child under the age of 18, you will require a trust deed to be completed in addition to the equity transfer. Because anyone under the age of eighteen cannot legally hold the property in their own name the trust deed allows a responsible and trustworthy adult to hold the property until the child is 18.

Can I carry out a transfer of equity if I value my property at less than market value?
If the transfer of equity takes place at below market value, the transaction will be deemed as a 'transfer at undervalue' and if there is a mortgage on the
property the lender may insist on the new owner(s) entering into a declaration of solvency, as well as a one off insurance premium being paid by the continuing owner(s) to protect the mortgage repayments and by extension the lender against any claims resulting from the equity transfer.

Can I transfer a property to another person to avoid losing the property because of debt, insolvency or bankruptcy?
If a property is transferred for less than its value, it is deemed a gift due to being a 'transfer at undervalue'. If the person who transfers the property becomes bankrupt within 3 years of the donation the law can void or reverse the transfer. The insolvency laws allow the official receiver to sell the property and to pay the creditors of the insolvent person from the proceeds.

Do I need to carry out an SDLT for a transfer of equity?
Every time a transfer of equity is completed a stamp duty land tax form (SDLT) needs to be completed on behalf of the new owner(s). There is a minimum penalty of 100 for any forms not successfully submitted within 30 days of completion of the equity transfer. Gordons Property Lawyers will advise you of whether the transfer of equity is exempt from stamp duty or otherwise the amount of stamp duty land tax due.

Do I need to inform my mortgage lender that I want to carry out an equity transfer?
Yes. If you wish your existing mortgage to continue then you will need your current lenders consent to any proposed change in the percentage of ownership of a property through a transfer of equity. Your mortgage lender may make further enquiries with regard to the circumstances of the proposed equity transfer and also check the financial status of the current owner in order to satisfy themselves that the continuing owner(s) will be able to meet the mortgage repayments.

Your lender will contact us with conditions of acceptance which it requires to be met for the mortgage arrangement to continue. The consenting and continuing lender may wish to join in the transfer of equity as a party and in addition execute the document, however this requirement varies from lender to lender.

Can I change my mortgage provider at the same time as completing an equity transfer?
The new owner(s) may wish to change mortgage providers when completing a transfer of equity, for a variety of reasons. For example you may be able to raise cash for a larger deposit and subsequently gain a more favourable interest rate on the mortgage. The remortgage would be completed at the same time as the transfer of equity.

When would a Transfer of Equity take place?
Equity is the difference the current value of a property and the amount outstanding on any mortgage(es) taken out on the property. An equity transfer takes place when one or more joint owners of a property chose to sell or transfer their share of the property another owner or owners of the property. Several
common examples when a transfer of equity would take place are as follows:

Following marriage adding a spouse's name
This can be a gift with no money changing hands. If the spouse is paying below market value for the share in the property then this can be regarded as a 'transfer at undervalue' or a gift.

When cohabitants separate or a divorce takes place
The outgoing owner will be released of any mortgage commitments and the parties separating should agree on the amount of money changing hands (if any) as part of the equity transfer.

Transfer of property to a family member
This type of equity transfer is most commonly carried out when a property is being transferred to a family member who would have otherwise received the property upon the original owners death. The original owner of the property has the peace of mind of seeing the completion of the transfer while still alive. This type of transfer can also sometimes take place on the advice of an accountant

The current owner has an adverse credit rating
Transferring a share of equity may assist with a remortgage which would otherwise not complete due to the existing owner having a poor credit rating. This relies on the equity transfer being made to an additional owner who has a good credit rating.

Tax planning
Property owners are sometimes advised by their accountants to transfer a share of the family home into the name of a child or other relation. As this is an Equity Transfer it may be deemed in law as a gift.

Transferring or changing the share allocation of the property
Some people may buy a property jointly but do not wish to own exactly half of the property each. In this scenario a trust deed will be set up and registered at the land registry to explain the share that each partner owns. If the property owners later decide to change the percentages of the property that they each own a Transfer of Equity would be needed, and in addition the trust deed would need to be changed.

Submitted by:Gordons Property Lawyers
Disclaimer: Pressbox disclaims any inaccuracies in the content contained in these releases. If you would like a release removed please send an email to remove@pressbox.co.uk together with the url of the release.