Transfer of Equity Guide
14 minute read
Date Published - September 4th 2024
Date Updated - September 6th 2024
14 minute read
Date Published - September 4th 2024
Date Updated - September 6th 2024
Are you considering changing the ownership of your property? The process you’ll be dealing with is known as a transfer of equity.
At GloverPriest, we understand that transferring equity can feel like a complex legal process. You might be doing this for personal reasons - perhaps due to a relationship change, gifting part of your property to a family member, or ensuring financial security for loved ones. Whatever the reason, it’s important to know how the process works, what legal requirements are involved, and how to navigate any potential financial implications like stamp duty or mortgages.
In this guide, we’ll walk you through everything you need to know about transfer of equity, from the key steps involved to the costs and legalities you need to consider. By the end, you’ll have a clear understanding of the process, allowing you to move forward with confidence and, of course, the right legal support.
At GloverPriest, we specialise in all aspects of the transfer of equity process. If you require advice or assistance, please get in touch with one of our experienced Transfer of Equity Solicitors or get your no-obligation quote here.
Need information but no time to read our blog? Download our useful Guide to Transfer of Equity PDF!
A Transfer of Equity happens when a property's owner adds or removes someone to or from the title deeds of their home. It doesn't necessarily involve the transfer of money as the name might suggest.
The whole process can take around six weeks to complete, although each transaction can be unique and the time taken to complete could take longer.
This is certainly the case if there is a mortgage on the property, as you have to wait to receive written confirmation from any lenders involved before the transfer can go ahead. Also, it can become an increasingly complex process if parties are in disagreement, such as couples who are divorcing or separating.
There are two types of property transfer. The basic property transfer process is the same in most cases, whether you are transferring full or part ownership.
Equity refers to the portion of your property that you own outright. It’s calculated by taking the property’s current market value and subtracting any outstanding mortgage or loans. For example, if your home is worth £185,000 and you still owe £60,000 on the mortgage, then your equity in the property would be £125,000.
When it comes to a transfer of equity, the profit is what changes hands between the owners. If someone is being removed from the title deeds, they’re essentially giving up their share of the profit and, depending on the arrangement, they may be compensated for that share. On the other hand, if someone is being added to the title, they might take on part of the equity (and possibly part of the mortgage, if one exists).
If there is a mortgage on the property, you must get the mortgage lender’s approval before moving forward. If you’re buying out a co-owner’s share, you might need to remortgage with the same lender or find a new one, and the money from the new loan can be used to buy the other person’s share.
In some cases, a financial arrangement might also be necessary to balance the new ownership structure, like if you’re buying out your co-owner’s share.
When you’re transferring equity, whether you’re adding someone to the title deeds or removing them, you’ll need to decide how the property ownership is split. In England and Wales, up to four people can co-own a property, and there are two main ways to structure that ownership: joint tenants or tenants in common.
If you choose to own the property as joint tenants, everyone on the title will have an equal share in the property, regardless of how much each person may have contributed financially. This is often the most straightforward arrangement for couples, especially if you want to ensure equal ownership.
One key feature of joint tenancy is the Right of Survivorship. This means that if one of the joint tenants passes away, their share automatically transfers to the surviving joint tenant(s). So, you wouldn’t be able to leave your share to someone else in your Will - it would automatically go to the other co-owner(s). For many couples or close family members, this is seen as a positive, as it ensures the surviving partner or co-owner inherits the entire property.
Once the last surviving joint tenant passes away, the property can then be passed on according to their Will.
The other option is to own the property as tenants in common, which offers more flexibility. Unlike joint tenancy, you don’t need to own equal shares of the property. For example, one person could own 60%, while the other owns 40%, depending on how much each party has contributed or your personal arrangement.
Tenants in common is a popular choice when people want to reflect unequal financial contributions or ensure their share of the property goes to specific people in their will. If one of the tenants in common passes away, their share doesn’t automatically go to the other co-owners. Instead, it’s passed on to whoever they’ve named in their will, which can be important if you want your children or other family members to inherit your portion.
There are many reasons why you might need to change the ownership structure of your property through a transfer of equity. This legal process allows you to add or remove individuals from the property title without selling the property outright. Whether it’s due to a change in personal circumstances or for financial planning, transferring equity can help you adjust property ownership in a way that suits your current situation.
Here are some of the most common reasons why you might need to transfer equity:
If you and your partner have decided to separate or divorce, the property is often one of the most valuable shared assets. In many cases, one person may want to keep the property, while the other transfers their share of the equity in exchange for financial compensation or another arrangement. This means ownership transfers from two names to one.
You may have bought your property on your own but later entered into a long-term relationship. In this case, you might want to add your new partner to the title deeds, making you joint owners of the property. This can help formalise your shared investment in the home and establish joint responsibility for any mortgage.
It’s increasingly common for people to purchase property with friends or family to get onto the property ladder. If circumstances change and one co-owner wants to move on, they may sell their share of the property to the remaining owner(s). A transfer of equity is used in this scenario to formalise the new ownership structure.
Some property owners choose to transfer part of their equity to children or other family members, often as part of estate planning. This can be done to pass on part of the property without selling it, which may help with tax planning or simply provide a loved one with an ownership stake.
In some cases, transferring equity is used as a strategy to improve tax efficiency or to prepare for future inheritance arrangements. For example, transferring part of the property to family members could reduce potential tax liabilities, but it’s important to seek legal advice on how this could impact stamp duty or other taxes.
In all these scenarios, transferring equity is a flexible way to adjust property ownership without a full sale. However, the process can become more complex if mortgages or disagreements are involved, making professional legal support essential to ensure everything is handled smoothly.
One of the most common forms of property ownership transfer on your main property is to gift it to your children as a way of giving them a foot up onto the property ladder.
This is a useful way to reduce the impact of inheritance tax, but it is important to consider the regulations and potential financial impact before going down this road.
For instance, if you die between three and seven years after gifting your property, your children will still have to pay tax, but not the full 40% if the property is worth more than £350,000. This is known as “ tapered relief”.
After you have gifted the property, you will not own it and will not be able to live there rent-free. This process is not without its risks, for instance, it could be part of a divorce settlement if your children were to fall out with their spouses.
A Transfer of Equity may, on the surface, be seen as a simple process, but people can sometimes forget that it is a legal one. Legally, a Transfer of Equity can be complex and you should always seek professional legal advice from a lawyer.
All parties involved will need to agree on the terms of the transfer and the shares in which each individual will hold the property.
The process depends on the type of transfer required:
When transferring equity, it’s important to understand the tax implications involved - particularly Stamp Duty Land Tax (SDLT) and, in some cases, Capital Gains Tax. These taxes can apply depending on the value of the property, the circumstances of the transfer, and whether there is a financial consideration, such as a mortgage. Here's a breakdown of what you need to know.
Stamp Duty Land Tax (SDLT) is a tax that’s payable when you buy or transfer property in England and Northern Ireland. The amount of Stamp Duty you pay depends on the value of the property and whether any money or financial consideration is involved in the transfer. Importantly, it doesn’t just apply to the cash value of the transaction - if the person receiving equity is also taking on responsibility for part of the mortgage, this is seen as "consideration" and may trigger Stamp Duty.
For example, if you’re adding someone to the property title and they’re taking on a portion of the existing mortgage, this could be classed as a "chargeable consideration." If that consideration exceeds the Stamp Duty threshold, you’ll need to pay tax on it.
In many transfer of equity cases, Stamp Duty Land Tax becomes payable if the value of the share being transferred is over £125,000, or if the person being added takes on mortgage debt above £40,000. If the total consideration (the share of the equity and the mortgage taken on) exceeds the Stamp Duty threshold, HMRC will require you to pay SDLT.
For instance, if your property is worth £250,000 and you have a £150,000 mortgage, and you're transferring 50% of the ownership to a partner, your partner would take on half the mortgage, which is £75,000. In this case, SDLT would be payable on the amount above £125,000.
However, there are some exceptions to these rules. If the transfer of equity is a result of a divorce or legal separation, you won't be required to complete a Stamp Duty Land Tax form or pay Stamp Duty, regardless of the value of the property. Similarly, transfers made as part of an inheritance or a gift may not attract Stamp Duty, as there’s no monetary exchange involved.
In some cases, the transfer of equity may also trigger Capital Gains Tax (CGT), particularly when transferring property to someone outside of your immediate family or as part of a gift. While we can advise you on Stamp Duty implications, it's important to seek advice from an accountant to understand whether Capital Gains Tax applies to your situation.
For example, if you’re transferring equity to your children or another family member as part of a financial planning strategy, this could be seen as a gift. In such cases, you may be liable for CGT if the property has increased in value since you purchased it. However, transfers between spouses or civil partners are exempt from CGT.
At GloverPriest, we’ll guide you through the entire process, including completing the Stamp Duty Land Tax Return on your behalf, if needed. We’ll calculate the amount of Stamp Duty due, if any, and make sure all the necessary forms are lodged with HMRC as part of your transfer of equity. For more information about Stamp Duty, you can also visit the gov.uk website or speak to one of our experienced solicitors for personalised advice.
The existing and new owners of the property sign the transfer deed in the presence of a witness and the conveyancer registers the transfer deed at the Land Registry. If the value of the transaction is greater than £40,000 then a Stamp Duty certificate will need to be completed and submitted to HM Revenue & Customs on your behalf.
If there is a mortgage registered against the property, then the lender's consent may need to be obtained prior to the transfer, or in some cases, the mortgage may need to be paid off (redeemed). Where an existing mortgage will remain and the lender has consented to a new person being added to the title of the property, they will become equally liable for the mortgage and its repayment, along with the other joint owners.
If a party is being removed from the title, the lender will again need to consent to this. The outgoing owner must be released from their obligations under the mortgage. This will usually be done by insertion of a special clause in the transfer, which all parties to the transfer will sign including the lender. The lender will make financial checks to ensure that the remaining owner is financially capable of keeping up with the mortgage repayments.
As well as assisting with a smooth and efficient transfer of equity, GloverPriest’s property solicitors can help with arrangements for remortgaging if necessary.
There are a few key costs to consider when transferring equity. The most common include:
Your solicitor will provide a full breakdown of the costs upfront, so you’ll know exactly what to expect.
Transferring equity can be a straightforward process if the property is wholly owned by the parties listed on the title deeds and when everyone is in agreement, but if this isn't the case it becomes more complicated and can take longer for the process to complete.
Our experienced conveyancing solicitors can help facilitate the entire process of a transfer of ownership for you, including:
If you need to instruct a specialist Transfer of Equity Solicitors, please do not hesitate to contact us today to see how we can help you. Complete our enquiry form.
Yes, transferring property can have tax implications, but that depends on the nature of the transfer. For example, if you are transferring equity to your spouse or civil partner, you generally won’t have to pay Capital Gains Tax (CGT). However, if you’re transferring property to someone else, such as a child or another family member, CGT may apply. The CGT rate can range from 18% to 28%, depending on your tax bracket and the size of the gain.
It's also worth noting that transferring property could be subject to Inheritance Tax (IHT) if the value exceeds £325,000 and you pass away within seven years of the transfer. This is something an accountant or solicitor can help you assess in detail, especially if your transfer is part of a broader financial or estate plan.
Consideration is the amount of the property that you will take over from the previous owner. If you pay Stamp Duty will be dependent on the size of the consideration. Consideration includes both equity (the value of the property) and the value of the mortgage. If a transfer of equity is given 50% of a £400,000 house, but there is a mortgage of £200,000, the portion would be £300,000 which would incur Stamp Duty. This is dependent on circumstances.
Yes, you can transfer equity to someone under 18, but there’s a legal catch - minors cannot legally own property outright. To transfer equity to someone under 18, a trust deed must be set up. This deed allows a trustee to hold the property on behalf of the minor until they reach the age of 18 and can legally take ownership. This setup ensures the transfer is valid and that the minor’s interests are protected.
Your solicitor will help you establish a trust and make sure the transfer follows the correct legal procedures.
Title deeds are the official legal documents that prove who owns a property. They contain important information about the property, including any restrictions, rights of way, or mortgages attached to it. When you transfer equity, the title deeds need to be updated to reflect the new ownership structure.
As part of the process, your solicitor will obtain a copy of the title deeds from the Land Registry, make any necessary changes, and ensure that the correct details are submitted to the Land Registry for the update.
The Land Registry is the government department responsible for keeping records of land and property ownership in England and Wales. Whenever there’s a change in property ownership - such as during a transfer of equity - the new ownership details must be registered with the Land Registry. This ensures that the transfer is legally recognised and that the property’s title reflects the correct owners.
Your solicitor will handle submitting the necessary forms and registering the updated ownership with the Land Registry as part of the transfer of equity process
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