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.

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 transaction 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 the transaction, 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 as complications can arise. One solicitor can not always act for both parties involved as there may be a conflict of interest. A solicitor should then be appointed by each party. As they will be able to provide independent advice.

SDLT on Transfer of Equity

Many clients are surprised to learn that Stamp Duty Land Tax may be payable 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 mortgage debt, being £200,000. They would therefore have to pay SDLT on that amount at 1%, equal to £2,000.

In the above example as the Transferee was effectively 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 requirements.