A transfer of equity changes who owns a property without it being sold on the open market. Common examples are:
- adding a spouse or partner to the title when they move in or marry;
- removing a former partner on separation or divorce, with the remaining owner taking over the mortgage;
- parents transferring a share in a property to a child, or a child buying out a parent; and
- moving a property between family members as part of estate planning.
What is involved
- Lender consent. If the property is mortgaged, the lender must agree to the change. Often the remaining or new owners need a new mortgage, in which case we deal with the transfer and the remortgage together.
- The transfer deed. We prepare the transfer, confirm the consideration (if any) and make sure everyone signs it correctly, with independent legal advice where one party is giving up their interest.
- Registration. We register the change of ownership at HM Land Registry.
Tax
Transfers of equity can have tax consequences that are easy to overlook.
- Stamp Duty Land Tax. Where the person acquiring a share takes on responsibility for part of the mortgage, that share of the debt counts as the price paid, alongside any cash. If it exceeds the relevant threshold, Stamp Duty Land Tax is payable, and the higher rates for additional dwellings can apply if the person acquiring the share owns another property. A transfer by way of gift, with no mortgage taken on and nothing paid, is not usually chargeable. Transfers under a court order on divorce or dissolution of a civil partnership are exempt.
- Capital gains tax. Transfers between spouses and civil partners who live together are on a no gain, no loss basis. A gift to anyone else is treated as a disposal at market value, which may give rise to capital gains tax unless the property has been the owner’s main residence throughout.
- Inheritance tax. A gift of property, or a share in it, is usually a potentially exempt transfer, but if you continue to live in or benefit from the property you have given away, the gift may not be effective for inheritance tax. Our private client team can advise.
We will tell you if any of these issues arise and recommend specialist tax advice where it is needed.
Declarations of trust
If you own a property with someone else and you contributed different amounts, or want to agree what happens if you separate or one of you wants to sell, a declaration of trust records your respective shares. It is particularly important for unmarried couples, who do not have the protection of the courts’ powers on divorce, and for parents helping a child to buy. We usually register a restriction at HM Land Registry at the same time, so that the property cannot be sold without both owners being involved.
Our fees
Transfers of equity are not one of the services for which the SRA requires us to publish prices, but we do so anyway: see our residential conveyancing fees page.