Transferring residential property - adding or removing a registered co-owner (Transfer of Equity)

Whether you are transferring a residential property into your sole name or looking to add another person as a co-owner, these relatively simple transactions, known as Transfers of Equity, can become daunting and time-consuming.  

Before thinking about a Transfer of Equity, homeowners should consider the following; 

Are there tax implications? 

You may want to speak with a Tax advisor in relation to any tax implications that the transfer could have.  

You should consider Stamp Duty Land Tax (SDLT) advice. This is sometimes payable in transfers of equity depending on the circumstances, which comes as a surprise to many people. This is because someone is acquiring a share in property and so it may give rise to SDLT being payable. One way to think about the transaction is as though it is a sale and purchase of a share, where one party is “selling” and one party is “purchasing” a share. This assists to understand the different sides to the transaction, even if no money is changing hands. 

A good starting point for SDLT information would be HMRC’s website: Stamp Duty Land Tax: transfer ownership of land or property - GOV.UK (www.gov.uk). It is unlikely that Tax Advice will be provided by the Solicitor or Conveyancer and so a specialist Tax Advisor would need to be instructed. 

Consideration needs to be made as to the amount of the existing mortgage debt and whether the property was previously owned in equal or unequal shares for SDLT liability to be considered. Your Tax advisor will explain how the calculation would work, but the link above to HMRC’s website provides full details and examples. 

You should also be aware that if you have never owned residential property anywhere in the world before, any SDLT relief afforded to first time buyers would no longer apply once you are a named owner of any residential property. Therefore, transferring property even for nil value into your name would then mean you would not be eligible for First Time Buyer relief that may have otherwise been available to you if you purchase a property in the future. 

Do I need a conveyancer? 

If the property is currently owned jointly and being transferred into a sole name, the person who remains the owner at the end of the transaction must have a conveyancer. 

Whilst it is not a legal requirement that they do so, it is recommended that the person who is being removed as co-owner instructs their own independent legal advisor to act for them in reviewing documentation and overseeing the transaction. 

A conveyancer can act for both an existing owner and a person who is being added to the title as a new owner, as long as there is no potential conflict arising from the transaction.  

What will my conveyancer do? 

The conveyancer will prepare the documentation as well as register it on completion. They will also consider any mortgage lender’s requirements and submit any required SDLT Return and payment on completion.  

If the property will be owned by more than one person on completion of the transfer, you will need to consider how you intend to own the property jointly. There are several different options and your personal circumstances will be what needs to be considered when making a choice about this.  

If you are contributing unequal amounts to the mortgage and/or contributing to be named owner and you wish to own in set shares, this may be best reflected in a separate Declaration of Trust/Cohabitation Agreement. Your Solicitor/Conveyancer will ask you to consider if you want the property to automatically pass to the other owner on your death, or if you want to own shares that do not automatically pass to the other owner on death. If the latter and if the property is to be owned in unequal shares, you may wish to consider a Declaration of Trust being prepared to ensure the wishes of both owners are recorded. A restriction could be added to the Title Register to refer to the Declaration of Trust, however, the Land Registry will not record shares in the Title Register itself, so this would be the only way to make reference to shares in some way on it. A Will should always be updated or prepared when interest in residential property is taken or removed. 

Solicitors/Conveyancers generally do not request searches for transfers of equity, or raise enquiries or make investigations which would be the usual case when purchasing residential property. New owners may be asked to sign a waiver as they would not have all the information they would have if they were to buy the property. 

It is worth noting that if your property is leasehold, your Conveyancer will have more work to do and likely will need to consult with the Landlord and Management Company (if any) in order to progress and complete the transfer. The additional work will likely be several additional hours if the property is a flat, and so increase their Legal Fees. 

What about my mortgage? 

The mortgage will usually be in the names of the current owners. The Transfer of Equity cannot complete unless the mortgage lender consents to it and is party to the Transfer Deed, or a new mortgage is taken in the name of the person who will be the sole owner, which will be used to repay the existing mortgage on the same day that the transfer of equity completes. This would need to happen on the same day to comply with the requirements of the mortgage lender and Land Registry. 

Depending on the salary and affordability assessments by the lender, they may not be able to lend to a sole owner the required amount to settle the existing mortgage. In these circumstances, the remaining owner may need to or wish to add a new joint owner, who, in turn, will also need to be added to the mortgage. 

What if a payment has been agreed?  

The parties will need to agree whether there will be any payment to an outgoing owner in return for them giving up their ownership of the property. 

If so, how will these funds be raised by the remaining owner? If a new person is to become a joint owner, will they be making a financial contribution? Depending on the source of funds,  the conveyancer or conveyancers acting would need to carry out Anti-Money Laundering and Compliance Checks before the funds could be received into their Firm’s Client Bank Account. This is a requirement of all clients instructing Solicitors/Conveyancers both for their own regulators but also for the Land Registry’s requirements when registering the transfer.  

You will likely be asked to provide photo identification like a Driving Licence or Passport, as well as identification to evidence your address, such as recent bank statements. If you are introducing funds to the transaction, for example to pay for the share of the property you are going to acquire, evidence of the source of those funds will be requested. This may be savings accounts statements, evidence of inheritance and it crediting into your bank account, or any other evidence as to how the funds have become available to you. This process may seem invasive, however, it is necessary to enable a Solicitor/Conveyancer to proceed. You having the paperwork ready to provide and being transparent about source of funds from the outset will assist in the transaction progressing without delay. 

Does it make a difference if the transfer is in accordance with a court order or following divorce? 

This can affect SDLT that may be payable. Send the Final Order for divorce to your Solicitor/Conveyancer, if applicable. 

Therefore, there is much to consider when transferring ownership of property, in particular Tax implications, whether it gives rise to SDLT being payable and how this may affect any existing mortgage. It would be a good plan to seek Tax Advice and Mortgage Advice before instructing a Solicitor or Conveyancer. 

Find out more about the Irwin Mitchell Conveyancing Team.