• Do I need to carry out an SDLT for a transfer of equity?

    In the UK, Stamp Duty Land Tax (SDLT) is generally not applicable to a transfer of equity, provided certain conditions are met. SDLT is primarily associated with the purchase or acquisition of property, and a transfer of equity involves a rearrangement of ownership among existing co-owners rather than the acquisition of a new property, generally meaning that the new owner / co-owner does not have to pay SDLT.

    However, there are some circumstances where SDLT might be triggered:

    Consideration Paid: If money or other forms of consideration (such as the assumption of debt) is changing hands as part of the transfer of equity, SDLT may be applicable. For example, if one party is buying out another’s share, the monetary value of the consideration could be subject to SDLT.

    Mortgage on the Property: If there is an outstanding mortgage on the property and the transferring party is released from the mortgage obligation, this could be considered as consideration, potentially leading to SDLT liability.
    Joint to Sole Ownership: If the transfer involves a change from joint ownership to sole ownership, and there is an outstanding mortgage on the property, SDLT might be triggered on the share of the property that is subject to the mortgage.

    Gifts with Reservation of Benefit: If the transfer is a gift but the donor retains some benefit from the property, SDLT may be applicable.

    It’s important to note that the rules regarding SDLT are subject to change, and it’s advisable to seek professional advice from a solicitor or tax advisor to ensure compliance with the current regulations. If SDLT is applicable, it is typically the responsibility of the party acquiring the interest in the property to report and pay the tax to HM Revenue & Customs within 14 days of the effective date of the transfer.

    In summary, while a straightforward transfer of equity without consideration or changes to mortgage arrangements is usually exempt from SDLT, it’s essential to carefully assess the specific circumstances of the transfer to determine whether SDLT obligations apply. Professional advice is recommended to navigate the complexities of SDLT regulations.

  • When would transfer of equity take place?

    The transfer of equity in the sale and purchase process typically occurs at the moment there is a change in the ownership structure or distribution of shares in a property. In the sale and purchase process, the physical transfer of equity occurs at the moment of exchange and completion, which brings the process to a close. There are multiple situations which may trigger the transfer of equity in a property, and depending on the current owner’s situation, this can change the time when this may occur.

    1. Marriage or Civil Partnership: A common scenario for a transfer of equity is when individuals get married or enter into a civil partnership. This involves adding a spouse or partner to the property title to reflect joint ownership. The timing often coincides with the formalization of the marriage or partnership, but it can vary based on individual preferences and legal considerations.
    2. Divorce or Separation: A transfer of equity may take place during divorce or separation proceedings. In such cases, one party may wish to remove their name from the property title, transferring their share to the other party. The timing is often determined by the resolution of the divorce or separation agreement.
    3. Inheritance: Another instance is when a property owner passes away, and the property is inherited by one or more beneficiaries. The transfer of equity in this context facilitates the legal transition of property ownership from the deceased owner to the beneficiaries. The timing is typically linked to the probate process and the resolution of any inheritance-related matters.
    4. Financial Arrangements: Changes in financial arrangements among co-owners, such as the redistribution of ownership shares or the inclusion of new investors, may prompt a transfer of equity. This could be due to business partnerships or other financial considerations. The timing here depends on when the financial arrangements are formalized and agreed upon.
    5. Other potential circumstances: Various personal circumstances, such as changes in relationships, family structures, or individual financial situations, can lead to a transfer of equity. The timing is dependent on when the parties involved decide to make the changes and complete the necessary legal processes.

    Once the decision to proceed with a transfer of equity is made, the legal process begins with the preparation and execution of a Transfer Deed. This document outlines the details of the transfer, including the names of the existing and new owners, their respective shares, and any financial considerations. The completed Transfer Deed is then submitted to the Land Registry for registration, finalising the transfer of equity.

  • What is transfer of equity?

    The transfer of equity in residential property law refers to the process of changing the ownership, or distribution of shares in a property, among its current owners. This usually happens when there is a change in the co-ownership of a property, for example, when a name needs adding or removing from the property title. Some of the most common reasons why a transfer of equity is needed include marriage, divorce, inheritance, or changes in financial arrangements among co-owners.

    One of the main ways we carry out a transfer of equity is through a formal legal document known as a Transfer Deed. The document outlines the specific details of the transfer, including the names of the existing and new owners, their respective shares in the property, and any financial considerations involved. The signing of the Transfer Deed must be done in the presence of a witness to ensure it’s legal validity, this can also be your solicitor.

    In the context of marriage or civil partnership, a transfer of equity usually takes place when one party already owns a property and wishes to include the other on the property title. The process may include adjusting the ownership percentages to reflect the financial contributions of each party. On the other hand, if a couple were to divorce or separate, the transfer of equity may occur when one party wishes to relinquish their share in the property to the other.

    In cases of inheritance, the transfer of equity allows for the transfer of property ownership from the deceased owner to the beneficiaries seamlessly. In most cases, the assets of the deceased will be left to the executor of the estate, and the sale or purchase is the transaction between the executor and the new buyer. The process may involve the creation of a new Transfer Deed, and, depending on the circumstances, could be subject to inheritance tax.

    Financial considerations are also a crucial aspect of the transfer of equity. The party acquiring the additional share may need to compensate the outgoing party for their share of the property. This can involve a monetary payment or an adjustment in other financial arrangements.

    Once the Transfer Deed is executed and any financial transactions are completed, it must be registered with the Land Registry. This is a crucial step to ensure that the change in ownership is officially recognized, providing legal certainty and protection for all parties involved.

    In conclusion, the transfer of equity in residential property law is the legal process that facilitates the change in property ownership. Whether due to changes in personal relationships, inheritance, or financial arrangements, the Transfer Deed plays a central role in documenting and formalizing these transactions, with registration at the Land Registry finalising the process.

  • What is the difference between transfer of ownership and transfer of possession?

    In residential property law, the terms “transfer of ownership” and “transfer of possession” refer to distinct and separate legal concepts associated with property transactions.

    Transfer of Ownership: The transfer of ownership involves the legal transfer of property rights from one party to another. This is typically achieved through a formal document known as a Transfer Deed. The Transfer Deed is a legally binding document that conveys the ownership interest in a property from the seller (transferor) to the buyer (transferee). The solicitor plays a crucial role in preparing and overseeing the execution of the Transfer Deed, ensuring that the transfer is in compliance with all legal requirements. After the completion of the transfer of ownership, the buyer becomes the legal owner of the property, with the corresponding rights and responsibilities.

    Transfer of Possession: Transfer of possession, on the other hand, relates to the physical occupation and control of the property. It involves the actual handover of the property from the seller to the buyer. While transfer of ownership signifies the legal change in property rights, transfer of possession signifies the physical handover of the property keys and the right to occupy and use the premises. The transfer of possession often occurs simultaneously with the transfer of ownership, but the two concepts can be separated in certain situations. For instance, in a leasehold arrangement where a tenant is renting a property, possession may be transferred to a tenant while the ownership remains with the landlord.

    In summary, the key distinction lies in the legal rights associated with the property. Transfer of ownership is the formal legal process of conveying property rights, while transfer of possession involves the physical handover and occupation of the property. Conveyancers navigate both aspects, ensuring that the legal transfer is comprehensive and aligns with the intentions of the parties involved, whether they pertain to ownership rights or the physical use and occupation of the property.

  • What is a Transfer Deed?

    A Transfer Deed is the legal document used transfer the ownership or equity interest in a property from one party to another. In the conveyancing process, the Transfer Deed is a critical legal component which facilitates the formal change in property ownership, documenting the transaction.
    The document contains the essential information required for the transaction, such as the names and details of both parties involved, the nature of the transfer, such as whether it is a sale, gift, to other type of transfer, and the terms and conditions which have been agreed. It also contains details on the consideration, or amount of money, associated with the transfer.
    The Transfer Deed will also outline details of the property, such as its address and relevant title numbers as well as describing the extend of the property being transferred, including any rights or restrictions.
    In order to ensure the validity of the transfer, both parties involved in the transaction, the transferor and transferee, must sign the Transfer deed in the presence of a witness. The witness to the signing is usually a solicitor but can also be a notary public or another individual qualified to witness legal documents and is there to attest that the signing of the document is voluntary and to its authenticity.

    Once the Transfer Deed has been signed and submitted to the Land Registry for registration, it becomes a legally binding document. The Land Registry is the UK Government’s authoritative body responsible for maintaining a public record of property ownership in England and Wales. Registering the Transfer Deed with the Land Registry provides the official recognition in the change of ownership, ensuring legal certainty and protecting the rights of the parties involved.

    In summary, a Transfer Deed is the legal document which formalises the transfer of ownership or equity interest in a property. It contains the key details of the transaction, including information about the property, and the parties involved. It is signed by both parties in the presence of a witness, and once registered with the Land Registry, becomes legally binding, and finalises the change in property ownership.

  • What does a solicitor do for transfer of equity?

    A Solicitor plays a vital role in the Transfer of Equity process, facilitating the legal process of transferring ownership or equity in a property from one party to another. The role of the solicitor throughout the process varies, but here are some of their key responsibilities:

    Providing Legal Advice: 

    A solicitor will provide egal advice to the parties involved in the transfer of equity. This includes explaining the legal implications of the transaction and ensuring that all parties understand their rights and obligations.

    Document Preparation: 

    The solicitor prepares and reviews legal documents related to the transfer, including preparing and drafting the Transfer Deed, the legal document which formally transfers the ownership of the property from one party to the other.

    Title Checks:

    Solicitors conduct thorough checks on the title of the property to ensure that the seller has the legal right to transfer ownership. This involves examining Land Registry records and other relevant documents to verify ownership and identify any restrictions or issues.

    Searches:

    Solicitors may conduct various searches, such as local authority searches, environmental searches, and water authority searches, to identify any potential issues that may affect the property or its value.

    Financial Settlement:

    The solicitor handles the financial aspects of the transfer, including the calculation of any outstanding mortgage or loans on the property. They ensure that all financial matters are settled between the parties involved.

    Stamp Duty and Land Tax (SDLT):

    Solicitors help clients understand and comply with any applicable tax requirements, such as SDLT. They calculate the amount of stamp duty payable on the transaction and ensure that it is paid to the appropriate authorities. It is important to note that SDLT isn’t always required and depends on multiple factors; your solicitor will help you in your specific situation. 

    Registration:

    After the transfer is complete, the solicitor is responsible for registering the change of ownership with the Land Registry. This ensures that the new owner’s details are officially recorded.

    Communication:

    Throughout the process, solicitors act as intermediaries between the parties involved, ensuring that information is communicated accurately and that all necessary steps are taken to complete the transfer smoothly.

    It’s important to note that in the UK, either a solicitor or a licensed conveyancer can handle the legal aspects of property transactions, including the transfer of equity. However, the specific duties may vary depending on the complexity of the transaction and the agreements between the parties involved.

  • How long does it take to complete a transfer of equity?

    There are several factors which can alter the duration of a transfer of equity in the UK. While the process aims for efficiency, several stages and external factors contribute to the overall timeframe.

    The process of transferring equity in residential property law starts with the drafting and signing of the Transfer Deed, the document which outlines the details of the ownership change. All parties involved in the transaction must sign the Transfer Deed in the presence of a witness, which is usually a solicitor. Depending on how responsive each party is in getting the document signed, this process tends to be relatively quick, however, there may be some delays if either party doesn’t sign the Deed.

    The next step of the process, once the Transfer Deed has been signed by both parties, is to submit it to the Land Registry. The Land Registry is the government department responsible for maintaining records of land and property ownership in the UK. The time taken for registration varies and can range anywhere from a few days to several weeks. Depending on the time of year, property market and administrative backlogs, the Land Registry may experience peak periods, delaying the time it may take for the Transfer Deed to be registered.

    The involvement of a mortgage lender in the process can also impact the timeline. If there is an existing mortgage on the property, the lender may need to provide consent for the transfer of equity. Securing this consent involves communication between the solicitors, lenders, and all parties. The responsiveness of the lender and the complexity of their internal processes can influence the overall duration of the process too.

    Furthermore, any outstanding financial considerations, such as the settlement of financial arrangements between the existing and new owners, can affect the speed of the transfer. If there are disputes or negotiations involved, these may extend the timeline. In cases where the transfer of equity is part of a broader legal process, such as divorce proceedings, the overall timeframe may become dependent on that.

    In summary, the timeframe for a transfer of equity in residential property in the UK is influenced by various factors, including the responsiveness of the parties involved, the efficiency of the Land Registry, the cooperation of mortgage lenders, and any additional legal complexities. While some straightforward cases may conclude within a few weeks, others with more intricate elements could take several weeks or even months to finalise.

  • How much can I borrow against the value of my home?

    If you are eligible, you could remortgage to raise some additional money by borrowing more money in addition to your existing loan on your home. The amount that you can borrow against your home will depend on various factors including:

    • The property value. One of the most common reasons people choose to remortgage is because their house has gone up in value.
    • The equity that you have in the property – this is how much of the house that you own outright. It is calculated by removing the amount of the loan outstanding from the value of the property. For example, if your house is worth £500,000 and you have a mortgage of £300,000 outstanding then your equity will be £200,000.
    • Your credit history. Lenders will want to run a credit check on you before making you an offer.
    • Your affordability – The amount that you are able to borrow will also depend on your circumstances. The lender will carry out affordability checks as part of the application to ensure you can keep up with the repayments for the mortgage considering your income and outgoings.
    • Theoretically you can borrow as much as will the maximum Loan-to-Value (LTV) will allow. Some lenders offer 95% mortgages and the majority will offer 90% mortgages but for remortgages the maximum LTV they are usually willing to lend when you release equity is around 75 – 85%.

    Loan-to-Value (LTV) is essentially the size of your mortgage or loan in relation to the value of the property. It is shown as a percentage. For example, if you have a mortgage offer with an LTV of 80%, your mortgage will be up to 80% of the property value.

  • What fees are payable when remortgaging?

    There are various fees that you may have to pay to leave your current mortgage provider and move to another.

    Fees payable to your existing lender include:

    • an Exit Fee/Redemption Fee which is essentially an administration fee for closing down the mortgage and redeeming the charge. This is payable to your existing lender.
    • You may also be subject to an Early Repayment Charge if you are still within the initial fixed term of your deal. These vary depending on the lender and how long is left on your fixed term but are usually charges as a percentage of the outstanding loan.

    There will also be fees in arranging the new mortgage which can include:

    • an Arrangement Fee/Product Fee which is typically between £1,000 and £1,500 and can either be paid upfront or added to the loan.
    • Your lender may also charge a Valuation Fee

    You will also be liable to pay legal fees for the conveyancer or solicitors firm dealing with the legal aspects of the remortgage. Many lenders offer package deals which will include free valuation and/or legal fees to complete the conveyancing.

    If you use a mortgage adviser or mortgage broker then they may charge a fee for their services.

    It is important to consider whether these extra costs will outweigh the savings that you will make in the long run.

    You can avoid some of these fees by switching products but staying with your existing lender. It is worth calculating whether the savings made by moving to a new lender outweigh the costs that will be incurred and compare this to the savings you could make on a new deal with your existing lender.

  • What are the pros and cons of remortgaging?

    A remortgage might be a good financial move for many homeowners but it isn’t the right move for everyone. Those that are already on good deals with low interest rates or those that have less than 25% equity in the property are probably not going to be best placed for remortgage deals. Those that have bad credit or very small mortgages may also find that it isn’t worth going through the process.

    Even those that are not one of the above need to consider the pros and cons of a potential remortgage before proceeding.

    Cons:

    • You might incur fees such as a high Early Repayment Charge if you remortgage before the end of your current deal
    • If you secure more debt against your property and fail to keep up with repayments, you could end up having your property repossessed
    • If you consolidate your short-term debts, this is likely to be spread out over a longer period on your mortgage and you may end up paying more interest in the long term
    • Your monthly repayments are likely to be higher
    • You may end up with a longer mortgage term
    • It will be easier to find yourself in negative equity if house prices fall as you will have reduced your level of equity
    • The Loan-to-value will raise and if this might mean you can’t access competitive rates as at the lower LTV.

    Pros:

    • You could switch to a cheaper deal and save money on your monthly payments
    • You can use the remortgage to release equity in your property (please note this would increase the size of the loan)
    • You can extend or shorten the loan term to suit your financial needs
    • You can use the remortgage to consolidate more expensive debts such as credit cards if there is sufficient LTV
    • You can usually borrow a larger amount that possible under a personal loan
    • You can use the money for almost any legal purpose

    Before you commit to a remortgage application, consider whether it will be beneficial to your financial situation not only in the short term but in the long term as well ensuring that the benefits outweigh the drawbacks.