Transferring the equity in your home has legal implications for all involved. It probably goes without saying that a transaction like this shouldn’t be entered into without properly thinking through the consequences. When undertaking such a transaction, do you need to get legal advice? In most circumstanced, professional legal guidance is necessary. If the property has a mortgage or the transfer is being done to give effect to a divorce settlement, the parties may have no choice but to get advice from a solicitor. In other instances each side of the transaction may have to get their own independent advice. This is usually so that any potential conflicts of interest that could invalidate the transfer are addressed. In this article we explain what a transfer of equity is and when you may wish to make one. We also examine the circumstances when legal advice will be necessary, and we outline the legal process involved when you complete a transfer of equity.
At Gamlins Solicitors LLP we have offices across North Wales. We offer expert, cost-effective advice on all aspects of conveyancing and property law. Call us on 01492 860420 or contact the team online.
What is ‘equity’?
When discussing transfers of equity, the term ‘equity’ refers to the part of your home that you own outright – without a mortgage. The equity in your home increases steadily as you pay off more of your mortgage.
Transfer of Equity v Sale or Purchase
A transfer of equity involves either registering someone as a co-owner of the property at the Land Registry or removing a current owner from the register. The process is different from a sale or purchase of property where the entire ownership of the property changes hands. When conducting a transfer of equity at least one of the existing owners will remain on the title deeds to the property following completion of the transaction.
Why Transfer the Equity in my House?
There are several reasons why you might want to transfer the equity in your home. For example:
- Divorce – As part of the financial settlement following divorce you may agree (or a judge may order) that ownership of the family home is transferred entirely to one spouse. If it was previously jointly owned, a transfer of equity will be necessary to put the terms of the settlement into effect
- New relationship – If you are in a new relationship and are cohabiting it may make sense to put your property into joint names through transferring the equity
- Tax reasons – Depending on your circumstances you may be able to benefit from mitigating the impact of certain taxes such as inheritance tax by transferring the equity in your home to family members. You should also be aware that the transfer may – depending on the specific circumstances – attract Capital Gains Tax and that there may be Stamp Duty payable on the transaction. As with all matters regarding your personal tax liability you should seek advice from an accountant or tax expert
- ‘Buying out’ joint owners – It’s becoming more common for friends, family members and colleagues to buy property jointly as a way of getting that first step on the property ladder. As the years go by it’s often the case that one owner will wish to buy the interest of the other owners so that they can enjoy the property in its entirety. A transfer of equity can be used for this purpose.
Do I need legal advice?
If the transfer of equity is straightforward – there is complete agreement between the parties to the transfer, no money is changing hands and there is no mortgage – then provided you are comfortable dealing with the Land Registry yourself, you may be able to complete the transfer without getting legal advice. However in most cases guidance from a solicitor is advisable. In certain circumstances it will be mandatory. The process is complicated, and there may well be tax implications that you should be aware of.
Often both parties to the transaction will be required to get separate legal advice. Guidance from the Law Society states that where there is the possibility of a conflict of interest in any property transaction – now or in the future – then the same lawyer shouldn’t advise both sides. Transfers of equity fall into a category of transaction that is generally assumed to carry a threat of a conflict. As a result, both sides will often have to get independent advice. This is particularly the case where there is a price being paid for the transfer and when there is a mortgage on the property (the lender too will require separate legal representation).
How does a transfer of equity work?
We aim to complete transfers of equity in 4-6 weeks. However when third parties are involved (such as mortgage companies) the process can be delayed as we await consent and deal with any specific conditions imposed by the lender.
When you instruct us, we will carry out all essential ID checks and inspect the property details at the Land Registry on your behalf. We will also prepare the formal transfer documentation and notify any relevant third parties, including lenders. Where the existing mortgage is remaining in place the lender will be required to consent to the terms of the transfer.
Once all necessary checks have been carried out and consents received, we will arrange for you to sign the transfer deed, register the documentation at the Land Registry and pay the appropriate fee. All taxation matters will also be dealt with at this stage.
Comment
The transfer of equity process is not without its complications. By getting expert legal advice you can ensure that the transaction will be completed in a way that’s watertight. This prevents any conflicts of interest or uncertainties arising that could lead to the transfer being declared invalid in the future. By instructing your own solicitor you also have the reassurance of knowing that your advisor is fully regulated by the Law Society and your case will be protected by professional indemnity insurance.
Contact Us
Gamlins Solicitors LLP has a network of offices across North Wales, and we can arrange an in-person appointment at the office that’s most convenient for you or a remote appointment if you prefer. Please call us on 01492 860420 or contact the team online
