The transfer of a share or interest in a property (as opposed to selling or gifting the whole thing) from one person to another is usually called a ‘transfer of equity’, whether or not any money changes hands.
Someone entering into a transfer of equity can do so for many reasons but specialist advice should always be obtained to ensure that it is the most appropriate option for your individual circumstances. Birketts LLP can offer family, matrimonial, estate and tax advice in relation to any proposed transfer of equity.
Reasons to transfer equity
Some reasons why you might want to make a transfer of equity include:
- marriage or cohabitation – when two people get married, form a civil partnership or live together and a property occupied is currently owned by one party, they may want to have the ownership of the property transferred into joint names
- divorce or relationship breakdown – following any form of relationship breakdown it may be necessary to have a property that is owned in joint names transferred into the name of one party only. The outgoing party may receive money for their interest in the property and this value should be properly assessed
- tax reasons – an accountant or other financial professional may advise a property owner to make a transfer of equity to make the individual’s estate or general position more tax efficient.
It may be possible for both parties to be represented by one conveyancer or it may be necessary for separate representation for both parties. We can advise you on the most suitable course of action depending on the circumstances.
Where the property is mortgaged, the consent of the lender must be obtained before any transfer of equity can take place. Different lenders may have different requirements depending on the circumstances, including requiring the new owner to become jointly liable on the existing mortgage.
If the transfer is as the result of matrimonial or civil proceedings it is preferable for a sealed Court Order to be granted prior to any transfer taking place. If not there is a risk that Stamp Duty Land Tax may apply to the transfer.
If the property is leasehold or subject to a restriction on title, additional consents may be required prior to the transfer proceeding. Again this is something we can advise on as obtaining third party consents may affect how quickly the transfer can be completed.
In some circumstances we may also recommend Insolvency Act indemnity insurance, especially where the transfer of equity is at less than market value. This is a specialist insurance policy (with a one-off premium cost) which is designed to protect future lenders or owners of the property against claims being made that the original transfer of equity was completed to transfer the original owner’s assets to avoid paying creditors.
It is important to note that Insolvency Act Indemnity Insurance does not protect the parties to the transaction and only covers lenders and future purchasers. If you are being gifted a part-share in the property and the transferring owner is later declared bankrupt, your share of the property may be at risk.
This information is intended for guidance purposes only and is not intended to apply to any specific circumstances and does not constitute legal advice. Further matters may be relevant to your own circumstances and can be discussed with a dedicated member of our Residential Property team.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2020.