While everyone wants to own property, it’s not always something you do alone. There are plenty of situations where you might want to co-own a place with someone. Alternatively, you may jointly own something and wish to fully own it, or perhaps remove yourself from the ownership entirely. Transfer of equity is the legal process for making these changes happen as smoothly and as quickly as possible.
What is a transfer of equity?
Transfer of equity is when a person is either added to, or removed from, the deeds of a property. Equity is the legal term for the percentage of the property you own.
So, for example, you might have just got married and wish to co-own your house with your spouse. Or perhaps you are a parent and wish to transfer your equity to your child. You might be selling your stake in a business venture to your partner. There are a wide range of situations that require transfer of equity between interested parties.
What is involved in a transfer of equity?
In the UK, transfer of equity works by filling out a simple form stating who is being added to, or removed from, the deed. All interested parties will then sign it before a solicitor sends the paperwork to the UK Land Registry for approval.
How long does a transfer of equity take?
From filing the appropriate forms with the Land Registry to completion, you should expect transfer of equity to take between 4-6 weeks. However, this is the average time for a simple equity transfer without undue complications. More complex situations can take much longer to resolve.
What circumstances might delay transfer of equity?
If there is a mortgage on the property, transfer of equity will take longer. This is because the mortgage provider will need to approve the transfer and be satisfied that the new owner(s) can reliably make the necessary repayments. Any legal disputes concerning property ownership – such as divorce proceedings – can also hold up the transfer of equity.
Do both parties need a solicitor for transfer of equity?
In a transfer of equity, the person being added to the deed must be represented by a solicitor. However, the person who already holds the deed doesn’t have to.
It’s quite common for both parties to have their own representation. This means they can receive independent legal advice. Still, if the process is amicable and you want to save money, one solicitor representing the buyer/new co-owner is enough.
As in any legal situation, if you are unsure, seek out some expert guidance. The right advice can often be worth far more than the fees you pay to get it.
What is a transfer deed?
In any transfer of equity there will be a transfer deed which is the legal document that officially declares the new ownership of the property. All parties involved will have the chance to see it, check and sign it.
The UK Land Registry has various transfer deed forms to cover different circumstances and types of property. However, the TR1 form is the most common. The TR1 form deals with properties being wholly transferred from one person to another.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a UK tax that you usually need to pay when buying or transferring property. HMRC’s full stamp duty guidelines will tell you everything you need to know about how and when to pay SDLT.
Do you pay stamp duty on a transfer of equity?
Stamp duty payment on a transfer of equity depends on the value of the property involved. If you are taking on equity or a mortgage worth more than £125,000, then some stamp duty may have to be paid.
Usually you would pay 2% on everything above this threshold. However, SDLT is only paid if you are taking on equity in exchange for a payment (also called a ‘consideration). Transfer of equity as part of a gift, divorce settlement or equal property spilt is exempt from stamp duty.
How much does transfer of equity cost?
Transfer of equity usually costs anywhere between £100-£500 plus VAT. The reason that this price range is so wide is that there are a lot of factors to consider.
The property’s value, whether you need to remortgage, solicitor fees charges for additional checks – all these things make a difference. Generally, the simpler your transfer of equity needs, the cheaper and quicker it will be to complete.
More questions about the legal side of buying, selling, renting or owning property? Check out our Guides section which includes more helpful posts like our offers and contracts FAQ and a first-time buyer’s guide to getting a mortgage.
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