If you currently own a property with one or more co-owners and you either wish to buy out that person’s interest, or they want to sell their interest to you, then this is known as a transfer of equity.
In these cases we cannot act for both parties.
Where you have a mortgage on the property normally the party transferring the interest in the property will require releasing from the mortgage conditions and debt. There are three ways of doing this:
- Discharge the existing mortgage from monies from your own resources,
- Obtain consent from your current lender to transfer the property and make an application for a further advance where required for the “buy out”,
- Re-mortgage your property and borrow sufficient funds to discharge the existing mortgage and any surplus required for the “buy out”.
What we do when changing a property from a sole name into joint or multiple names
When changing a property from a sole name into joint or multiple names or simply adding more names to the deeds of a property this is the process a conveyancer may follow
- Review the title deeds or a copy of the property deeds from the Land Registry to prepare for an equity transfer
- Prepare the transfer deed and then meet with the parties to sign the transfer deed in the presence of a witness
- Notify any additional parties like mortgage lenders or secured lenders, banks or building societie. Any third party like this must give their written consent to the deed transfer
- Register the deed transfer at the Land Registry. A Land Registry fee is payable
- Check the identity of the clients as it is a legal requirement.
Removing names from your property deeds
The same basic legal process as mentioned above is followed. If names need to be removed from your property deed this may be as a result of an unsettled dispute. In cases like these one conveyancer may not be able to act for all the parties involved because there will most likely be a conflict of interest. Each person must find an independent lawyer so that independent advice can be given.
Circumstances which require a Transfer of Equity:
Marriage – When two people get married, if they own two houses, they often decide on one matrimonial home and therefore it makes sense to transfer the matrimonial home into joint names. This is referred to as a Transfer of Equity. Usually the person being added to the property deeds will not pay full price for their share in the property as such the law see this transfer of deeds or transfer of equity as a gift. This is also sometimes referred to as a transaction at an under value.
Divorce and separation – After a divorce the divorcees may have to transfer their share in a jointly owned property back so that only one of them legally owns the property. This is also called a Transfer of Equity and might also be seen by law as a gift. There are, however, other circumstances, such as if a court order has been instructed, where the law will not see this transfer of equity as a gift. Also if full price has been paid for the property share the law will not see this transfer of equity as a gift either.
Tax – Accountants will often advise property owners to make a transfer of equity to their children or other family members. This financial sharing of the home can be more tax efficient and it is also referred to as a transfer of equity and might also be seen in law as a gift.
Even though a transfer of equity may be seen on the surface as a simple process people can forget that it is a legal one. Legally a transfer of equity can be complex and you should always get professional legal advice from a qualified solicitor.