Transfer of Equity FAQs

Welcome to our guide on transfer of equity, where we address some of the most common questions we get asked about this topic. 

Transfer of equity is used in a variety of scenarios ranging from transferring ownership following divorce proceedings to inheritance planning. So, what is transfer of equity and what do you need to know about it? Read on for more information.  

At Setfords, our residential property lawyers are experts in transfer of equity transactions, helping you to navigate this complex area of property law with clear, comprehensive and pragmatic legal advice. 

What is a transfer of equity? 

Transfer of equity occurs where the legal ownership of a property changes, but at least one of the original legal owners remains on the title deed as a registered proprietor – it differs from a property sale because of this.  

It involves transferring both the legal title to the property and the beneficial (or equitable) title. If the parties only wish to vary their respective shares in their beneficial interests in the property, a declaration of trust should be used instead.  

Do both parties need a solicitor for transfer of equity? 

The Law Society advises that solicitors should avoid acting for both the transferor and transferee in a transaction where a conflict of interest might arise either during the transaction or in the future.  

We advise that each party must instruct separate solicitors. This helps to ensure that their respective interests are fully protected and that they receive advice tailored to their specific situation. Furthermore, the use of separate solicitors reduces the risk of any potential claims of bias or inadequate representation arising from a perceived or actual conflict of interest. 

What is the transfer of equity process? 

There are several different stages of the process, which your solicitor will guide you through. The exact steps will depend on your specific circumstances, but the process typically looks something like this: 

• The property is usually valued to determine the equity in the property. The parties can then decide the share of the equity to be transferred.  

• Your solicitor will obtain an official copy of the title deeds from the Land Registry, to check for any mortgages and restrictions on the property that could affect the transfer of equity process.  

• You must obtain consent from the mortgage provider to proceed with the transfer. 

• Your solicitor will prepare the transfer deed documents, to be signed by the parties. Any mortgage lender will need to provide their written consent or be a party to the transfer deed. 

• Next, the completed and signed transfer deed will be registered with the Land Registry. There is usually a fee payable, which will vary based on the value of the property. 

• There may be Stamp Duty Land Tax (SDLT) or Welsh Land Transaction Tax (LTT) implications if the property is transferred subject to a mortgage – your solicitor will be able to advise you on this. 

When is transfer of equity used? 

Transfer of equity is used in a range of situations. Some of the most common include: 

• After a divorce or separation, transferring the jointly owned family home to sole ownership of one party. 

• Transferring ownership of a property to children or other relatives before death for tax reasons. 

• Transferring a property into joint ownership after getting married. 

Transfer of equity and remortgages 

It is possible to transfer equity on a property subject to an existing mortgage. However, this process can be complex. For example, where a couple transfer ownership from their joint names into the sole name of one of them following a divorce or separation, one party may be required to buy the other’s share of the property, or a Court may order the transfer of the property into the name of one party as part of the divorce settlement. 

If the property is subject to an existing mortgage, the person who is transferring their equity may only be able to do so by obtaining the existing lender’s consent. This would be the case if party A is the sole registered proprietor of the property and is adding party B to the title, or if party A and B jointly own a property and party A is transferring their share in the property to party B. 

The mortgage lender will run their own checks on the person being added to the title deed, to ensure that they are suitable to be responsible for the mortgage. They may require a remortgage, such as a change to the terms like interest or length of the term, based on their findings. 

Transfer of equity and stamp duty 

In some cases, you may be required to pay stamp duty (or land transaction tax in Wales) when equity is transferred to you. This depends on a few factors, including: 

• Whether the value of the equity being transferred exceeds the stamp duty threshold. 

• The reason for the transfer. Some reasons, such as transferring equity as part of a divorce or dissolution of civil partnership, typically don’t require stamp duty to be paid. 

• The relationship between the people involved in the transaction. For example, in some cases transfers between spouses offer reduced or no stamp duty. 

• The circumstances around the transfer. If you receive it as a gift or as part of the terms of a will, there is usually no stamp duty to pay. 

This topic of transfer of equity and stamp duty is complex, and you should consult a solicitor for advice based on your specific circumstances. You can find out more about transfer of equity and stamp duty on the Gov.uk website. 

Transfer of equity and divorce 

If you own a property with your spouse and divorce or dissolve your civil partnership, you will need to decide what to do with this shared asset. In instances where it is not practicable to sell or if the property has sentimental value to a party, a transfer of equity could be a viable option. This option also helps minimise disruptions where children are involved. There is no stamp duty applicable if you are transferring equity as part of a divorce, legal separation or the dissolving of a civil partnership. It may however be applicable for unmarried couples separating where the total consideration exceeds the threshold of £125,000. 

Do you pay Capital Gains Tax on Transfer of Equity? 

Transfer of equity transactions can have different Capital Gains Tax (CGT) implications depending on the circumstances. Transfers between spouses or civil partners are exempt from CGT. Transfers to someone other than a spouse or civil partner are likely to attract CGT, as such transfers are treated as disposals for CGT purposes even if no money changes hands. Given the complexities it is advisable to speak to a specialist legal advisor who can inform you of any liabilities and offer guidance on the most efficient way to manage your estate. 

How much does it cost? 

When transferring equity, there are two key fees to consider: 

• Solicitors’ fees for your transfer of equity solicitor 

• Land Registry fees, which are paid when registering the Transfer at the Land Registry 

You may also have to pay stamp duty if your transfer of equity meets the requirements for this and the value of the transfer is over the SDLT/LTT threshold. 

Can I transfer equity to someone under 18? 

Yes, you can technically transfer equity to someone under the age of 18. However, the equity must be held in trust for them until they turn 18, as they cannot become a registered proprietor of a property prior to this age. A trust deed will be required with a trustee holding the property temporarily until the recipient of the transfer turns 18, at which point they can legally receive the equity. 

Do I need to get approval from my mortgage lender? 

If there is a mortgage on the property, you must inform the lender before transferring equity. The party leaving or joining the title will need to either be released from the mortgage covenants or be allowed to covenant to observe the mortgage obligations.  

The lender will need to give their consent for the change in ownership to take place and will contact your solicitor with a list of conditions they require to be satisfied prior to any consent being provided. Your solicitor will typically handle the correspondence with the mortgage lender to ensure that the transaction satisfies all their requirements. 

How long does the process take? 

Each transaction is different, so there are no firm guidelines on anticipated timescales. However, for a simple transfer of equity with no mortgage involvement, you can typically expect a turn-around timescale of 4 to 6 weeks. For other transfers where a mortgage is involved or where there are divorce proceedings, the process is likely to take more time to complete. 

If you are considering transfer of equity, our experienced and understanding property solicitors are dedicated to achieving the best possible outcome for you. For advice on transfer of equity and other aspects of property law, do not hesitate to contact our residential property team.