What is a Transfer of Equity?

In simple terms a transfer of equity is a process in which the legal ownership of a property changes. When a property is purchased, a decision is made over who will own the property and how it will be owned if there is more than one individual involved in the purchase. For example, a couple may purchase as joint owners, or as tenants in common in differing shares, if one party contributes more funds than the other. Whichever way a property is purchased or held, individual circumstances can change for any manner of reasons and so the ownership of a property may also need to change as a result.  Although it may not be immediately obvious, a transfer of equity is different from a sale or purchase as at least one of the original property owners remains the same by the end of the transfer.

Reasons for a transfer of equity

There are a number of reasons why someone may choose to carry out a transfer of equity. The most common reasons we see, include:

• An individual having purchased the property in their sole name, may later wish to add a new partner or family member to the property title along with a share of the property’s equity.
• If a couple separates, either when married or not, the property may be transferred solely to one party or the other.
• In some cases, family members or friends may purchase a property together in order to get a foot on the property ladder and later they may wish to change this if they go on to purchase a property with a spouse or partner.
• If property is held between people as tenants in common in unequal shares, a transfer of equity can be used to change the percentage of the property each individual holds.
• There are also tax reasons for transfers of equity, although tax is a complex matter and the advice of a specialist tax advisor specialising in property is recommended in such cases. Conveyancers do not routinely advise on tax matters as this is not their specialist area of expertise.

What to consider with a Transfer of Equity

Depending on individual circumstances and reasons for a transfer of equity, there are different considerations. A transfer of equity can be carried out for nil consideration, in which no money changes hands, or it can be for a value. The financing of a transfer of equity can vary also depending on any current mortgages on a property, or any new mortgages that need to be arranged especially if one party is buying the other out for value.

In a situation where one party is taking over full ownership of a previously jointly owned property and there is to be no money paid to the departing party, or this money is to come from the remaining party’s savings, and so the remaining party is intending on continuing to pay the same mortgage, someone would be excused for thinking that there is no requirement to notify the mortgage lender. However, this is unfortunately not the case. Any party with a financial interest in the property must give permission before carrying out a transfer of equity.

Whilst in the majority of cases, transfers of equities are mutually agreed, they can be contentious and not agreed to by all parties. A transfer of equity is a simple process when all parties agree, however if it is as a result of a disagreement it can become more complex and therefore independent legal advice is recommended in such situations. If the transfer is as a result of a relationship breakdown, it is recommended that you seek the advice of a family solicitor prior to agreeing to something and any relevant financial orders should be obtained prior to starting any property transfer.

What is the process of a Transfer of Equity?

Your appointed conveyancer will guide you through the transfer process, however as a broad overview, the process is as follows:

1. Instruct a conveyancing solicitor

Find a conveyancer that has the time, expertise and experience of handling a transfer of equity. It is important to discuss your individual circumstances including any finance options when obtaining a quote to make sure it is an accurate quotation. Once happy with your quote, instruct the solicitor, complete all onboarding paperwork and send in relevant supporting documents.

2. Complete ID checks

Your conveyancer will carry out ID checks on all people involved in the transaction. If funds are changing hands, then proof of funds checks will also be carried out.

3. Obtain Title Deeds

Your conveyancer will look up the subject property at the Land Registry and will obtain copies of the title deeds for the property. They will check everything matches up and if any restrictions, mortgages or charges will affect the transaction. In some cases, consent for the change in ownership is required from third parties such as landlords or management companies.

 4. Draw up Transfer Deed

Your conveyancer will draw up the transfer deed which is the instrument (the legal document) which will actually carry out the transfer between parties. This will need to checked by all parties involved and also any independent solicitors acting for other parties in the transaction.

5. Deal with any finance

If there is a refinance involved, or a mortgage to be redeemed, then the conveyancer will need to deal with these financial obligations and arrangements. Consent may be required from a lender or the lender may place conditions on any new finance which will need to be dealt with by your conveyancer

 6. Arrange for signatures on the deeds

All conveyancers involved in the transfer will need to arrange for their respective clients to sign the finalised transfer deed in the presence of an independent witness. Conveyancers have different ways of dealing with signatures and you will need to consult your specific conveyancing solicitor as to how they would like your signature and that of your witness.

7. Transfer any funds

Depending on the monetary value or consideration of your specific transfer, funds will be transferred on completion day from and to the relevant party or third party lender via the solicitors.

8. Complete an application to the Land Registry

The Land Registry must be notified for any and all changes to property ownership, even if the change is slight like in a transfer. The Land Registry will update the Office Copies for the property and will send out revised version to the new property owner(s). There is a registration fee to pay for this, set by the Land Registry.

Independent Legal Advice

There are situations through legal processes including transfers of equities, where you will be required to obtain independent legal advice, however as a general rule, before agreeing to any legal processes with property, it is always recommended you obtain independent legal advice to make sure you are happy with any decision you make. 

How can we help?

We have been working for some time to build strong team ready and able to act on transfers of equity with speed and accuracy. If all parties are in agreement, we can act regardless of whether you are the remaining, joining or departing party in the transfer. If you would like to talk to one of our specialist team about your specific circumstances, or to get a quote for us to handle your transfer, contact us in the office on 0800 799 9892 or hello@express-conveyancing.co.uk