Transfer of Equity is the term used to describe the legal process for changing the ownership status of a property. This is likely to be required during the divorce process, to remove someone from the title – and later down the line, potentially to add someone new.

Relationship breakdown / divorce   

The transfer may be subject to a Court Order. The matrimonial home is usually the biggest asset in divorce cases. The parties may agree to sell the property, whilst others will choose to transfer the ownership to one spouse. This can be the most pragmatic and sensible approach if there are children, and one parent would prefer to stay in the family home with them.

In this situation, if there is a mortgage secured on the property, the lender’s consent will be required. This is because the mortgage will have been approved on the basis of two salaries. If one party is coming off the title and indeed the mortgage, the lender will need to be satisfied that the existing borrower has sufficient means to meet the monthly payments.

Forming a new relationship  

 You may decide to add your partner to the title (subject to lender’s consent if the property is subject to a mortgage or indeed a remortgage).

Regardless of the reason, if you wish to change the names of the registered proprietors, a Transfer of Equity will be required.

Equity is the value of your property, less the sum outstanding on your mortgage. For example, if you own a property which cost £500,000.00 and you have a mortgage with £250,000.00 outstanding, you will have £250,000.00 equity in the property.

It is essential that the reason for the Transfer of Equity is explained to your Solicitor to ensure that appropriate advice is given. If the consideration (payment) being passed between the outgoing and incoming party is over £40,000.00, a Stamp Duty Certificate is required. Not all Transfer of Equity applications will require consideration to be passed between parties.

A Transfer of Equity may give rise to a Stamp Duty Liability payable to HMRC – usually when paying another party for their share of a property. Taking on a mortgage debt in a property is seen by HMRC as “consideration” and therefore a Stamp Duty Return may be required.

Transactions as a result of divorce proceedings and subject to a Court Order are exempt from the requirement to submit a return and any liability.

To start off the process, we would need to obtain an up-to-date copy of the official copy of the title. This enables us to verify the identity of the owners, ascertain all mortgages secured on the title and indeed to prepare the Transfer Deed.

Once the deed is prepared and if there are no mortgages or loans secured against the title, we simply need to obtain signatures to the deed. The Conveyancer will register the Transfer Deed at the Land Registry.

If there is a mortgage registered against the title, consent of the mortgage lender will be required. The lender will need to be satisfied that all parties will be able to make the monthly payments before agreeing to the transfer. This is because once consent is granted, all parties will be jointly and severally responsible for repayment of the mortgage.

We would need to obtain lender’s written consent. The lender may wish to change the terms of the mortgage. If consent is not given, then ultimately you will need to remortgage the property in the joint names of all owners. A remortgage would have to be completed simultaneously with the Transfer of Equity. Alternatively, you can redeem your mortgage if you have funds to do so without obtaining a new mortgage.

In addition to legal costs, there may be additional costs which we can discuss with you. We will advise whether Stamp Duty is a payable and we will also confirm the Land Registry fee to register the transfer following completion of the transaction. The transfer is sent to the Land Registry so that they can update the title into the correct names.

DISCLAIMER: The information and opinions expressed in this article does not address individual requirements and is for informational purposes only. It does not constitute any form of legal advice and should not be relied on or treated as a substitute for specific advice relevant to your particular circumstances.