24 Dec Transfer of Equity: What It Is and How It Is Achieved
If you’re looking to buy into a jointly owned property, or remove yourself or a third party from a jointly owned property, you will need a legal document outlining clearly all of the details of the transaction. It is important that this is done thoroughly and normally through the guidance of a solicitor, to prevent complicated disputes in the future.
What is transfer of equity?
Transfer of equity is the legal term applied to the addition or removal of names from the title of a property. It is officially and legally altering the ownership. Money does not have to change hands during this process but, for obvious reasons, often does.
When is it needed?
The most common scenario is when a couple moves in together or separates, but it can apply to any situation when a party needs to be added or removed from the title deeds of a property, for example, a parent wanting to add their child. When adding someone to the deeds, a share in the title is allocated based upon their contribution or prior agreement, and when they are removed, those shares are bought out. The buying-out process normally involves remortgaging or transferring to a new lender, and the leaving party receives their equity share from the lender.
What does the process involve?
There is quite a lot of legal paperwork to be dealt with, so it’s advisable to appoint a solicitor to handle the transfer details. A TR1 form needs to be completed, which outlines the current owner(s) (the transferors) and the new owner(s) (transferees). You will need to provide various documents, including official copies of the title and mortgage contracts. If the transaction is for more than £40,000, you’ll also require a Stamp Duty Land Tax Certificate. Because of the potential complexity of the paperwork and the legal implications if errors are made, firms such as Sam Conveyancing can offer advice as to whether equity transfer is appropriate in your situation.
How long does it take?
If it’s a simple transfer, then the lead time is normally between four and six weeks. If there is a mortgage on the property, then this will take longer due to affordability checks and waiting for consent from the lender. If the transfer of equity is part of a wider legal dispute such as divorce, then the process could take even longer.
How much does it cost?
Conveyancing fees for a transfer of equity vary enormously and depend on the complexity of the case, whether you need to remortgage, as well as the value of the property. Fees usually range between around £400 to £1000 plus VAT.
There are additional third-party costs incurred during the process, such as ID checks, copies of the title and land registry fees which some conveyancing firms include in their fees and some do not, so it’s worth checking the finer details when you are given a quote. Your lender may also apply administration fees, Stamp Duty Land Tax is payable on property with a value of £125,000 or more.
HM Land Registry has a helpful fee calculator to give you an idea as to the likely third-party costs that will be incurred in addition to your basic conveyancing fee.
In an arrangement such as an equity transfer, it’s vitally important that the agreement is legally watertight. This will serve to reduce the risk of complicated, protracted and expensive disputes later. An experienced conveyancing solicitor can help you handle all the details to protect the financial interests of all parties involved.