Transfer of Equity Conveyancing
Transfer of equity conveyancing involves a transaction where legal ownership of a property changes hands but at least one of the original owners remains on the title. For example where a couple transfer it into the sole name of one or other of them or a person is added to the title.
If you want to add or remove someone from the title deeds and there is a mortgage involved, you will need permission from your mortgage lender. This is because the names on the mortgage deed ordinarily have to match the names on the transfer deed.
Similarly if money is changing hands e.g. if someone is being removed and the remaining owner is buying out their share, then this will make the transfer of equity more complicated and you may incur additional fees.
Please note that you may have to pay stamp duty when adding or removing someone from the title deeds. Please speak to your lawyer about this at the outset and before your start the transfer of equity conveyancing process.
Stamp duty is not the only tax to consider when it comes to Transfer of Equity. You should speak to your account about potential capital gains or inheritance tax implications of the transfer of equity before you go ahead, so that you know where you stand and you can make a fully informed decision before proceeding.
Transfer of Equity Conveyancing - Where there is an Existing Lender
Your conveyancer must approve the transfer (which should be in the Land Registry's standard form) and, if required by your lender, the deed of covenant.
When drafting or approving a transfer, your lawyer should bear in mind that:
- although the transfer should state that it is subject to the mortgage (identified by date and parties), it need give no details of the terms of the mortgage; the transfer need not state the amount of the mortgage debt. If it does, the figure should include both principal and interest at the date of completion, which you must check (see below for where to obtain this);
- there should be no statement that all interest has been paid to date.
Your conveyancing lawyer must ensure that every person who will be a borrower after the transfer covenants with the lender (i.e.enters into an agreement with the mortgage company) to pay the money secured by the mortgage, except in the case of:
- an original party to the mortgage (unless the mortgage conditions are being varied); or
- a person who has previously covenanted to that effect.
Any such covenant will either be in the transfer or in a separate deed of covenant. In a transfer, the wording of the covenant should be as follows, or as close as circumstances permit: "The new borrower agrees to pay the lender all the money due under the mortgage and will keep to all the terms of the mortgage." If it is in the transfer, the lawyer must place a certified copy of the transfer with the deeds (unless the lender advises your lawyer not to).
If your lender has agreed to release you as a borrower or a guarantor and the standard transfer form (if any) includes no appropriate clause, your lawyer must add a simple form of release. The release clause should be as follows, or as close as circumstances permit: "The lender releases ... from [his/her/their] obligations under the mortgage." Your lawyer should check whether a guarantor who is to be released was a party to the mortgage or to a separate guarantee. If applicable, your lawyer will need to obtain the consent of every guarantor to the release of a borrower or, as the case may be, any other guarantor. Your lawyer must only submit the transfer to the lender for execution if it releases a party. All other parties must execute the transfer before it is sent to the lender. See the table below as to where the transfer should be sent for sealing.The table below also sets out individual lenders’ approved form of attestation clauses.
Sampling of Lenders Who Set Their Own Transfer Of Equity Conveyancing Requirements
Transfer of Equity Conveyancing: Mortgage Free
Where transfer of equity conveyancing does not involve a mortgage on the property and assuming no money is passing then a transfer of equity is a fairly straight forward process. Your conveyancer should be able to complete the transfer inside a couple of weeks depending on how fast you provide documents. The Land Registry will then take a few weeks to reflect the new ownership of the property. A registration fee will need to be paid
Transfer of Equity Conveyancing for a leasehold property
Where the property is leasehold then it is likely that the freeholder or their managing agents will charge their own administration fees. These should be set out in the lease. Occasionally formal licence will be required from the freeholder. If that does prove to be the case it will add a couple of weeks on to the transaction as well as a few hindered pound as it will involve the freeholders lawyers charging for drafting the appropriate consent documents.
Transfer of Equity Conveyancing and Insolvency Act Indemnity Insurance
If your transfer of equity transaction is made pursuant to an Order of the Court, then Insolvency Indemnity Insurance is not required. However in other situations, where a property being transferred at less than market value between owners, an Insolvency Act Indemnity Insurance policy may be necessary - especially if you have a charge over the property. This is due the risk of the outgoing person being made bankrupt in the future, in which case the Trustee in Bankruptcy will assert that the transfer of equity took place in order to avoid creditors. The Trustee in Bankruptcy will then apply to the Court to have the transaction set aside. If this happens, it could affect the lender or a future buyer from you as they would lose the property and the lender may not get back what they have loaned to you. The policy is also wise for your own protection. The Insolvency Act Indemnity Insurance policy only protects lenders or future buyers from you. If there is no mortgage and the outgoing owner is made bankrupt, there is a risk to you that you could lose your property if the transfer of equity is set aside. The cost of Indemnity Insurance policy is calculated on the value of the property at completion of the transfer of equity conveyancing.
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