16 Oct Transfer of equity – a residential property
What do you need to think about?
A transfer of equity happens when a person transfers their interest in a property to the other person or persons who already have an interest in the property. For example, a couple jointly own a property as their home and they separate, one of them decides they wish to leave the property and the other person wants to continue living at the property, the person leaving the property can transfer their interest in the property to the person who is going to continue living at the property. If a transfer of equity is contemplated then what do you need to think about?
Below are just some of the things you need to consider, it is not an exhaustive list, there will be other factors you also need to consider:
- If you are giving up your interest in the property, will the other person pay you money for your interest in the property, if so, how much money will they pay you, when and how are they going to raise the money?
- If you have a joint mortgage together can the person remaining living in the property release the person leaving the property from the mortgage? The mortgage company will need to be consulted. If the current mortgage company will not agree then the person staying at the property will need to see if another mortgage provider will agree to lend solely to them by way of a remortgage.
- Do you need to enter into a formal written agreement to record what has been agreed by you both to protect you both from a claim in the future being raised by the other person? It is advisable to consider having a Deed of Agreement setting out the terms of the agreement.
- Whose name are the utility bills held in? If bills are held in the name of the person who is leaving the property the bills will need to be transferred to the person staying. The person leaving will need to make sure their contracts with the utility company are brought to an end.
- How are the contents of the property to be divided? What items is the person leaving the property going to take with them?
- You will need to seek advice about any tax implications. For example the person keeping the property may have to pay stamp duty or the person leaving the property may have to pay capital gains tax.
As well as thinking about the above factors, you should think about getting advice about how much the person leaving will need to receive for their interest in the property, or if you are the person staying at the property how much you should offer to pay the person leaving.
Advisably before anyone moves out or money is paid or the transfer happens all matters should be agreed and recorded in a Deed of Agreement.
This article was written by Genette Gale who is a Family Solicitor at Rutters Solicitors. Genette will be able to assist you if you are going through a separation resolve how much will need to be paid if there is going to be transfer of equity and how to protect against any potential claims in the future. You can contact her by calling 01747 852377. Genette’s colleagues in Rutters Property Law Team will be able to deal with the actual transfer itself.