Transfers of Equity – what, why and how?
This article was written for and published as original content in the East Anglian Daily Times property section.
A Transfer of Equity (TOE) takes place when someone transfers their share in a property to another person that they know for less than the market value of their share and so it is different to a sale of a share.
There are a number of reasons why you may need or want to do a TOE. Sometimes people are forced to do a TOE. For example on a divorce or relationship breakdown a Court may order one party to transfer their share in the property to the other.
On other occasions, people may wish to do a TOE. Primarily this is likely to be for tax planning purposes. As people get older, they may wish to transfer their property to their children to avoid them having to pay Inheritance Tax. We would always recommend that you speak to an Accountant in advance of making any TOE to ensure that it does have the effect that you intend it to, and that it is the most tax efficient way to proceed.
A TOE is carried out by us drafting a Transfer (TR1) between the various parties. In the simplest of matters, this will just name the parties and the property and can then be sent to Land Registry to record the position.
However, it is frequently not as straightforward as this. The most common cause of complication is where you have a mortgage over the property. In that instance, the mortgage lender must consent to any change in ownership. If they do not then you will be unable to change the Register at Land Registry.
Another example that can complicate matters is where you are transferring ownership of a leasehold property as the terms of the Lease will require formal notice to be given to the freeholder and, in some cases, their formal consent must be obtained in advance of the transfer.
If you are thinking of carrying out a TOE, always contact a Solicitor in the first instance so that they can advise you on the best way to proceed.
For more information on our conveyancing services, please call our expert property team on 01206 574431 or email enquiries@tsplegal.com