Transfer of Equity is where a co-owner transfers their share in a property to another co-owner. The interest can be transferred for a sum of money or it may be as part of an agreement, for instance on divorce. It is also a process when someone is either added or removed from the title deed(s), such as either a sole owner adding their husband, wife, parent, son or daughter. It is a reasonably straightforward transaction provided that all parties including any Lender or Mortgagee agree. There are circumstances when Stamp Duty Land Tax will be payable to HM Revenue and Customs. Legend Solicitors will be able to offer the professional advice you need to ensure that everything goes as smooth and stress-free as possible.
A legally binding Declaration of Trust will safeguard financial contributions made towards the purchase or improvement of a property and can also state in what circumstances the property must be sold.
A Declaration of Trust is particularly recommended if any of the following applies to you:
Declarations of Trust are very useful documents when two or more people buy property jointly together. It will set out each owner’s share in the property. It also sets out the rights and obligations of each owner in relation to the property, for example, relating to payments of outgoings and mortgage contributions. The document details what should happen if one owner wishes to “walk away” from the property. In those circumstances, the opportunity is given to the remaining owner to buy out the share of the owner who wishes to leave. If a “buy-out” is not possible then the property is placed on the open market. The Declaration of Trust can detail how the property’s open market value should be determined in the event of any disagreement. The proceeds of sale of the property would then be distributed to the owners in the shares as recorded in the Declaration of Trust.
There are two different ways in which property can be owned when purchased jointly; either as ‘joint tenants’ or ‘tenants in common’. Both mean that the property is owned by both parties together but the way it is viewed in law is very different.
If you own a property as joint tenants, then you each own the whole of the property together. If one of the owners were to pass away, the property would continue in the name of the surviving owner or owners. This happens regardless of the terms of the Will.
If you own a property as tenants in common, you each own your own distinct shares in the property. This allows you to divide up the property into shares, which can be 50/50, 60/40, or whichever proportions you agree between you. Your respective shares in the property will pass in accordance with the terms of your Wills. If you decide to own a property as tenants in common it is extremely important that you consider putting a Will in place.