'Transfer of Equity'

rdpro

Is this a good way to buy a house and avoid agents/legal fees?

Background: My brother and I have inherited my mothers house. He wants to move into the property and buy my share under a transfer of equity - both our names get added to the deeds (done by Land Registry, 40 quid fee), then a fixed-fee (200-300 quid) transfer of equity is done by a solicitor to remove my name from the deeds in exchange for an agreed sum.

Now, the iffy bit - I've agreed to buy a house from friends for an agreed price (cash, no mortgage involved). Can I have my name added to the deeds by the Land Registry, then do a transfer of equity using one solicitor, or am I missing something? Seems like a good way to save several hundred pounds in legal costs.

The property is in a stamp duty-exempt area, and the agreed amount is below the exemption limit anyway.

cowbopper

Hi rdpro

Im going through a similair situation at the moment. I am using only 1 solicitor for the transaction, as there is no involvement with a lender.
My solicitor has written to the other party to ask for confirmation that they want to proceed with this, suggesting they may want to seek legal advice (but not essential), the transfer of equity is done quite simply by means of consdieration. I.e. the other party agrees that in consideraiton of the sum of £100,000 they agree to transfer their equity.

rdpro

Ah, so it doesn't matter who the transfer is between? I was concerned that it was only between husband/wife/family, etc.

Rick62

But transfer of equity is still subject to stamp duty.

rdpro

Rick62 wrote: »

But transfer of equity is still subject to stamp duty.

As mentioned above though, it's in a duty-exempt area, so I assume that the solicitor would return a nil value Stamp Duty Land Tax form. The price agreed is about 40k below it's market value though (they're retiring abroad and just want enough to clear their house purchase in France).

Richard_Webster

I think you may be confusing the precise form of document that is used to carry out the transaction with the issue of whether or not you use a solicitor or save on solicitor's costs for a purchase.

If you don't use a solicitor to check stuff about the property you are purchasing and you don't do searches etc then you will be taking a risk. If you are happy with that risk, I'm not clear what doing a transfer of equity will achieve. So you are B and the present owner is A. As far as I understand your idea is A transfers to the property to A & B and then A & B transfer to B. Why not a straight transfer A to B? You save a set of Land Registry Fees that way.

Also if A has a mortgage on his property you will have to pay him enough money to discharge his mortgage because his mortgage lender won't be happy that the property is transferred with their mortgage on it to you and your seller.

So as far as I can see what has happened is that you have found out that solicitors' charges for transfers of equity are cheaper than for a normal purchase so you think you can exploit that. Remember though that generally speaking the people involved in such transfers are familiar with the property and so don't need the advice about legal issues relating to it.

Really all you are doing is saying to a solicitor that you simply want him to deal with the mechanical transfer of the property to you and you do not want any advice about any legal aspects relating to it. If you can find a solicitor who is prepared to give that limited service, fine. Or you may want to do it all yourself. However, you take the risk something will come up in the future that you didn't know about and you will have nobody to blame but yourself.

rdpro

The property is mortgage-free, and ex-local authority. I plan to have it surveyed, and have already viewed the previous searches, etc. that were done when it was bought from the council.

The main reason for doing it as ToE is because to transfer it through normal conveyancing would require two solicitors, charging around 900 apiece. The sellers are my girlfriend's parents, who have lived in/maintained the property for over 30 years. Aside from any physical defects in the property found by the survey, and having the details of prior searches, I feel saving myself 1500 quid (I agreed to pay all legal costs) may well be worth it.

Richard_Webster

I still think you are missing the point.

If you really want to do a transfer of equity, you will have to do two Land Registry Transfers (one to add your name and one to take the other person's name off) and register both. If you are happy not using a solicitor why not then simply do one transfer of the property straight from your seller to yourself?

Why the extra complication of having

my name added to the deeds by the Land Registry, then do a transfer of equity

...?

At some point,whichever way you do it you will have to complete the SDLT forms, even if you won't have any tax to pay if the price is under the limit.

rdpro

Ah, are you saying that even a ToE isn't necessary, and a simple title transfer would be sufficient?

I thought at some point the ToE would be necessary to 'legalise' the transfer of names, and legitimise the sale.

Richard_Webster

Ah, are you saying that even a ToE isn't necessary, and a simple title transfer would be sufficient?

Correct.

You will need to put the actual price paid in the transfer and pay the right LR Fee for it.

rdpro

Excellent news.. thank you for your input