Mortgage deed - The Borrower and The Mortgagor?

schmuel

Hello, first post here, hoping I can find some much-needed advice.

I purchased a property back in 2005, using a mortgage that allowed me to name a family member as a 'sponsor', to boost the amount I could borrow. My mum kindly agreed to do this and I (or should that be we..??) bought my first flat.

I still live in the flat, now with my wife and baby boy. However, my mother and I are both listed on the land registry as proprietors, and it's this that's making life a bit difficult - I need to transfer ownership from me (and my mother?) to me and my wife, in order to secure a remortgage with a new lender. I'm told the transfer might result in CGT and stamp duty implications if HMRC were to view my mother as a true proprietor, rather than simply a mortgage guarantor.

I requested a copy of the mortgage deed from the lender, which names me and my mother as 'The Borrower', but just me as 'The Mortgagor'. But both me and mum are both on the land reg.... Why would this be the case? My understanding is that The Borrower is effectively the owner, but is that not the case? Is anyone able to shed any light on how HMRC might treat this case?

Thanks so much for any advice you can give.

Sam

00ec25

SDLT implications - Removal of your mother has no stamp duty implications as no "chargeable consideration" is involved. however, adding the wife will have SDLT implications as the consideration will be half of the value of the outstanding mortgage (assuming no actual cash also gets paid to mother). If that is more than the SDLT threshold then SDLT will be payable.

CGt - liability is based on who is a "beneficial owner". That is a very different concept to who is a legal owner. There are several factors which determine who is a beneficial owner, see here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg70230

who is named on the mortgage is not a key factor. Your mother is listed on the land registry, therefore is a legal owner (along with you obviously). Who is listed as "borrower" has no bearing on who is the legal owner, only the land registry records are the definitive statement of who the legal owner is. Why that is the case is probably related to the fact that lenders do not like to have borrowers who are not legal owners and therefore have nothing which can be repossessed (without getting into the complexities of a guarantee - which does not seem to be in place given what you have said, much "simpler" to have a property with 2 owners and repossess the property if needs be.)

so... is your mother a beneficial owner is the only question that matters in respect of whether she would be liable for CGT when she "disposes" of her interest in the property by transferring it to your wife. On paper it appears to be so at the moment. I assume your solicitor at the time of purchase did not get your mother to do a deed of trust renouncing any interest in receiving money from the sale of the property?

did your mother provide any money towards the deposit on the property? if so how was that recorded: an outright gift to you? a share of the property? a loan to be repaid?

the answer may therefore be for your mother to now do a declaration/deed of interest in which she does renounce any claim to money from the property, then there is no question of CGT liability for her. No beneficial ownership = no CGT liability, see here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg11730

note that at the moment with 2 names on the land registry the legal ownership must be either a as joint tenant or as a tenant in common. It is impossible for it not to be one or the other. if a "joint tenancy" both of you will need to sever that tenancy and convert it into a tenancy in common before your wife can then "take over" as a co-owner with you. You will then also need to decide if you and the wife will be joint tenants or tenants in common - that could have implications further down the line if, for example, you ever end up letting ("renting out") this property.

getmore4less

Adding the wife will need a SDLT assessment.

schmuel

00ec25 - wow, thank you for your very full and helpful response.

SDLT - "adding the wife will have SDLT implications as the consideration will be half of the value of the outstanding mortgage (assuming no actual cash also gets paid to mother)" - just to clarify, by outstanding mortgage do you mean the mortgage my mother and I currently have left on the property, or the new mortgage amount when we have remortgaged it (the new mortgage will be larger)?

CGT - thank you for the link to the CGT manual. Looking at the criteria for a beneficial owner, the only one my mother satisfies is that she has the legal title. She has never lived at the property, paid any of the mortgage or received any rental income, and did not provide any funds for the deposit.

As far as we can remember we did not sign a deed of trust at the time of the purchase, and we also can't remember whether we bought the property as joint tenants or tenants in common. Do you know how I can find this out?

Re the declaration / deed of interest - my mother is happy to sign anything that will help our case here, but can this really be done after the fact, i.e. 12 years after the purchase? If so, wonderful! Her view is that she was only ever on the mortgage to act as a guarantor to help me, not because she wanted to retain an interest in the property.

Are members allowed to recommend solicitors on here? If so please do, we went with a big factory conveyancing firm for the remortgage and I think we may need some more specialist advice...!

getmore4less - thank you as well for your response, noted, we will keep some funds back for a SDLT assessment.

00ec25

schmuel wrote: »

00ec25 SDLT - by outstanding mortgage do you mean the mortgage my mother and I currently have left on the property,.

amount o/s at point of transfer (which will thus be before re-mortgage)

schmuel wrote: »

As far as we can remember we did not sign a deed of trust at the time of the purchase, and we also can't remember whether we bought the property as joint tenants or tenants in common. Do you know how I can find this out?

Sadly it does not use plain English! there is no simple statement you are JT or TIC, instead, only if TIC will there be an additional paragraph called a FORM A restriction on the land registry title deed. It will however cost you £3 to check them https://www.gov.uk/get-information-about-property-and-land/copies-of-deeds (make sure you use the .GOV website - there are many other websites that will charge a lot more than that for the same info)

this gives an idea of whatForm A wording looks like - but Do Not use their links to buy the LR info from!
http://freeconveyancingadvice.co.uk/diy-conveyancing/notices-restrictions-on-title

what it means is the Land registry are required to make sure that the property cannot be sold if only one person has signed the document

schmuel wrote: »

Re the declaration / deed of interest - my mother is happy to sign anything that will help our case here, but can this really be done after the fact, i.e. 12 years after the purchase? If so, wonderful! Her view is that she was only ever on the mortgage to act as a guarantor to help me, not because she wanted to retain an interest in the property.

sorry - seek legal advice on that one

Land_Registry

00ec25 wrote: »

Sadly it does not use plain English! there is no simple statement you are JT or TIC, instead, only if TIC will there be an additional paragraph called a FORM A restriction on the land registry title deed.

what it means is the Land registry are required to make sure that the property cannot be sold if only one person has signed the document

sorry - seek legal advice on that one

Not wishing to over complicate things for you here but two points to make re above

The register is not definitive re how you hold the property as JTs or TICs. As ooec25 posts the legal and beneficial ownership are two very distinct things and we register the legal ownership.

So you could have a form A restriction on the register but you are not TICs - they can be added by default when JPs are registered for example simply because you gave no indication as to how you wished to hold the property; or
It may not be there but you still had a trust deed in place but did not apply fir a form A restriction

And secondly to clarify the 'make sure bit' - a for A restricts the surviving joint owner from say selling/remortgaging the property on their own. On each 'capital monies' arise, so in that situation they either prove they are the sole beneficial owner and the form A does not apply, or they appoint someone to act with them and together they take receipt of the capital monies.

We don't police what happens next or make sure the capital monies are shared in any way intended under the JPs beneficial ownership/ trust deed etc

Note to OP- the legal charge (mortgage) charges the property so it's the Borrower which is the key part of any legal charge as it is they who 'charge the property' within the terms of the legal charge.
There are other roles defined and sometimes involved such as guarantor but they have a different role in mortgage terms
Normally in such family arrangements you would go through the impact of joint ownership with the conveyancer who acted for you

So the best bit if advice I can give is that all three of you get legal/financial advice to cover all the angles both existing and with future potential