Advice on selling house in parents name

Josh_sheffield

I'm after some advice on transferring ownership of a property.

I will try to keep this description as brief as possible. 7 years ago my parents bought a property in their name for myself and my partner to live in, as we were both students at the time we were struggling to get a mortgage despite having significant savings and sufficient income to cover the mortgage. We gave them the money for the deposit and transferred the monthly mortgage payments. As we now both earn pretty good wages we have been overpaying and paid of the mortgage a few months ago.

We are now looking at selling the house and buying somewhere else. Herein lies my question, how do we approach the sale? Will a single solicitor be able to handle the sale of the current property (in my parents name) and the purchase of a new property (in mine and my partners names)? Or will it be necessary/easier for my parents to transfer the property into our names before we then sell and purchase a new property?

I've been looking at the ‘transfer of whole of registered title’ form on the land registry website, but I assume I would need to pay a solicitor to sign the verifying identity forms? Also I'm not really clear on how you calculate the fee when the transfer is essentially a gift.

I'm also worried about capital gains tax, which I assume my parents could be liable for, depending on how much the property sells for. I'm aware that legally all proceeds from the sale of the house will be my parents, so essentially they will be gifting this to us. I don't think there is likely to be a problem with inheritance tax or deprivation of assets etc.

Any advice greatly appreciated.

davidmcn

Josh_sheffield wrote: »

Or will it be necessary/easier for my parents to transfer the property into our names before we then sell and purchase a new property?

No, this will make it much more complex!

Your parents sell the house to whoever buys it. They (instantaneously) gift the money to you and you buy new house. One solicitor can do the whole thing.

Yes, your parents will need to consider CGT.

AdrianC

Josh_sheffield wrote: »

7 years ago my parents bought a property in their name for myself and my partner to live in, as we were both students at the time we were struggling to get a mortgage despite having significant savings and sufficient income to cover the mortgage. We gave them the money for the deposit

I presume they didn't declare it to their lender as borrowed money, but as a gift?

and transferred the monthly mortgage payments. As we now both earn pretty good wages we have been overpaying and paid of the mortgage a few months ago.

That's one way of looking at it. A more legally correct way to look at it is that you were paying your landlords rent, which they then used to pay their mortgage on their house. Now that they've finished repaying their mortgage, and own their property outright, they've decided not to charge you rent. That's very kind of them, and I do hope they're maintaining the rest of their legal responsibilities as landlords - gas safety certificate etc - and I hope they were declaring the rent on their tax returns...

I hope they also had a BtL mortgage on it, and the lender were aware of the fact the tenant was a family member - but that's academic now the mortgage is paid off.

We are now looking at selling the house

It's not your house to sell. It's your landlord's. The fact that the landlord is also your parents is not strictly relevant.

Herein lies my question, how do we approach the sale? Will a single solicitor be able to handle the sale of the current property (in my parents name) and the purchase of a new property (in mine and my partners names)?

Yes, you can use the same solicitor to buy your property as your landlord/parents use to sell theirs. Why would you think that not possible?

Don't forget that you will need to make your own future lender aware that your deposit is gifted.

Or will it be necessary/easier for my parents to transfer the property into our names before we then sell and purchase a new property?

Yes, that would also be possible - they could gift you the property to sell, rather than gifting you the money from the sale. It may just complicates matters, though it might make chaining the transactions easier.

I'm also worried about capital gains tax, which I assume my parents could be liable for, depending on how much the property sells for.

Of course.

I'm aware that legally all proceeds from the sale of the house will be my parents, so essentially they will be gifting this to us. I don't think there is likely to be a problem with inheritance tax or deprivation of assets etc.

It would certainly fall into their scope, yes. They have bought a rental property, which is currently a substantial part of their wealth, and they are now gifting it/the proceeds from its sale to you. Nobody would wish their demise or dotage to be imminent, I'm sure - but it may well become an issue.

davidmcn

AdrianC wrote: »

Yes, that would also be possible - they could gift you the property to sell, rather than gifting you the money from the sale. It may just complicates matters, though it might make chaining the transactions easier.

Two main disadvantages:
1. Buyers (and/or their lenders) generally treat recent transfers of ownership with suspicion, so it will be difficult to mortgage for at least six months.
2. The OP will lose their first time buyer virginity (assuming they haven't previously owned), which means they couldn't claim the relevant SDLT concession on their purchase.

skintandfat

You could


Add yourself as a joint account holder to your parents joint account (with their consent and signature)


Have the parents sell the house with the proceeds going in to the joint account


Use the joint account to buy the new house


Then they are not gifting you the money- the money is jointly yours and theirs

davidmcn

skintandfat wrote: »

You could


Add yourself as a joint account holder to your parents joint account (with their consent and signature)


Have the parents sell the house with the proceeds going in to the joint account


Use the joint account to buy the new house


Then they are not gifting you the money- the money is jointly yours and theirs

That would fool only the most gullible solicitor.

Josh_sheffield

Thanks all for the replies, particularly Adrian for your detailed response. It seems the best thing to do is just get them to sell and gift money with same solicitor.

AdrianC wrote: »

I hope they also had a BtL mortgage on it, and the lender were aware of the fact the tenant was a family member - but that's academic now the mortgage is paid off.

Interestingly the lender (HSBC) was fully aware that the house was being purchased for us to live in and did not require a buy to let mortgage as it would only be family members living there. Likewise home insurance, I had assumed that they would need landlord cover, however Directline again said that this was not required.

AdrianC wrote: »

Yes, you can use the same solicitor to buy your property as your landlord/parents use to sell theirs. Why would you think that not possible?

I suppose I was thinking if there would be any conflict of interest around gifting the money. Not having much legal knowledge I wanted to ask before I get in touch with solicitors so I could validate whatever they were to tell me.

Thanks again.

Josh_sheffield

davidmcn wrote: »

Two main disadvantages:

2. The OP will lose their first time buyer virginity (assuming they haven't previously owned), which means they couldn't claim the relevant SDLT concession on their purchase.

I had no idea that first time buyers could claim a concession! Thank you very much for that info.

00ec25

AdrianC wrote: »

That's one way of looking at it. A more legally correct way to look at it is that you were paying your landlords rent, which they then used to pay their mortgage on their house. Now that they've finished repaying their mortgage, and own their property outright, they've decided not to charge you rent. That's very kind of them, and I do hope they're maintaining the rest of their legal responsibilities as landlords - gas safety certificate etc - and I hope they were declaring the rent on their tax returns...

why? an equally valid way to portray it, particularly given OP's background info

Josh_sheffield wrote: »

7 years ago my parents bought a property in their name for myself and my partner to live in, as we were both students at the time we were struggling to get a mortgage despite having significant savings and sufficient income to cover the mortgage. We gave them the money for the deposit and transferred the monthly mortgage payments. As we now both earn pretty good wages we have been overpaying and paid of the mortgage a few months ago.

is that the parents purchased the house as bare trustees and the OP is the full beneficial owner who has been paying the mortgage himself. No CGT for parents, since the beneficial owner is living there as his main home, money to him when the trust is wound up on sale of the property.

OP - do you want to do this based on helpful hints form internet strangers or do you want to do this properly but at the cost of paying qualified people for professional advice? You and your parents should speak to a solicitor and/or an accountant....

SDLT_Geek

00ec25 is right. There might be a declaration of trust from the time of the purchase making it clear that the parents hold the house as bare trustees with OP as full beneficial owner. That will improve things from some angles, though it would mean OP could not qualify as a first time buyer for the purposes of SDLT.

AdrianC

There may be a signed declaration of trust. But I think the OP would have mentioned that.