Transferring a property into joint names

Skippy13

I'm not sure if I've posted in the right section, apologies if not.

We are probably going to be in a position to pay off our mortgage at some point this year through an inheritance. At the moment the property is in my husband's name as I couldn't get a mortgage at that time. Once the mortgage is cleared, we plan to put the property in both names. Will we have to pay stamp duty to do this? We haven't had a valuation but similar properties in the area have gone from £230K-£260K.

We will also need to extend our lease as we only have 57 years left. Should this be done before or after or doesn't it make a difference?

Thanks in advance

AlexMac

We did this on a mortgage - free property worth about the same as yours a couple of years ago. We didn't pay SDLT.

I think the answer in your case is also no, especially as the mortgage will be cleared before the transfer.

In fact my reading of HMRC guidance at
https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

is that you won't have to pay even if your 50% share exceeds the zero rate threshold of £125k (which it probably won't if the property is worth about £250k). The guidance says

"You might pay SDLT when you transfer a share in a property to a husband, wife or partner when you do one of the following: marry, enter into a civil partnership, move in together."...
it then talks about SDLT being due on the "consideration"; e.g the real or notional payment (taking on liability for half the mortgage seems to counts as a "consideration")...
and
..." if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold"

but wraps up by saying
"If the transfer is a gift and there’s no consideration, SDLT doesn’t normally apply."

and
https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift
"If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold."

Either way, we used a solicitor to make it watertight, as I assume you will?. Another point (given the first quote above; " when you do one of the following: marry..."), is that we were married for years before we got round to doing it; which didn't seem to make a difference.

I dunno about the timing of the lease extension, but can't see this makes a difference.

00ec25

summary in a nutshell
if the outstanding amount of the current mortgage is for less than 250,000, and neither of you owns a second property, you will not pay SDLT whether you do the transfer before or after the mortgage is paid off

detailed reasons
if the mortgage is paid off then no "chargeable consideration" is exchanged when the property is put in joint names, therefore no SDLT

even if the mortgage is not paid off, you would only pay SDLT if 2 things apply:

a) neither of you own another property somewhere else, in other words you as a couple are not exposed to higher rate SDLT with its very much lower threshold of 40k

b) assuming a) does not apply, then if the mortgage remains o/s the exchange of chargeable consideration is 50% of the outstanding mortgage (it does not matter if he gives you more or less than 50% of the property, the default is always 50%). If that 50% outstanding mortgage is more than £125,000 then the wife would pay SDLT on the value of her share of the o/s mortgage at standard SDLT rates

note, being married is irrelevant, it is the exchange of chargeable consideration which determines what happens. Someone being "added" to an outstanding mortgage is deemed to be chargeable consideration being given to the person who currently owns the property and has sole liability for the mortgage. In return they are giving a share of the property to the other person hence the exchange. With no mortgage there is no exchange as the giver gets nothing in return, hence no SDLT

Skippy13

Thank you both for your replies, that’s a big help. Neither of us own another property at the moment (my husband does stand to inherit one), the mortgage will be paid off before transferring as Santander won’t allow me anywhere near the mortgage due to my credit history.

G_M

As explained above, no SDLT if the mortgage is paid off first.

I'm not fully familiar with lease extensions, but believe you have to have owned the lease for 2+ years to use the statutory process (you can agree voluntary extension with the freeholder at any time).

(please someone correct me if I'm wrong!)

if that s so, it may be that transferring the Title into joint names would re-start thaat 2 year clock, so better to extend the lease first and then transfer Title ownership.

The transfer itself, once the mortgage is removed, can be done yourselves using

* TR1
* AP1
* ID1

https://www.gov.uk/government/publications/registered-titles-whole-transfer-tr1

SDLT_Geek

00e_25 wrote: »

... if the mortgage remains o/s the exchange of chargeable consideration is 50% of the outstanding mortgage (it does not matter if he gives you more or less than 50% of the property, the default is always 50%). If that 50% outstanding mortgage is more than £125,000 then the wife would pay SDLT on the value of her share of the o/s mortgage at standard SDLT rates

I agree with most of 00ec25's comments, but not the section quoted here.

My understanding is that if, for example, a 10% share in a property is assigned, with the liabilities for the debt changing (e.g. by the incoming owner covenanting to pay the mortgage) then the chargeable consideration is 10% of the debt. I have seen that confirmed today in an email from a senior person in HMRC'S stamp taxes team in response to an analysis quoting Finance Act 2003 Schedule 4 para 8 (1B) and SDLTM04040.

SDLTM04040 https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm04040 includes the following: "each person’s liability for the debt is taken to be a proportion of the debt corresponding to the share that they own in the property subject to the debt."