Adding girlfriend to property title - can I do it myself?

theoldmiser

I own a £250,000 house and have £100,000 left to pay on the mortgage.
I have moved in with my girlfriend of 15 years, who owns her own house and has inherited £400,000. She would like to pay off my mortgage for me (not least because she and I both think her money would be safer in property than in a bank, and would give more interest, as we plan to rent my house out), and become either a joint tenant or a tenant in common with me, so that she owns either an equal share of my house, or a percentage (in this case, £100,000 over £250,000, 40%)
We were thinking of using a conveyancing solicitor to deal with all of this, but after reading up a little about it, I think that I can just add my girlfriend to the legal title, using forms AP2 and TP1 from the land registry, and a Certificate of Identity Form, ID1. Once she is listed as either a Joint Tenant or Tenant in Common, she would then pay me the £100,000 and I would pay off my mortgage with it. We both want to go ahead with it, so there is no conflict of interest, or possibility of one of us taking something from the other without consent. (We are both over 50).
Do I need to use a solicitor, or can I safely do this myself?

AdrianC

You cannot change the ownership of the property until after the mortgage has been paid off.

Do you actually want to run a residential letting business, and is that particular property a sensible one to use?
What net yield are you foreseeing, and what assumptions are you making to arrive at that figure?

theoldmiser

Many thanks for your reply. I've had two letting agents round this week to let me know how much the property would rent for, they say it will rent for between £1,100 and £1,200 a month, and that they have clients waiting to rent properties already on their books, apparently in my area there are far more people looking for properties than there are properties to rent. So we would receive about £13,000 - £14,000 a year, minus costs (insurance, tax and maintenance - but I have just spent months doing up the property, so maintenance should be very low in the beginning.)

It's very helpful to know that we have to pay the mortgage off first! I didn't realise that.

AdrianC

Yes, but that's gross revenue - it's not net yield, which is your actual business profit (before you pay income tax on it)... And don't forget voids, bad debts, damage - and an allowance for wear and tear.

Will you be self-managing, or will you be happy to receive phone calls from the tenants at 2am needing you to arrange an emergency plumber?

Continental

Don’t forget to get your Wills updated (or having them written for the first time).
It might be best to actually get married tbh.

Tiglet2

Yes, pay off the mortgage first then you can do the Transfer of Equity yourself - note that the forms needed are AP1, TR1 and ID1.  This would be fine if you are intending to own as Joint Tenants.  However, if you want to own as Tenants in Common, you would probably need to have a Declaration of Trust drawn up by a solicitor.  Then another TR1 would need to be sent to the Land Registry to show the percentage shares and a sole proprietor restriction added to the title.  I think if you are paying a solicitor to draw up the Declaration of Trust, they may as well do the Transfer of Equity at the same time and pay one set of Land Registry fees.

Mutton_Geoff

theoldmiser said:

my girlfriend of 15 years, who owns her own house and has inherited £400,000. She would like to pay off my mortgage for me (not least because she and I both think her money would be safer in property than in a bank, and would give more interest, as we plan to rent my house out), and become either a joint tenant or a tenant in common with me, so that she owns either an equal share of my house, or a percentage (in this case, £100,000 over £250,000, 40%)

You are possibly confusing investment of your gf's money with savings interest. You only get interest on savings accounts, for most other types of investment (property/shares/funds etc) you get returns on the investment (yield) and possible capital growth.

If she'd hypothetically invested in the stock markets for the last 100+ years, she would have seen average yields of 7%. That's a lot more than a rental property. And a property is a very illiquid asset.

Renting out is a business venture in which you are about to invest a quarter of a million pounds. Are you sure, as Adrian says, you have done your due diligence on this new venture. Tax and legislation changes have decimated the potential for profit in the BTL industry. It's a business, not an easy path to riches.

Have you considered the more normal path of both selling up and buying a place together with equal shares perhaps leaving some money between you in savings for your rainy day fund. She has many other investment options to consider for her cash, not least pension provision.

AlexMac

AdrianC said:

Do you actually want to run a residential letting business, and is that particular property a sensible one to use?
What net yield are you foreseeing, and what assumptions are you making to arrive at that figure?

Good points and I assume you've done the spreadsheet?  At that rent, return on your £250k asset looks good; close to 6% gross, but factor in an average month or two p.a. voids, a couple of grand for annual maintenence and insurance, and the actual post-tax profit drops to around 2.5%- 3% yield; £6-7k,split between you .depending on whetjer you pay basic or higher rate tax on existing salary. 

Co-incidentally, my two little BTLs are now worth north of 250k each, like yours, but as I've owned them for 10 and 20+ years respectively, in a London suburb, I've enjoyed almost indecently meteoric Capital Gains; I can't see that happening again in the next 10-20 years.  I chose them as ideal BTLs; 2 bed flats in low-rise blocks without lifts near commuter links and shops.  Is your the ideal BTL gaff?  And I've been lucky with tenants; no bad debts or vandalisin fact one property's on long term let to a social Landlord as public housing, so no voids nor maintenence cost.  But I've often I've had to cough from £200- £3,000 at short notice in the past for the inevitable replacement of anything from white goods and electrics to a boiler or windows.

So take on others' advice above; the human as well as the fiscal, including the essential need to regularise the relationship. My and 'er indoors' affairs were equally complex (her property, my property, a BTL or two in my name...) so after 14-15 years we just got married, pooled the property and put everything in joint names; no messing about with %s...   And unless you really fancy being a landlord, how about selling the two homes; yours and ghers, and buying the worst property you an find in the best street locally, doing it up and letting that appreciate as your nest egg?  A dearer house will appreciate better than a cheap one over the years and that way, if you ever want to realise your asset and downsize to free up cas, it will be tax free?  If you sell yours now, you might even cash in with the next buy in 2021 or so if the pundits in this weekend's 
press are right about an impending price-drop?

But waht a nice dilemma; worrying about what to do with half a million of cash and assets!

greatcrested

theoldmiser said:

Many thanks for your reply. I've had two letting agents round this week to let me know how much the property would rent for, they say it will rent for between £1,100 and £1,200 a month, and that they have clients waiting to rent properties already on their books, apparently in my area there are far more people looking for properties than there are properties to rent. So we would receive about £13,000 - £14,000 a year, minus costs (insurance, tax and maintenance - but I have just spent months doing up the property, so maintenance should be very low in the beginning.)

It's very helpful to know that we have to pay the mortgage off first! I didn't realise that.

The agents may be right, or may be over-stating the rent to encourage you to sign up with them.... Do your own local research.

Assuming they are right, £1,100 x 10 is 11,000 pa, to allow for voids etc., not 13-14K.

Are you familiar with the 98 regulations you'll have to comply with or will you employ a letting agent to manage the property (10 - 12% of rent)? Have you factored in the overheads? gas report EPC, Right to Rent check, deposit scheme costs etc etc?

Do a proper budget! Then read my posts here:

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

Whilst the mortgage exists, you cannot change the ownership without the lender's permission, and they'll require a solicitor (at your cost). But if you pay off the mortgage first, then you could DIY the Transfer into joint names by submitting forms to the Land Regisry:

TR1

AP1

ID1

https://www.gov.uk/government/publications/registered-titles-whole-transfer-tr1/guidance-completing-form-tr1-for-the-transfer-of-registered-property

theoldmiser

AdrianC said:

Yes, but that's gross revenue - it's not net yield, which is your actual business profit (before you pay income tax on it)... And don't forget voids, bad debts, damage - and an allowance for wear and tear.

Will you be self-managing, or will you be happy to receive phone calls from the tenants at 2am needing you to arrange an emergency plumber?

I will be self managing - I have just replaced the bathroom suite, fitted a new shower, done tiling, all plumbing work myself, redid all the pipes in the kitchen with Yorkshire soldered joints (they were push fit before), there is no gas in my road, so I am not expecting any major problems with anything, I've lived in the house for over ten years.

theoldmiser

Continental said:

Don’t forget to get your Wills updated (or having them written for the first time).
It might be best to actually get married tbh.

We have both set up our wills so that I leave her my house and she will leave me her house.