Transfer of Property Ownership after Divorce

Within this guide, we cover everything you need to know about the transfer of property ownership after a divorce within the UK.

Each of the two spouses has a legal right to reside in the family home throughout a divorce. You shouldn’t presume that you’ll be allowed to stay there after a divorce or that you’ll be entitled to 100% of the property’s value just because your name is on the mortgage or the title deeds.

On the other hand, don’t expect to have to vacate the property if your name isn’t on the mortgage or title deeds. The marital house is one of the assets you are legally entitled to get a portion of from your ex.

When a couple gets divorced, there are two options for deciding what will happen to the house: either you and your spouse agree, or the Court makes the decision for you.

If the decision to change the ownership of the property from joint owners to sole owners has already been made by both of you, you should speak with a divorce lawyer who can assess whether the agreement is fair. If it is not, the divorce financial settlement may be rejected when it is reviewed by a judge.

In order to start the process of transferring the property to you or your ex-partner, as per the agreement, the solicitor will gather all the information needed.

What happens to the matrimonial home in the event of a divorce?

In most divorce cases, the marital home is the most valuable asset. That is why the transfer of equity, or the removal of one spouse from the property title deeds, is an important step in a divorce.

While some couples decide to sell their property in the event of a divorce, others prefer to transfer ownership to one spouse. If there are children and one parent wishes to remain in the family home, this is frequently regarded as the best solution.

The value of the portion of a property you own that is subject to property law is known as equity. An individual can be added to or removed from a property title deed through a legal procedure called a transfer of equity.

In most divorces, one spouse must be removed. In some cases, a new partner may be added to the deeds as well. A transfer of equity involves at least one original owner remaining on the deeds and does not involve the sale of the property.

What is a transfer of equity?

The process of adding or removing someone from a property’s title deeds and consequently adding or removing them as the owner of that property is known as a transfer of equity.

A transfer of equity is different from a sale in that there will still be at least one original owner of the property even though the other owners’ names will change entirely.

We at Austin Kemp Solicitors are experts in every facet of the transfer of equity procedure. Contact one of our solicitors by phoning 0333 311 0925 or sending an email to mail@austinkemp.co.uk.

What does the transfer of equity process entail?

Your attorney will assist you with the process once you have decided to transfer equity. Each party will have their own attorney representing and counseling them if you are transferring equity as part of the divorce procedure. The essential steps remain the same regardless of how many parties are involved in the process:

1. Take a copy of the title deeds

Your lawyer will get a certified copy of the property’s title to begin the transfer process. This will be examined by your lawyer to see if there is a mortgage or any other restrictions on the property. They will now verify each party’s IDs as well.

2. Get the transfer documentation ready

After the process has started, your lawyer will prepare the transfer deed document for signing.

3. Notify third parties

Any third parties with interest in the property, such as a mortgage lender, bank, or building society, must give their written agreement for the transfer to be finalized. The lender must sign the transfer deed if the property is being transferred subject to the existing mortgage.

4. Sign the deed

The final step is to meet with your lawyer and an impartial witness to sign the document when they have completed it.

5. Notify the Land Registry

Lastly, the Land Registry will need to be informed of the deed transfer’s specifics. The cost of this will depend on the value of the property and can be anything between £50 to almost £1,000.

How long does the transfer of equity process take?

A straightforward equity transfer may take 4-6 weeks to execute. But because every transaction is unique, it can take much longer or much less time to complete the transfer.

The transfer will take longer if the property has a mortgage because you must wait for written approval from any involved lenders.

The transfer may also be delayed until all issues have been resolved if it is necessary as part of a wider legal dispute, such as a divorce that is being decided by the Court.

Getting a property settlement agreement

The part of the financial settlement made by a divorcing couple that deals with the property that needs to be divided is known as a property settlement agreement after divorce.

The marital house, or the primary dwelling where they resided during the marriage, is typically the property that needs to be divided, although it can also include additional residences or investment properties that are owned either jointly or separately.

It is advisable to include the specifics of a property settlement agreement in a consent order once a divorced couple has decided how to divide their assets. This is a formal document that outlines the agreements reached between the parties and is typically drafted by a lawyer.

When the divorce reaches the “Decree Nisi” stage, the consent order is typically submitted to Court to make it enforceable. Once the Decree Absolute is issued, the consent order is then enforceable against both parties.

The only method to definitively end your financial obligations after a divorce is to obtain a consent order, which gives both parties financial security by guaranteeing that any subsequent claims will be rejected.

Is it possible for an ex-spouse to sign over the house to the other party?

Yes, as part of the overall financial settlement, the marital home may be divided between the divorce couples if it is mortgage-free. In essence, this means leaving the other party as the sole owner and deleting the name of one ex-spouse from the property deeds.

If the property is still subject to a mortgage, approval must be obtained from the mortgage provider, and the ability to pay off the entire amount will be considered.

Following negotiation and sometimes mediation, the divorcing couple will often agree to a property transfer as part of the divorce settlement. To learn more, see our guidance on property division and divorce.

A “transfer of property order,” which imposes a court decision respecting property transfer, may occasionally be made by a court. This kind of injunction, meanwhile, is relatively uncommon and is often primarily meant to safeguard the interests of any minor children.

Checking the title deeds

It is advisable to obtain as much knowledge as you can about the property before approving a transfer of equity. When a couple purchases a home, one partner is frequently more actively involved in the transaction than the other.

It can be a wise investment to ask your conveyancer to complete a thorough report on the deeds. Concerns concerning the property’s intended use in the future, as well as access rights and limitations, may be brought up by the research.

This information is important regardless of whether you plan to move out or stay in your former marital home because it may reveal problems with the property’s worth.

For instance, you should check the deeds to make sure there are no restrictive covenants that would prevent you from carrying out your plans if you were thinking of renting out the home as a vacation rental.

Checking the restrictive covenants in the deeds may also uncover other potential problems, such as whether a third party’s permission is required for changes like an addition to the property.

The value of the land may also be impacted by restrictions and historic rights of access; knowing this information may be crucial to your financial settlement.

How to remove the name from the land registry

A solicitor who specializes in the transfer of equity can draft a title deed transfer that will transfer the property to one of the divorce parties while removing the name of the other ex-spouse from the deeds.

Alternatively, you can do this directly with the Land Registry. To remove the name from the land registry, you can use the following procedure:

1. Use form AP1 to submit a request to modify the registry.
2. If the entire property is being transferred, a Land Registry form TR1 (Transfer of Whole of Registered Title) must be submitted.
3. Along with the application, form ID1 must be submitted if a conveyancer is not conducting the transfer.

Is permission from the lender necessary?

If a property is still subject to a mortgage, consent from the mortgagee is required before ownership of the home can be transferred.

You will need to get the lender’s written approval before the transfer process can be finished because the mortgage is a credit agreement, and the individual leaving or entering the lease will need to be either freed from or accepted into that agreement.

If a new owner is added to the title, they will be responsible for the mortgage, and the mortgage lender will need to conduct their own due diligence to make sure they can fulfill their obligations under the mortgage agreement and make payments on time.

The credit agreement that the mortgage reflects is likewise terminated when someone is removed from the title. You cannot simply end a credit agreement; rather, you must first pay off any outstanding obligation.

The lender must be convinced that the person whose name will stay on the property will be able to make the necessary mortgage payments on their own if the existing mortgage is intended to be kept by that person.

There are various solutions accessible to you if you need to fix your mortgage while transferring your equity to another entity. You might “discharge” the mortgage, which is the process of paying it off. You might go along the previously described path and ask your lender for permission to transfer your share of the property, and consequently the mortgage, as part of a buyout.

If any property is going to be transferred as part of a divorce settlement, it should be transferred as quickly as possible to minimize any potential tax repercussions.

What about stamp duty?

When planning a transfer of equity, many people find the Stamp Duty Land Tax (SDLT) regulations to be confusing. If you are merely transferring the property to the sole spouse who is still married as part of your divorce proceedings, SDLT is not due. However, if a new partner is becoming a joint owner, standard rates are due.

`Property transfers made by spouses or civil partners who aren’t divorcing are excluded from the higher rate of SDLT. Whether the spouse or civil partner owns another home or not, the transfer will be at regular rates.

For the higher rate of SDLT to be exempted, two requirements must be fulfilled:

• The transfer must only involve the spouses or civil partners as parties.
• The couple must be cohabiting.

If a married couple or civil partner is not formally separated (by a court order or a deed of separation) or is separated under circumstances that make it likely that the separation will last forever, they are viewed as living together.

Numerous various variables must be taken into account when determining when Stamp Duty is relevant when you must inform the HMRC of the transfer of equity, and just how much Stamp Duty you owe. Consult a solicitor with experience in this area if you are unsure if Stamp Duty fees will apply to your transfer.

Is there any Capital Gains Tax to worry about?

As long as transfers are finished before the end of the tax year of separation, there is typically no Capital Gains Tax on transfers of property to a spouse where the primary marital residence is being transferred. Instead, these transfers are treated as being made on a “no gain, no loss” basis for CGT purposes.

`Although there is some room for interpretation when defining “marriage separation,” official guidelines refer to situations when “the marriage separation is likely to be permanent.”

Additionally, Principal Private Residence (PPR) relief may be requested for a specific amount of time.

If one party transfers the house to their ex-spouse after moving out, the departing party may only be exempt from CGT if the transfer is finalized within nine months of the moving out date.

Do both parties need a solicitor to transfer property ownership?

The Law Society advises against having the same lawyer represent both the transferor and the transferee in situations where a conflict of interest might develop during the transaction or in the future. It is usually believed that when property transfers are involved, a dispute may occur.

One lawyer from the firm could represent both parties if the transfer of equity has no monetary value, while it is preferable to have two lawyers from the same firm represent either party. However, it would be preferable if the parties hired their own attorneys.

Can I transfer equity on my own?

Technically, you could manage an equity transfer by yourself. However, it’s crucial to be informed that the procedure is challenging, especially when a divorce or separation is involved.

It is necessary to take into account a number of complex elements, including stamp duty and tax issues, as well as make sure that the proper is recorded at the Land Registry. It’s crucial to understand any prerequisites for the mortgage being offered.

For your own peace of mind, it is highly recommended that you hire an experienced lawyer to handle the transfer of equity process, especially since the cost of doing so is rather low.

How Austin Kemp Solicitors can help

Whatever your specific situation, transferring equity can be a difficult and challenging procedure.

It is strongly advised to seek professional legal advice and help from a properly qualified counsel when taking into account the legal paperwork, the requirement to secure the lender’s agreement, and the potential for paying SDLT.

Contact Austin Kemp Solicitors if you want to discuss the transfer of property ownership after divorce, or if you have any questions about any of the topics covered in this article by calling 0333 311 0925 or sending an email to mail@austinkemp.co.uk.