Transfer of equity in shared ownership: what sellers need to know

A transfer of equity is a legal process that changes property ownership by adding or removing someone from the title deeds or adjusting ownership percentages. 

If you’re selling your share in a shared ownership property, understanding the process can help avoid unnecessary delays and costs. Here, we’ll cover the key steps, costs, and considerations for a smooth transfer.

What is transfer of equity in shared ownership?

Shared ownership properties are partly owned by the buyer and partly rented from a housing association. A transfer of equity involves selling your share (often to a co-owner or a new party), removing your name if you’re transferring ownership to a partner or family member, or adjusting ownership percentages if agreements between owners change. The housing association’s stake in the property remains unaffected unless a full sale occurs.

What happens to the mortgage during a transfer of equity?

Mortgage is a key consideration in the transfer of equity process because the new or remaining owners must meet the lender’s affordability requirements, ensuring the property remains adequate security for the loan.

If there’s an existing mortgage
The lender must confirm the new owner can afford their share of repayments when adding an owner or ensure the remaining owner can manage payments alone when removing an owner. If the lender doesn’t approve, you may need to remortgage or pay off the mortgage before proceeding.

If the property is mortgage-free
Without a mortgage, the process is more straightforward, focusing on updating the legal documentation and registering the changes with the Land Registry.

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Do you need a solicitor for transfer of equity?

It’s possible to complete a transfer of equity without a solicitor, but this is not advisable. The legal and financial aspects, particularly when a mortgage is involved, can be complex. One solicitor can be used if both parties agree on terms (e.g., adding a partner), but separate solicitors are required if there’s a dispute or if one party is being removed. A solicitor ensures documents are correctly prepared, lenders are liaised with, and the transfer is registered.

Costs involved in transfer of equity

Costs can vary based on the property’s value and whether a mortgage is involved:

• Conveyancer Fees: £100–£500 plus VAT, based on transaction complexity.
• Land Registry Fees: £20–£500, varying by property value and application type (e.g., £230 for postal or £100 for online applications on properties worth £100,001–£200,000). See the HM Land Registry fee guide.
• Mortgage Lender Fees: £60–£300 for administrative processing.
• Stamp Duty Land Tax (SDLT): Payable if money changes hands, with exemptions for divorce or separation. 

If money changes hands during the transfer, such as when buying out another owner, Stamp Duty might be required. Exemptions often exist for transfers due to divorce or separation. Costs may vary based on specific circumstances, so it’s advisable to consult a conveyancer or legal professional for tailored advice.

How does the transfer of equity process work?

For properties with or without a mortgage, the process involves legal documentation and Land Registry updates to ensure the ownership change is valid.

With a mortgage

1. Contact the lender to obtain consent for the transfer.
2. Prove the new ownership structure is financially viable.
3. Your solicitor prepares the transfer deed.
4. All parties sign the deed in the presence of a witness.
5. Complete and submit an ID1 form if a party is being removed from ownership.
6. Your solicitor registers the updated ownership details with the Land Registry.

Without a mortgage

1. Instruct a solicitor to prepare the transfer deed.
2. All parties sign the deed in the presence of a witness.
3. The solicitor registers the transfer with the Land Registry.

The entire process typically takes four to eight weeks. However, leasehold properties may take longer due to additional steps required by landlords or housing associations.

Common issues in transfer of equity

Several challenges can arise during a transfer of equity. It’s essential to anticipate potential hurdles for a smooth and timely resolution.

• Lender refusal: If the lender doesn’t believe the remaining or new owner can afford the mortgage, they may refuse the transfer.
• Stamp Duty confusion: Misunderstanding tax obligations can delay proceedings. A solicitor can clarify if exemptions apply.
• Leasehold delays: Additional approval from landlords or housing associations may be needed.
• Disputes between parties: Disagreement over ownership percentages or terms can slow progress and require mediation.

Combining remortgaging with transfer of equity

You can combine these processes to save time and costs. Choose a mortgage lender that supports the new ownership terms, use a solicitor experienced in handling both remortgaging and equity transfers, and ensure all documentation aligns with the updated ownership structure. By merging the processes, you reduce duplication and simplify the legal steps.

Move forward with confidence

If you’re selling your share in a shared ownership property or adjusting the ownership structure, a transfer of equity is an essential step that needs to be done correctly. Whether you’re removing your name, adding someone new, or resolving ownership percentages, planning and working with the right professionals will make the process smoother.

Contact your local Ellis & Co branch to discuss your next steps.