Transfer of equity: when your lender needs independent legal advice

What a transfer of equity is

A transfer of equity changes who owns a property without it being sold. Common examples:

• adding a partner after marriage or moving in together
• removing a partner after a separation or divorce
• a parent transferring a share to a child, or a child buying a parent out
• moving from joint names into one name to remortgage

The legal owners sign a transfer deed (form TR1), and it’s registered at HM Land Registry. If there’s a mortgage, the lender must agree, because the people liable for the loan are changing. The borrowers afterwards usually sign a new mortgage deed, and the lender checks the new borrower can afford it.

Who needs independent legal advice

Lenders set their own rules, but ILA is commonly required for:

• The person giving up their share, especially if they’re receiving little or nothing for it. Some lenders require it in every case, partly to rule out a transfer made under pressure or without the person’s knowledge.
• The person being added, who becomes liable for the whole mortgage, not just half.
• A person staying on the mortgage but not the title, which works like a JBSP mortgage.
• Anyone living in the property who isn’t a borrower, who may need to sign a deed of consent.

The lender’s instructions to the conveyancer, or its offer letter, say who needs advice and often include the certificate wording.

Why the conveyancer can’t usually advise everyone

One conveyancer often handles the transfer for both owners. That’s fine where your interests line up. But where one person is giving up value, or taking on a debt they get little from, their interests conflict with the other’s. Solicitors’ professional rules then stop the same firm advising both, and lenders want the advice to come from someone independent. That’s where ILA comes in: a separate solicitor advises that person on their own, by video call, and signs the certificate the lender needs.

What the solicitor checks with you

• Your ownership: what share you’re giving up or receiving, and how it’s recorded
• Money changing hands: whether you’re being paid for your share, and whether the figure reflects what it’s worth
• Mortgage liability: whether you’re being released from the mortgage, or taking it on in full
• Your choice: that you understand the transfer and aren’t being pressured into it
• What else to consider: such as tax, a separation agreement or a deed of trust

Coming off the title isn’t coming off the mortgage

If you’re being removed, check two separate things: that the transfer takes you off the title, and that the lender is releasing you from the mortgage. Without a formal release, you can still be liable for a mortgage on a home you no longer own. A properly completed transfer of equity with the lender’s consent normally deals with both, but it’s worth confirming.

Tax

A transfer of equity can have tax consequences, for example where money is paid for a share or someone takes on part of the mortgage. Ask the conveyancer handling the transfer to check the tax position before you sign.

How the advice works

Send the TR1 or draft transfer, the lender’s offer or consent and its certificate wording. Your solicitor goes through them with you by video, then signs the certificate, which is usually sent the same day. See independent legal advice for a transfer of equity.