A guide to transfer of equity – what’s the process?

Transferring the equity in your property can seem complicated, but it doesn’t need to be stressful.

We’ve put together a straightforward guide covering all the key questions around equity transfers. Whether you want to understand the ins and outs of what a transfer of equity means or learn step-by-step how the process works, our guide breaks it down in simple terms.

Let’s make sense of transfers of equity…

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What is equity?

Understanding home equity can feel confusing at first, but we’re here to walk you through it in simple terms. When we talk about the equity in your home, we essentially mean how much of it you truly own outright. You can get to that number by taking the current total value of your property and subtracting what you still owe on your mortgage.

Let’s take an example to make things clear, say your home is valued at £200,000 in today’s market. But your outstanding mortgage sits at £150,000, this would mean that you have £50,000 worth of equity built up so far.

What is a transfer of equity?

A transfer of equity refers to the legal process of changing the names on a property’s title deeds .

Life can throw anything at you, we understand that – marriages, divorces, new partners, inheritance changes, it’s sometimes hard to predict. But your record of home ownership needs to reflect this.

While each situation has its own nuances, the process fundamentally includes filing the right paperwork to record the ownership change, working with your mortgage lender to amend the loan if needed, handling any required stamp duty tax payments, and formally registering the updated property records. We'll explore the step-by-step process more later on so everything is crystal clear.

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Why would I need to transfer equity?

Sharing ownership of your assets can get complicated when circumstances shift. There’s no shortage of reasons you may need to legally transfer equity in your home. Here’s a rundown of some of the most common reasons for transferring equity:

Adding a partner

Adding a partner is one of the more exciting reasons why you need a transfer of equity, in this situation you are adding a person to the Title Deeds.

Separation or divorce

In case of a split, you may need to fully transfer equity to whichever partner will remain in the home.

Buying out owners

Over time you might find yourself needing to buy out the equity shares of a former co-owner, like an ex-spouse or partner.

Gifting equity

How generous – gifting part of your home’s equity to loved ones! Parents often choose to add children to property deeds.

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Do I need a conveyancer to transfer equity?

Transferring equity can feel like navigating a legal maze, hiring a conveyancer will help guide you through with expertise.

With many technical considerations, including mortgage and tax implications, we understand that feeling of being overwhelmed. Your conveyancer will work closely with you the complete the legal and administrative work for your transfer of equity.

Your conveyancer will handle:

Navigating legal challenges: With conveyancers specialising in property law, they have the expert knowledge to steer clients through transfers of equity.

Preparing documents: The paperwork involved in transfers of equity adheres to rigid requirements. Conveyancers ensure every document, from transfers, deeds registration and more, is fully accurate and compliant.

Update Land Registry records: Updating the Land Registry with the updated property ownership details is crucial. Your conveyancer will handle this for you.

Explaining tax implications: Depending on the specifics of the transfer, Stamp Duty (SDLT) may apply. At Eden, we get specialist tax advice on each case.

Liaising with lenders: For mortgaged properties, conveyancers communicate with lenders to secure necessary approvals and address financial impacts.

Guiding financial settlements: Where buyouts or agreements have a role, conveyancers assist in formally documenting the financial terms involved fairly and legally.

Instructing a conveyancer to assist you in your transfer of equity ensures that you are legally protected and ensures that the legal transfer is completed correctly.

What is the process of transferring equity?

Transferring equity in your home can seem incredibly daunting when you first start looking into it.

It's legal process with a lot of moving parts, paperwork, approvals needed, and fees to consider.

We completely understand why you might feel overwhelmed! But take a deep breath, because when the process is broken down step-by-step, it becomes much more digestible and manageable.

Here is a thorough walkthrough of what the full transfer of equity process entails:

Step 1 – Instruct a conveyancer

Start by consulting a conveyancer who will assess your needs, explain legal implications, and put a plan into action. Your conveyancer will be your map throughout the whole process.

Step 2 – Confirm ownership details

Your conveyancer will conduct a Land Registry search to ensure all current ownership information is correct before proceeding.

Step 3 – Prepare transfer documents

Next comes the formal paperwork. Once your conveyancer understands your case, it’s time to prepare the necessary documentation. This will include the Transfer Deed, outlining the details of the equity transfer and all the parties involved, ready to be signed.

Step 4 – Mortgage lender consent

For mortgaged homes, you’ll need consent from your lender, who may need to amend your mortgage terms and agreement. Your conveyancer will handle contacting them.

Step 5 – Signatures and consent

Your conveyancer will work diligently to collect official signatures from everyone included in the property transfer.

Step 6 – Submission to Land Registry

Once the transfer deed is signed, your conveyancer will submit it for you to formally register the change in ownership.

Step 7 – Pay SDLT (if applicable)

If stamp duty applies, don’t worry – your conveyancer will ensure payments are properly made to HMRC on your behalf.

Step 8 – Legal completion

When all the above is fulfilled, you’ve completed, congratulations! It may seem like a marathon at first but taking it step-by-step with the right guidance makes all the difference. Make sure you instruct a conveyancer you trust.

How long does a transfer of equity take?

We know that you’ll be eager to complete your transfer of equity as quickly as possible. The timing can vary quite a bit, but here’s a realistic expectation: The full process usually takes between 4-8 weeks when all goes smoothly. We wish we could give you an exact timeline, but many factors in play impact the pacing:

  • Complexity levels:  Is it a straightforward case or does it have lots of complicating factors? The more complex, the longer conveyancers need to work on your case.
  • Mortgage involvement:  If there is an existing mortgage, getting your lender’s approval and reworking loan details adds steps to the process.
  • Responsiveness of everyone involved:  How quickly can all relevant parties provide signatures, approvals, and essential information? Hold-ups increase timelines.

While it’s frustrating not having a definite date when you’ll hold those updated title deeds in your hands, your conveyancer should be able to provide you with realistic expectations once they have assessed your unique situation.

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How much does a transfer of equity cost?

We totally understand - unexpected costs arising can feel like the absolute last thing you need on top of an already stressful process. Trying to determine what exactly it will cost you to transfer equity can also feel confusing.

There are often so many moving parts and intricacies involved from case to case. While we can't give you an exact price tag upfront before assessing your unique circumstances, we can help make sense of the likely costs in play.

Here's an extended breakdown of some of the most common fees and charges you can expect as part of transferring equity:

1. Conveyancing fees

You’ll pay your conveyancer between £500 - £1,000 in  legal fees for the work they complete whilst acting on your behalf through the transfer of equity process.

2. Transaction costs

From document checks to bank transfers, your conveyancer covers admin fees that they will pay on your behalf (£20 - £150)

3. Land Registry

When transferring equity, you need to register the changes with the Land Registry. This will typically cost between £20 and £455.

4. Freehold consent (if applicable)

If you are transferring equity of a leasehold, you’ll need to get consent from the freeholder of the property. This can cost up to £250.

5. Stamp Duty

Stamp duty is often the largest cost when transferring equity. Stamp duty is owed based on the nature of the transfer of equity.

If you are adding a partner or spouse to your title deeds, you will only have to pay SDLT if the chargeable consideration exceeds the SDLT threshold (250,000). Learn more about when you’ll have to pay stamp duty here .

If the transfer of equity is a gift, or half the property is split between two people, SDLT is not payable. If a couple is separating or divorcing by a court order, there will also be no SDLT to pay.

Check out our full guide to Stamp Duty in the UK here .

6. Remortgaging

If you are remortgaging at the same time as transferring equity, you’ll incur additional costs. Again, depending on your situation will depend on the costs you incur, but we break it all down in our guide to remortgaging .

Transfer of equity checklist

Need the above at a glance? No worries, here's your transfer of equity checklist:

  • How much of your property you truly own outright
  • Current property value minus the outstanding mortgage

What is the transfer of equity?

  • Changing names on a property's title deeds
  • File paperwork to record ownership change
  • Work with lender to amend mortgage
  • Handle stamp duty payments
  • Formally register updated records

Why transfer equity?

  • Add or remove a partner
  • Separation/divorce
  • Buy out former co-owners
  • Gift equity to loved ones

Need a conveyancer?

  • Navigate legal challenges
  • Prepare compliant documents
  • Update Land Registry
  • Explain tax implications
  • Liaise with lenders
  • Guide financial settlements

The step-by-step process:

  • Instruct a conveyancer
  • Confirm current ownership
  • Prepare transfer documents
  • Get mortgage lender consent
  • Collect signatures & consent
  • Submit transfer deed to Land Registry
  • Pay applicable stamp duty
  • Legal completion

How long does it take?

  • 4-8 weeks typically
  • Depends on complexity, mortgage, responsiveness

What are the costs?

  • Conveyancing fees
  • Transaction/admin fees
  • Land Registry fees
  • Leasehold consent
  • Stamp duty tax
  • Remortgaging fees

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At Eden, we understand that buying or selling a home can be overwhelming. We’re here to make conveyancing simple.

We will be in touch with you weekly, providing updates and being there when you need us. You can contact your property lawyer whenever you like, to ask whatever you like.

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How does conveyancing work?

What is a Transfer of Equity?

Transfer of equity definition.

Unlike sale and purchase, the transfer-of-equity involves one of the existing legal owners who will remain on the title while the other party is added or removed from the title. The transfer-of-equity is the legal process if you require changing the legal ownership of a property.

Transfer of Equity

Not all transfer of ownership is simple as they may sound. It is a process needed when one of the original owners remains on the deed. It means that in some cases, more than two parties might be involved in the process. Remember, the property can’t have more than four owners, but several parties may get involved in the process.

When doing the transfer, all parties must agree on the outcome. The fact that no property search is involved, each party must look at the transaction carefully. Failure to that complications might occur in cases of conflicts and mortgages.

What is Equity?

On the other hand, equity means the value of your property less the outstanding sum of the mortgage. In other terms, it is the percentage of your property that you own. When one owner is giving up on their share, the other party receives the total percentage.

If there is no equity or a situation of limited equity, one can re-mortgage with an existing lender or a new party. The funds provided by the new member may act as compensation to the person leaving the contract.

What Are The Main Reasons For The Transfer Of Equity?

Divorce, through the legal way, comes in with the division of property between you and your spouse. The home is the most critical asset that cannot be divided into two physically. It will call for the need to apply for a transfer-of-equity.

One of the partners will have to remove the ex-partner from the deed if you have divorced. The remaining partner can agree to pay half the property’s value to the spouse as compensation for removal from the deed.

A current market price may need to be established to compensate the partner leaving the deed for this situation. The shares of each partner can also change depending on the situation.

Getting Married To A New Partner

Most people marry new partners after acquiring a property. Some may marry again after a divorce and may need to add their new partner on the deed. A transfer-of-equity must be done to incorporate the new partner.

In case the property was still under mortgage, the parties will have to seek the consent of the mortgage lender to go ahead with the transfer process.

Buying The Property As a Joint

Currently, most people are buying properties together with family members or friends. The application of a transfer-of-equity will be essential to incorporate the two owners into the deed.

Ease Tax Services

Most spouses transfer ownership to their children for tax efficiency. It may be seen as a gift, but it is essential to seek legal consent before doing it. In such a case, no money exchanges hands.

Processes Involved in the Transfer of Equity

The services of a lawyer are essential when planning a transfer-of-equity. But the lawyer is not involved in any of the processes. You’ll need a Conveyancing Solicitor to complete the legal requirements in a transfer of equity. You may have more than one legal advisor in your team, especially if it involves a divorce case.

Here are the main stages involved in the transfer:

1. Review the Ownership Documents

The ownership document may be in the form of a title deed or a lease agreement. The documents must contain the names of the two owners in case of a divorce or separation. In a scenario where a new member is added to the deed, the original owner’s name must be present on the deed.

The persons responsible for actualising the transfer will also confirm the co-ownership status of a property with the relevant department. In cases where there is a conflict, or the owner is dead, the death certificate is attached to show proof of ownership.

2. Prepare the Transfer Deeds Documents

There are several documents required for the transfer process to take place. The most important document required is a form of identification to prove that the parties involved are the property’s real owners.

If a parent is transferring equity to the children, one needs to provide evidence to show that they are the legal guardians. For adoption scenarios, the adoption permit will act as the birth certificate to show proof. In some cases, one may need to swear an affidavit if any conflicts may arise.

A marriage certificate is equally essential when adding or removing a spouse. It is the only legal evidence to prove the two parties are married. Divorce documents are also important when you want to remove your ex-partner from the deed if you have divorced.

3. Organise a Meeting with the Involved Parties

After preparing all the transfer deed documents, it is essential to meet all the necessary people involved. The people who should be present include the original owner(s) of the property, the persons being removed or added, a witness, and the legal advisor. The task of the legal advisor is to sign the transfer document in front of the witness.

4. Take Notice To The Mortgage Lender

If the property is still under mortgage, the mortgage lender’s consent is required to go ahead with the transfer . Failure to do that will bring complications during the transfer process.

5. Do the Final Registration of the Deed at the Relevant Department

When the above process is successful, the final part to actualise the transfer is done. The documents are submitted to the relevant authorities, which, most times, is the land registry department. The department verifies the authenticity of all the documents before approving the request. The department will provide the new parties with a new deed with the actual owner’s names (s).

What Happens in the Case of a Mortgage on the Property?

People buy properties under mortgages. Sometimes one party may leave, and the need to remove the person from the terms and conditions is required. One should seek the mortgage lender’s consent to go ahead with the transfer. One cannot leave the deeds without sorting the debts used to purchase them.

There are several ways to do it. The method you choose to apply depends entirely on the circumstance of the transfer. Below are some of the ways to apply;

  • Clear the mortgage with other resources. You can pay it off using other resources you own. This process only applies if one files for bankruptcy or when you refinance.
  • Seek approval from the lender. It happens in case the co-owner of the property purchases the share of the other party.
  • Re-mortgage the property to acquire enough funds to clear the existing loan and get surplus to clear the buyout. It is vital, especially when separating from your partner.
  • Transfer of equity and remortgage can be complicated so we have written guide on this.

Cost of Transfer of Equity

The cost of a transfer-of-equity will highly depend on the circumstance of the occurrence. There are no fixed charges, and the fees are calculated according to the transfer type. The following are the charges that you will likely incur during the transfer:

Conveyancing Fees

The calculation of these fees is based on different factors. The main factors that affect the amount include; the property value or whether you need to re-mortgage the property.

These fees depend on the solicitor. Some may include it in the general charges, while others will not. Some of these charges include; ID verification, a copy of the property’s register of title, and ownership change registration.

Mortgage Fees

Some of the banks will charge you their fees. These include service fees that cater to administrative costs involved in the process.

The Stamp Duty Land Tax

It is the heaviest cost incurred in the whole process. There is a limit where the need to pay the land tax depends on the authority rates. The amount is calculated using bands. In scenarios where one party is leaving due to separation stamp duty, land tax is unnecessary.

The stamp duty tax necessarily happens when the property is under a mortgage. When adding a partner into the title, a deed of trust must be in place to set out the property’s ownership. It is in a case where the shares to the property are unequal.

Final Words

It is advisable always to seek advice from a solicitor to help you through the process. Ensure that you find the right expert to guide you through the whole process. Some people get a fast experience, while some get obstacles due to missing documents.

Ensure that you verify everything before the beginning of the process. Contact your lawyer at the earliest stages to receive proper guidance. Ensure that the said professional is competent and aware of making it simple and straightforward without any complications.

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What is an equity purchase agreement and why do i need one.

Bella Vista Business Law , Business Law corporation , equity purchase agreement , llc , selling a business

What Is an Equity Purchase Agreement and Why Do I Need One?

Table of Contents

An equity purchase agreement, also known as a share purchase agreement or stock purchase agreement, is a contract that transfers shares of a company from a seller to a buyer. Equity purchases can be used to acquire a business in whole or in part. They are frequently contrasted with asset purchases, which achieve similar objectives but have a different deal structure.

Equity acquisition is generally simpler than asset acquisition. However, there are pros and cons to each deal type that both buyer and seller should explore with the help of a professional legal advisor.

When an Equity Purchase Agreement Is Used

There are two main situations in which a business might be interested in selling shares of the company. The first is to raise money. Selling stock to investors can provide capital to pay down debt, make investments, or expand the business.

When a company sells stock to raise money, new shareholders are brought onboard, but the transaction does not result in a transfer of the ownership of the business entity. This is true even if a new shareholder is the majority shareholder.

Ownership of the business changes hands when the shareholders sell all of the company’s stock to a buyer. The buyer who purchases the stock (i.e., the equity) becomes the new company owner. Other than the ownership transfer, the business remains unchanged. It has the same assets and liabilities as before the equity purchase.

Another way to become the de facto owner of a company is by purchasing its assets, rather than its stock. In this scenario, even though the assets of the company change hands, the ownership does not. On paper, the company ownership remains unchanged. Like selling company shares, selling assets can be a targeted way to raise money. It does not necessarily entail a radical change in the direction of the company.

Using an Equity Purchase Agreement in the Sale of a Business: Pros and Cons

According to Corporate Finance Institute (CFI), stock purchases are simpler and more commonplace than asset acquisitions. Hedge funds often conduct mergers and acquisitions in the form of stock purchases. Kruze Consulting notes that big companies almost always buy the assets of small companies, while deals between equal companies are typically equity purchases.

A business sale structured as a stock sale is usually preferred by sellers, while buyers tend to prefer asset sales. The reasons for this are related to structural differences between the deals and their implications.

As noted, an asset purchase transaction does not result in transfer of the ownership of the business. The buyer purchases individual company assets, such as equipment, licenses, inventory, and customer lists. They can also exclude specific liabilities from the deal. Contrast this with an equity purchase, in which the buyer acquires the stock of the target company—along with all of its assets and liabilities—and assumes company ownership.

Buying a company lock, stock, and barrel, as opposed to negotiating specific assets and liabilities to purchase and exclude, is simpler but also risker. It is simpler because assets do not need to be retitled and revaluated, and employment agreements and contracts with suppliers and customers do not need to be renegotiated. It is riskier because the buyer could be taking on unintended liabilities, such as an undisclosed lease or lawsuit.

Tax-wise, there are advantages and disadvantages to business acquisition equity purchases. The buyer may be able to avoid paying transfer taxes, but they lose the step-up tax benefit that can affect capital gains taxes down the road.

From the buyer’s side, current shareholders can complicate a stock sale if they cannot agree to sell. In addition, applicable securities laws can prolong the equity purchase process, especially when the target company has numerous shareholders.

From the seller’s side, buyers may offer a high price on asset purchases. In addition, a stock sale offers tax benefits to the seller and can free them from liabilities and contracts.

Elements of an Equity Purchase Agreement

A real-world example of an equity purchase agreement is available here on the Securities and Exchange Commission website. As you can see, the agreement lists numerous provisions that are typically found in an equity purchase agreement. These include the following provisions:

  • Definitions/defined terms
  • Names of the parties
  • Terms of the deal (i.e., how many shares are being sold and at what price)
  • Representations and warranties of the buyer, seller, and company
  • The laws that cover the agreement
  • Indemnification
  • Pre- and postclosing covenants
  • Payment details, including when payment is due and the closing date of the deal
  • Confidentiality and nondisclosure agreements
  • Conditions, indemnification, fees and expenses, and other miscellaneous provisions, such as how employee issues will be handled after the transaction and any ongoing consulting or transition services
  • Dated signatures

Whether you are selling stock in your company or buying equity in a company, the transaction should be conducted with an equity purchase agreement that reflects the specific parameters of the parties’ contractual relationship.

Not sure if an equity purchase or an asset purchase is the best way to proceed? Need help performing due diligence? Have questions about tax implications? Contact our legal team to set up an appointment.

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Founder’s Guide to Equity Investment Agreement

In this article, we will understand equity agreement importance, applicability, implementation, pros and cons of equity agreement.

It is often said that we invest for the long term when we categorize different businesses. We understand how important it is to be able to provide value by increasing profit. Similarly, investors make sure that they always take less risk. So they invest in equity shares which helps them drive more profit. These days, equity is the most expensive asset for a company , but it is worth keeping.

Equity Agreement

Equity , also known as shareholders’ Equity (or owners’ Equity in the case of privately held corporations), is the amount of money that would be returned to a company’s shareholders if all of the company’s assets were liquidated, and all of the debt was paid off in the event of a liquidation. In the case of an acquisition , equity is the company’s revenue after deducting any obligations due by the company.

What is an equity agreement?

When investors agree to donate money to a company in exchange for the chance of a future return on their investment, this is known as an equity investment agreement . Due to affluent investor partners and no repayment schedule, equity is one of the most appealing financial sources for entrepreneurs. It does, however, need the most effort to find. When you raise money through equity , investors give you money in exchange for a piece of the firm, which will theoretically increase in value as your company grows.

Any stock option agreement between the corporation and a selected stockholder entered into pursuant to an equity plan is referred to as an Equity Agreement. An equity agreement is like a partnership agreement between at least two people to run a venture jointly . An equity agreement binds each partner to each other and makes them personally liable for business debts. When two partners sign the equity agreement, each partner is responsible for each other’s actions. The share might not be the same in the equity agreement but the roles and responsibilities of each partner remain the same.

For example , if one partner is handling the entire management , the other partner must be responsible for running the operations of the business .

Why is an Equity Agreement important?

An Equity Agreement is done to ensure that both the investors and company can stay together for an extensive long duration of time.

Why is an Equity Agreement important?

The significance of an equity agreement could be broadly summarized as below :

  • Long-term commitment from the founders – Sometimes there are ups and downs, and some of the founders might start losing interest and don’t want to work together. They have limited capital and extensively high reliance on the founder’s efforts to work and stabilize the company. Signing an Equity Agreement makes it convenient for them to stay motivated and continue their efforts to grow the business.
  • Damages from the founders – While signing the agreement, there are some terms to be kept in mind that might create hurdles in the future. There is a clause where if one founder passes away after a certain period, a new company can jeopardize its future success . But without the equity agreement, this can’t be possible in case the company might face losses.
  • Protection of Investors – Before committing to an investment, professional investors – venture capital firms or angel investors – commonly demand stock vesting provisions from founders and key personnel. It’s a technique of determining how invested people are in the company, as well as protecting equity from departing partners.

When is an Equity Agreement applicable?

It is often done in the early stages of a startup as the company strives to align all of the founders’/critical talent’s incentives with the company’s. Typically, stock vesting is done over four years with one-year cliffs, i.e., if a person has 50% equity and quits in two years, the firm forfeits 25% of that equity. The one who stays longer with the company , the more equity vests. In this situation, if one stays for the entire tenure, the entire stock vests, rewarding the employee for sticking with the company for such a long time.

Pros and Cons of Equity Agreement

Investing in equity shares has always been expensive for companies, but if it is invested with proper information and knowledge, it can always be helpful and rewarding. Each investor will always look into the current market scenario before investing in any of the businesses . Similarly, they will also consider all the pros and cons before actually making a contract.

Here are the pros of an equity sharing agreement

  • Less Burden – When the equity sharing agreement is prepared, it helps the shareholders and the company to manage their finances more efficiently, as it creates less burden on the company and the shareholders. It lessens the decision making burden and losses that occurred during the operations of the running the business. It also enables the shareholders and company to remain accountable for their actions.
  • Credit issues gone – Credit problems are no longer an issue. If you lack creditworthiness due to low credit history or a lack of a financial track record , equity financing may be preferable to debt financing.
  • Learn and gain from partners – You might develop informal collaborations with more qualified or experienced persons if you use equity financing . Some may be well-connected, allowing your company to profit from their expertise.

Here are the cons of an equity sharing agreement

  • Sharing of Profit – Profits should be shared. Your investors will be expecting – and rightfully so – a cut of your earnings . However, it may be a reasonable trade-off if you benefit from their value as financial backers and their business skills and experience.
  • Loss of Control – Control is being lost. It would be best to share control of the company in exchange for equity financing and all of its potential benefits.
  • Possibility of Conflict – Conflict is a possibility. If there are differences in vision, management style, and ways of running the firm, sharing ownership and cooperating with others could cause some friction and even conflict.

How to implement an equity agreement?

To implement an Equity Agreement, it’s important to understand all the procedures and processes involved in the business. Investors can have various opinions on how they look at the implementation of the equity agreement. Before entering into the agreement, multiple amendments are put forward to avoid any further conflicts .

  • Understanding the goals – It is crucial to understand the objectives of  – this partnership agreement of equity sharing , and each shareholder must be aware of their rights and responsibilities. It should also be clear on the end goal of this investment.
  • Vesting Schedules – The process of acquiring a full right that cannot be taken away by a third party is known as vesting . If a person completes their tenure according to the vesting schedule, they are entitled to all of the shares, and the corporation has no power to buy back or forfeit them if they decide to move.
  • Funding Contributions – A contribution agreement is a legal document that spells out the terms and conditions of transferring an asset from one person to another. Small businesses also use these agreements to save aside money for retirement.
  • Understanding the Sweat Equity – Sweat equity is a term that describes a person’s or a company’s commitment to a commercial endeavor or another initiative. Sweat equity is usually not monetary and takes the shape of physical labor, mental effort, and time .
  • Splitting the Equity – When a company splits its shares, it simply exchanges new shares for old ones among all shareholders. Stock rollbacks, also known as share consolidations , are the polar opposite of stock splits, with one significant exception.
  • Capital Infusions – In this section, the company considers what could be the possible call to action investments to be made in case of any loss or emergency, sometimes some shareholders don’t have capital investment. Instead of removing them from the share, the company keeps itself in a safe zone so it avoids any further problems for the company.

What does an equity agreement include?

Contracts are an inevitable element of owning a small business. It’s critical to keep track of your contracts and commercial contacts. The following are included while signing an equity agreement :

  • Offer – The offer includes the details of the entire investment plan , whereas the names of the shareholders and what amount of investment they will be making in terms of assets. It also states the purpose, objectives, conditions, clauses. This offer can be either approved or disapproved by the party.
  • Acceptance – Once the clauses and legalities are clear by all the shareholders, they can now form an acceptance letter containing all the information about equity sharing . After writing the acceptance letter, both can make a further move on to creating legal documents.
  • Intention to create a legal relationship – There must be a purpose to create legal relations for a contract to be enforced, lawful and binding. The parties could not sue each other if they did not intend to do so. If there is no desire to create legal ties, the contract may become a simple promise.
  • Consideration (money) – In contract law, consideration is an inducement to enter into a contract sufficient to enforce the courts’ commitment. In a contract for the sale of goods , the consideration for the vendor is the money paid, and the consideration for the buyer is the property sold.

How does the Equity Agreement work?

An equity contract is a sort of employment contract that allows employees to acquire a piece of the company’s ownership . Company owners frequently use equity agreements in addition to standard pay. Both the investor and the occupier contribute to the down payment; the occupier lives in the home, maintains it, and pays the monthly payments; and the parties split the home’s appreciation.

Example of using Equity Agreement

Let’s say someone wants to buy a house but can’t afford to do so independently. If a parent is willing to assist their child in purchasing a home, they can engage in a shared equity finance agreement . The two parties come to terms in the agreement that vary depending on the situation.

For example , the parents may decide to enter into an agreement in which they pay the down payment and sign a mortgage . This means they will be compelled to pay half of the mortgage until the loan is paid in full.

In this circumstance , the child pays half of the mortgage to the bank and the other half of the house’s market rate as rent to their parents. After splitting the costs of the mortgage and other housing costs, they would pay their parents an additional $500 if the home rents for $1,000 per month.

Equity Agreement Template

The Equity Sharing Association shall have the authority to contract for products and services as allowed by this Agreement, as well as undertake other duties on behalf of. An equity pooling agreement is drafted in such cases. This sample agreement grants two or more parties the right to own the property.

Equity Agreement Template

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Drafting Equity Agreements

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Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom. Also note: This is not legal advice.

Introduction

From entrepreneurs to venture capitalists, the importance of equity agreements in any business venture cannot be overstated. These legally binding documents provide clarity and structure to a relationship between two or more parties, protecting their interests accordingly. A well-drafted equity agreement that covers all aspects of the partnership can give investors peace of mind that their money is invested safely in a company, while ensuring that the expected returns are outlined and legal obligations are clearly defined. It can also protect the interests of all parties involved by outlining each party’s rights and responsibilities; providing guidance on how the company should be managed; and delineating procedures for dispute resolution.

Creating an effective equity agreement requires time and expertise - which is why so many people turn to Genie AI for help. Our open source legal template library provides millions of datapoints to teach our AI what a market-standard agreement looks like, allowing anyone to draft and customize high quality legal documents without paying a lawyer or having any prior knowledge on legal templates. With step-by-step guidance available below, you can access our library today - free of charge - to ensure your business venture runs as smoothly as possible with every party’s best interests taken into account. Read on for more information on how you can get started today!

Definitions (feel free to skip)

Shareholders: People who own part of a company, either through purchasing shares of the company or being given shares as part of a compensation package.

Common stock: A type of ownership in a company that grants the shareholder voting rights and the ability to receive dividends.

Preferred stock: A type of stock that grants the shareholder voting rights, the ability to receive dividends, and higher priority in the event of the company’s dissolution.

Restricted stock: A type of equity that is subject to certain restrictions and conditions, such as a vesting period, and is usually not transferable until all conditions have been met.

Capital structure: The ratio of debt to equity that affects the company’s creditworthiness and tax liability.

Vesting schedule: A way of ensuring that founders remain with the company for a set period of time in order to receive their full equity award.

Corporate and securities laws: Laws in place to protect both the company and the investors, which vary depending on the jurisdiction in which the company is registered.

Articles of incorporation: A document outlining the company’s purpose and how it will be managed.

Shareholders’ agreement: A document outlining the rights and responsibilities of the shareholders.

Understanding the basics of equity agreements

Common stock, preferred stock, restricted stock, determining the company’s capital structure and issuing equity to the founders and investors, developing a comprehensive understanding of the corporate and securities laws applicable to the equity agreement, setting up a vesting schedule for founders, if applicable, identifying potential investors and negotiating the terms of their investment, gathering the necessary documents, such as the company’s articles of incorporation and the shareholders’ agreement, drafting the equity agreement, including the specifics of the company’s capital structure, the number of shares to be offered, the rights of the shareholders, and other details, reviewing the equity agreement with legal and financial advisors, to ensure that all parties involved in the equity agreement fully understand its terms and consequences, executing the equity agreement, including obtaining the necessary signatures and filing the documents with the relevant government entities, following up with investors to ensure that all paperwork has been completed and filed correctly, get started.

  • Understand the different types of equity and what they mean for both you and the company
  • Learn about the different types of equity agreements that can be drafted
  • Familiarize yourself with the legal and financial aspects of equity agreements
  • Research and analyze existing equity agreements to see what works best in various scenarios
  • Become familiar with any laws or regulations related to equity agreements
  • Talk to a legal or financial expert to ensure you understand all the aspects of equity agreements

When you can check this step off your list:

  • You are familiar with the different types of equity and types of equity agreements
  • You understand the legal and financial aspects of equity agreements
  • You have done research and analysis of existing equity agreements
  • You understand any laws or regulations related to equity agreements
  • You have consulted a legal or financial expert to ensure you understand all aspects of equity agreements
  • Draft the terms and conditions of common stock to be issued
  • Include the class of common stock, the number of authorized shares, and the par value of each share
  • Specify any restrictions on the transfer of common stock
  • Outline any voting rights associated with common stock
  • When you have finalized the common stock section of the agreement, you can move on to the next step of the guide which is drafting the terms and conditions of preferred stock.
  • Understand the different types of preferred stock and the rights that come with them
  • Consider how the company can issue different classes of preferred stock
  • Decide on the number of shares of each type of preferred stock to issue
  • Allocate the number of shares to each holder of preferred stock
  • Draft the terms of the preferred stock in the equity agreement
  • Verify the equity agreement to ensure that it is legally valid and complies with state and federal securities laws
  • Once all the above steps are completed, the preferred stock section of the equity agreement can be considered finished and you can move on to the next step.
  • Gather information regarding the company’s capital structure and determine how many restricted shares the founders, investors, and other key individuals will receive.
  • Consider any vesting or performance-based conditions that must be met before the restricted stock can be issued.
  • Draft the restricted stock agreement and ensure it is signed by all parties involved.
  • Obtain the necessary signatures and approvals as required by law.

Once the restricted stock agreement is drafted, signed, and approved, this step can be checked off the list and the next step can begin.

  • Establish the class of securities and the terms of the securities (e.g. who can receive them, how long they can be held, voting rights, etc.)
  • Choose the type of corporate entity for the company
  • Determine the number of authorized shares
  • Establish the company’s capital structure (e.g. how much of the company will be owned by the founders, how much by other investors, etc.)
  • Decide the type of equity or debt to be issued and to whom
  • Issue equity or debt to the founders, investors, or other parties as needed
  • Draft and execute the equity agreement

Once you have determined the company’s capital structure and issued equity to the founders and investors, you can move on to the next step in the process.

  • Research the relevant corporate and securities laws in the jurisdiction where the company is incorporated
  • Consult with a lawyer who is knowledgeable in corporate and securities law
  • Make sure to understand the different types of equity, such as common and preferred stock
  • Research the different types of equity and corporate structures that are available
  • Understand the different legal implications associated with each type of equity
  • Make sure to understand the different tax implications associated with each type of equity
  • Once you have a good understanding of the different types of equity and the legal and tax implications associated with each, you can move on to the next step.
  • Research the various vesting schedules that are available and decide which one works best for the founders and the company
  • Make sure to consider various factors such as the length of the vesting period, the speed of vesting, and any applicable cliff periods
  • Have the founders sign off on the vesting schedule and include it in the equity agreement
  • Once all of the necessary paperwork is completed, the vesting schedule setup is complete and ready to go
  • You will know you have finished this step when the vesting schedule has been agreed upon and included in the equity agreement
  • Research potential investors and financial institutions to identify those that may be a good fit and willing to invest in the company
  • Reach out to the potential investors and financial institutions to discuss the company and the investment opportunity
  • Negotiate the terms of the potential investors’ or financial institution’s investment, such as the amount, type, and duration of the investment
  • Make sure to include any contingencies or requirements that potential investors or financial institutions may have
  • Finalize the terms of the investment and have all relevant parties sign off on the agreement
  • Once all parties have agreed to the terms of the investment, you can check this off your list and move on to the next step of gathering the necessary documents.
  • Obtain a copy of the company’s articles of incorporation from the relevant government agency.
  • Gather the shareholders’ agreement.
  • Review the documents and ensure they are up-to-date.
  • Make any necessary changes to the documents, such as updating the company’s name, address, or other details.

When you can check this off your list: You will know when you can check this off your list when you have obtained a copy of the company’s articles of incorporation, gathered the shareholders’ agreement, and reviewed and made any necessary changes to the documents.

• Identify the company’s capital structure and determine the total number of shares that can be issued. • Define the rights of the shareholders, such as voting rights, rights to dividends, and other specifics. • Draft the equity agreement, detailing the company’s capital structure, the number of shares to be offered, the rights of the shareholders, and other details. • Consult legal and financial advisors to ensure that the equity agreement is in line with all applicable laws and regulations. • When the equity agreement is finalized, it should be signed by all parties involved. • Once the equity agreement is signed, you can check this step off your list and move on to the next step.

  • Meet with legal and financial advisors to review the equity agreement
  • Ask questions to ensure understanding of the equity agreement and its consequences
  • Get clarifications on any unclear terms or conditions
  • Ensure that all parties involved in the equity agreement fully understand its terms and consequences
  • When all parties understand the agreement, you can check off this step and move on to executing the equity agreement.
  • Obtain all the necessary signatures from all parties involved in the equity agreement
  • File the documents with the relevant government entities
  • Make sure that all required forms and documents are completed accurately and in compliance with applicable laws and regulations
  • Monitor the progress of the filing and make sure that all paperwork is filed in a timely manner
  • Once all the paperwork is filed and the relevant government entities have accepted the documents, you can check this step off your list and move on to the next step.
  • Contact investors to verify that all paperwork has been completed and filed correctly.
  • Get written confirmation from investors that the paperwork is correct and has been filed.
  • Follow up with the relevant government entity to ensure that all documents have been received.
  • You’ll know that this step is complete when you have received written confirmation from the investors and the government entity that the paperwork is correct and has been filed.

Q: Is there a difference between drafting an equity agreement in the UK and US?

Asked by William on April 2nd, 2022. A: Yes, there are some differences when it comes to drafting an equity agreement between the UK and US. Generally speaking, US agreements tend to be more detailed and specific, while UK agreements tend to be more general in nature. For example, US agreements generally include provisions related to vesting periods, voting rights, and board composition, while UK agreements may not include such details. It’s important to understand the applicable laws in both jurisdictions before drafting any equity agreement.

Q: How does drafting an equity agreement for a SaaS business differ from a B2B business?

Asked by Emma on June 21st, 2022. A: The differences in drafting an equity agreement for a SaaS business compared to a B2B business depend on the specifics of each type of business. Generally speaking, SaaS businesses tend to have different revenue streams than B2B businesses and may require different types of provisions or clauses in their equity agreements. For example, SaaS businesses may require different compensation structures for their employees than B2B businesses do. Additionally, SaaS businesses may also require different types of shareholder rights than B2B businesses do.

Q: What are the implications of drafting an equity agreement with regards to EU law?

Asked by Michael on August 15th, 2022. A: When drafting an equity agreement with regards to EU law, it’s important to understand the implications of such an agreement on the applicable laws in each EU jurisdiction. Depending on the specifics of the agreement and the country in which it will be executed, there may be certain regulations that need to be taken into account when drafting an equity agreement. Additionally, it’s important to understand how EU law might affect the rights and obligations of shareholders and other stakeholders within the agreement.

Q: What are some common mistakes to avoid when drafting an equity agreement?

Asked by Olivia on December 9th, 2022. A: When drafting an equity agreement, it’s important to take into consideration all of the relevant legal regulations for each jurisdiction in which the agreement will be executed. Additionally, it’s important to ensure that all parties involved have a clear understanding of their rights and obligations under the agreement. Common mistakes that should be avoided when drafting an equity agreement include not providing sufficient detail on voting rights and other shareholder rights; not clearly defining vesting periods; not providing sufficient detail on board composition and decision-making processes; and not accounting for potential changes in laws or regulations that might affect the terms of the agreement.

Q: What are some factors to consider when deciding whether or not an entity needs an equity agreement?

Asked by Noah on May 4th, 2022. A: When deciding whether or not an entity needs an equity agreement, there are several factors that should be taken into consideration. These include understanding if there is any need for shareholders or other stakeholders to receive compensation (e.g., through dividends); understanding if any parties involved have conflicting interests that need to be addressed through a written document; understanding if there is potential for business growth or expansion; understanding if there is potential for any disputes between parties; and understanding if there is potential for any changes in laws or regulations that could affect the terms of the agreement. Once these factors are taken into consideration, then entities can make an informed decision as to whether they need an equity agreement or not.

Example dispute

Suing a company over equity agreement issues.

  • Plaintiff must prove that the company violated the terms of the equity agreement, either by failing to perform its contractual obligations, or by taking actions which conflict with the equity agreement.
  • Plaintiff will need to provide evidence of the breach of contract, such as documents or witness testimony.
  • Plaintiff must also provide evidence of damages caused by the breach of contract, such as lost profits or other economic losses.
  • Plaintiff may be able to recover damages for breach of contract, such as lost profits or other economic losses.
  • The court may also award punitive damages if the breach of contract was especially egregious.
  • Plaintiff may also be able to seek an injunction to prevent the company from violating the equity agreement in the future.
  • Settlement may be reached through negotiation between the parties, or through mediation or arbitration.

Templates available (free to use)

Deed Of Adherence For Non Leveraged Investment Agreement Feature Film Investment Agreement Investment Agreement Non Leveraged Real Estate Investment Agreement Strategic Investment Agreement Technology Investment Agreement

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transfer of equity agreement

The Transfer Of Equity Process: Your Questions Answered! 🏠

Dec 07, 2023 | Shakeel Mir

Are you considering a transfer of equity? Whether you are looking to transfer ownership of a property to a family member, remove a person from the title, or make changes to joint ownership, it is essential to have a full understanding of the process and implications involved. In this comprehensive guide to transfer of equity, we will walk you through everything you need to know. From the basics of what transfer of equity involves to important considerations before making the decision, we will answer all the key questions.

The aim of this guide is to provide a comprehensive outline of the step-by-step process of transferring equity, including the legal requirements, the necessary documentation, and potential costs. We will also explore the issues of mortgages and stamp duty in the context of a transfer of equity, ensuring you are fully informed before deciding whether or not to proceed.

With all your key questions answered and with the guidance of an experienced property solicitor, you will be able to navigate the transfer of equity process confidently and efficiently, making well-informed decisions along the way.

At Elite Law Solicitors , we specialise in all aspects of the transfer of equity process.  If you require any advice or assistance, please get in touch with one of our Residential Conveyancing solicitors by calling 0800 086 2929 , emailing [email protected] or completing our Free Online Enquiry Form .

In addition to office meetings, we offer remote meetings to clients via telephone and video conferencing software so can assist you wherever you are based.

What is a Transfer of Equity?

Transfer of equity is the process of adding or removing someone from the title deeds of a property – in effect, of adding or removing them as the owner of that property.

Transfer of equity is distinct from a sale as at least one of the original owners of the property will stay the same, however, the complete list of owners will change.

Reasons for Transfer of Equity

There are many reasons why you might want to transfer equity. Some of the most common include:

Divorce or separation

If your relationship has broken down and you and your partner own property together, a decision will have to be made on what to do with this asset. Some couples choose to remain joint owners and sell the property, while others may want to remove one party from ownership so that the other party can keep the house to live in (often the case if the relationship also involves children).

A new relationship

If you already own property and have started a new relationship, you might want to consider adding your new partner to the deeds of the house through a transfer of equity.

Resolving joint ownership

It is becoming an increasingly common practice for people to pool their resources to buy property with friends or family. This is a practical way of getting onto the property ladder, but at some point later down the line, one owner may wish to buy out the others – to do so would require a transfer of equity.

Tax efficiency

Transferring equity to children or other family members can be an effective way to increase your tax efficiency. The property can be treated as a gift, minimising the tax owed when transferring it. If you are considering transferring equity for tax reasons, it is highly recommended that you seek legal advice before taking any action.

Transferring equity can be a simple process when the property is wholly owned by the parties listed on the deeds and when everyone involved is in agreement, but it can become increasingly complex when factors such as mortgages, taxes, and parties in disagreement are involved. Ultimately, every transfer of equity is unique and should be treated as such.

If you are looking to transfer equity, it is advisable to obtain independent legal advice from an appropriately experienced property solicitor before taking any action. If you would like legal advice or assistance on the process of transferring equity please call us on 0800 086 2929 , email [email protected] or complete our Free Online Enquiry Form.

What is the process for Transfer of Equity?

1. Take a copy of the title deeds

To start the transfer process, your solicitor will obtain an official copy of the title for the property. Your solicitor will review this to check for a mortgage or any other restrictions on the property. At this point, they will also check the identities of each party .

2. Prepare the transfer documents

Once the process has begun, your solicitor will next draw up the transfer deed document ready to be signed.

3. Notify third parties

For the transfer to be completed any third party involved in the property, such as a mortgage lender, bank or building society, will need to provide their written consent. If the property is being transferred subject to the current mortgage, the lender will need to be a party to the transfer deed.

4. Sign the deed

Once your solicitor has prepared the paperwork, the next step is to meet with them and an independent witness to sign it.

5. Notify the Land Registry

Finally, the details of the deed transfer will need to be passed on to the Land Registry . This will involve a fee which can range from around £50 to nearly £1000 – the exact fee is dependent on the value of the property.

How long does a Transfer of Equity take?

A simple transfer of equity can take around 4-6 weeks to complete. However, each transaction is different, and the time taken to complete the transfer can vary greatly.

If there is a mortgage on the property, the transfer will take longer as you will have to wait to receive written consent from any lenders involved. Likewise, if the transfer is required as part of a larger legal dispute – for example, a divorce that is being resolved by the Court – the transfer may be held up until all disagreements have been resolved.

What if you have an existing mortgage?

Since the mortgage is a credit agreement and the person leaving or joining the lease will need to be either released from or accepted into that agreement, you will need to obtain the written consent of the lender before the transfer process can be completed.

If someone is added to the title, they will become liable for the mortgage, and the mortgage lender will need to run their own checks to ensure that that person is able to meet the responsibilities of the mortgage agreement and maintain payments.

Similarly, when someone is removed from the title, they are also leaving the credit agreement that the mortgage represents. As with any credit agreement, you cannot simply step away from it: you first must resolve the debt you still owe.

If it is intended that the existing mortgage will be kept by the person whose name will remain on the property, the lender will have to be satisfied that that person will be able to make the necessary mortgage payments themselves.

If you are transferring your equity to another party and need to resolve your mortgage, there are several options available to you. You could pay off the mortgage, otherwise known as ‘discharging’ it. You could choose the aforementioned route of seeking approval from your lender to transfer your share of the property – and therefore the mortgage – as part of a buyout.

Finally, if you want to take ownership of the property, you could re-mortgage the house with a new lender, using the funds you release to discharge the existing mortgage while using the surplus cash to finance a buyout of the remaining shares in the property.

Transfer of Equity and Stamp Duty

HMRC guidelines state that “you may need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.” It is important to note that “anything of monetary value” includes not just cash but also the value of any mortgage taken on as part of the transfer. HMRC go on to illustrate various scenarios in which you may or may not need to pay Stamp Duty, including:

  • If you transfer a share in a property to a partner when marrying, entering into a civil partnership or cohabiting , you may have to pay Stamp Duty. In this scenario, you pay Stamp Duty if the monetary value exchanged for the property (referred to as the ‘changeable consideration’) exceeds the Stamp Duty threshold of £125,000. You only pay Stamp Duty, at 2%, on the portion of the consideration that exceeds this threshold. So if the combined value of the cash you pay and the mortgage you take responsibility for is £200,000, you would pay Stamp Duty at 2% of £75,000, or £1,500.
  • If the transfer of equity is the result of a divorce, legal separation or the dissolving or a civil partnership , either achieved by private agreement or court order, Stamp Duty does not apply. However, if an unmarried couple separate and one party takes a larger share of the property or buys out the other party completely, they will have to pay Stamp Duty on any changeable consideration above the £125,000 threshold.
  • If the transfer is a gift, in which case there would be no consideration as the receiving party is not exchanging anything for their equity, Stamp Duty does not apply.
  • Similarly, if you receive property under the terms of a will there is no need to pay Stamp Duty.

The rules for when Stamp Duty is applicable, when you need to notify the HMRC of the transfer of equity and exactly how much Stamp Duty you owe are subject to consideration of many different factors. If you are unclear on whether your transfer will incur Stamp Duty fees, it may help to talk to a solicitor with expertise in this field.

Transfer of Equity costs

Beyond that, there are many other fees that may apply depending on the circumstances of the transfer. For example, search fees if your lender requires new searches, if they are modifying the existing mortgage or if you are taking out a new mortgage.

If you are buying a share of the property or taking on a mortgage in excess of £125,000, you may also have to pay SDLT at a rate of 2% on anything above this threshold – though, as covered above, this charge may not apply in all circumstances.

If you would like a detailed breakdown of our costs for dealing with a transfer of equity, please get in touch with one of our Residential Conveyancing solicitors by calling 0800 086 2929 , emailing [email protected] or completing our Free Online Enquiry Form .

When would a Transfer of Equity take place?

A transfer of equity can happen in any situation in which someone wishes to either leave or join a property deed. You can transfer equity to a new partner or another family member, or gift it to your children.

You can also transfer equity to an existing partner if you are separating or divorcing. It’s important to note that a transfer of equity is not the same as a sale: crucially, at least one existing owner must remain on the deed when a transfer is completed.

Can I transfer equity to someone under 18 years old?

Yes, you can transfer equity to someone under the age of 18. However, someone younger than 18 cannot legally hold the property, so to get around this you will need to set up a trust deed.

The trust deed designates a trustee who holds the property temporarily until the recipient of the transfer turns 18 and can legally receive the equity.

What is a transfer deed?

The transfer deed is a legal document which officially transfers the ownership of a property. This deed is prepared as part of the transfer process and signed by all parties.

There are several different transfer deed forms provided by the Land Registry for recording transfers of equity, the most common being the TR1 form, which covers the transfer of a whole property from one party to another.

As with any legal document, this form must be completed accurately and signed with witnesses for the transfer to be valid: an experienced conveyancing solicitor can help with this.

Do I need to contact my mortgage lender?

Yes. Regardless of the circumstances of the transfer, if your property has a mortgage you must contact your lender to notify them of any proposed changes and to obtain their consent.

The lender may wish to investigate the context of the transfer themselves and will certainly perform checks on the continuing owner and any new owners to ensure that mortgage payments will still be met.

Usually, the lender will contact your solicitor with a list of conditions they require to be met before they provide their consent.

Do I need to pay stamp duty if I am divorcing?

No. As covered above, SDLT is not applicable if you are transferring equity as part of a divorce, legal separation or the dissolving of a civil partnership.

However, if you are an unmarried couple separating and are not dividing the property equally, the party taking the larger share of the property may have to pay SDLT if the total consideration exchanged for that share exceeds the SDLT threshold of £125,000.

Do both parties need a solicitor for Transfer of Equity?

The Law Society recommends that where a possible conflict of interest could arise during the transaction or in the future, then the same solicitor should not act for both the transferor and transferee. It is generally assumed that a conflict could arise where property transfers are involved.

If the transfer of equity is for no monetary value, then one solicitor in the firm could act for both parties, or preferably two solicitors within the same firm to act for either party. However, the preference would be for the parties to instruct their own solicitors. Where there is to be any monetary consideration, the parties should instruct separate solicitors.

Can I do a Transfer of Equity myself?

Technically you can carry out a transfer of equity by yourself. However, it is important to be aware that the process is a complicated one, particularly in circumstances involving a divorce or separation.

Several complicating factors need to be taken into account including stamp duty and tax considerations and ensuring that the properly is registered correctly at the Land Registry. Being aware of any expectations from the mortgage provided is also important.

Instructing an appropriately experienced solicitor to deal with the transfer of equity process is strongly advisable for the peace of mind, particularly when considering that the outlay for a transfer of equity is relatively modest.

What happens if a part-owner of the property dies?

When a part-owner of a property dies, their share of the property usually passes to their beneficiaries, as outlined in their will or under the rules of intestacy if there is no Will. There are a few important aspects to consider when dealing with this situation, such as:

Probate process

The property cannot be transferred until the probate process is completed, which involves validating the will and administering the deceased’s estate.

Joint Tenancy vs Tenancy in Common

If the property was held as a joint tenancy, the deceased’s share automatically passes to the surviving joint owners. In contrast, if the property was held as tenants in common, the deceased’s share is dealt with according to their will or the rules of intestacy.

What is the 7 year rule for transfer of equity?

The 7 year rule is particularly relevant when a property or a share of it is gifted to someone. This rule is part of the inheritance tax legislation. If the person who gifted the property dies within 7 years of the gift, the value of the gifted property may be subject to inheritance tax. The tax rate decreases on a sliding scale depending on how many years have passed since the gift was made.

If the person survives for more than 7 years after making the gift, the property falls entirely outside of their estate for inheritance tax purposes.

Do you pay Capital Gains Tax on transfer of equity?

The tax implications associated with a transfer of equity is another important area to understand. Whether or not capital gains tax is payable in a transfer of equity depends on various factors. CGT is a tax on the profit when you sell or dispose of an asset that has increased in value.

Exemptions and Reliefs

Transfers between spouses or civil partners are usually exempt from CGT. However, if the transfer is to someone else, or if the property is not the main home of the person transferring the equity, CGT may be applicable.

Calculating CGT

The amount of CGT due is based on the increase in the property’s value from the time it was acquired to the time of the transfer. Various deductions and reliefs may apply, which can reduce the CGT liability.

Seek Professional Advice

Due to the complexities of tax implications, it is advisable to seek professional advice when considering a transfer of equity, especially in situations involving potential CGT liabilities. Speaking with a legal professional who specialises in the transfer of equity can help you better understand your circumstances. Moreover, they have the expertise that allows you to navigate the transfer of equity in a way that suits you.

How Elite Law Solicitors can help

Regardless of your exact circumstances, transferring equity can be a daunting and complicated process.

When factoring in the legal documentation, the need to obtain lender’s consent and the possibility of paying SDLT, obtaining expert legal advice and assistance from an appropriately qualified solicitor is highly recommended.

Shakeel Mir is a Partner at the firm and is a part of a team that possesses many years of experience in dealing with the transfer of equity process.

We regularly provide specialist legal advice on all aspects of property law to clients nationwide. In addition to office meetings, we offer remote meetings to clients via telephone and video conferencing software so can assist you wherever you are based.

Get a FREE Transfer of Equity quote

If you are looking to transfer equity or have any queries relating to any of the issues discussed in this article, please get in touch with one of our experienced transfer of equity solicitors by calling 0800 086 2929 , emailing [email protected] or completing our Free Online Enquiry Form.

The content of this article is for general information only. The information in this article is not legal or professional advice. If you require legal or professional advice you should obtain independent expert advice from qualified property solicitors such as those within our firm.

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Shares Transfer Agreement

Jump to section, what is a shares transfer agreement.

A shares transfer agreement, also known as a stock purchase agreement, is an legal document used to transfer the ownership of shares of stock. The party transferring shares could be a person or a company. This agreement type is usually entered into by a buyer and a seller where the seller wishes to sell a specific number of shares to the buyer for an agreed upon price. The shares transfer agreement specifies the terms and conditions of the sale.

  • Details about the party transferring the shares
  • Consideration (what is being given to the seller in exchange for the shares - usually money); and
  • Information about the shares such as the share type and the share value

Common Sections in Shares Transfer Agreements

Below is a list of common sections included in Shares Transfer Agreements. These sections are linked to the below sample agreement for you to explore.

Shares Transfer Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.G 2 dex10g.htm SHARE TRANSFER AGREEMENT , Viewed October 4, 2021, View Source on SEC .

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Steven S. on ContractsCounsel

Steven Stark has more than 35 years of experience in business and commercial law representing start-ups as well as large and small companies spanning a wide variety of industries. Steven has provided winning strategies, valuable advice, and highly effective counsel on legal issues in the areas of Business Entity Formation and Organization, Drafting Key Business Contracts, Trademark and Copyright Registration, Independent Contractor Relationships, and Website Compliance, including Terms and Privacy Policies. Steven has also served as General Counsel for companies providing software development, financial services, digital marketing, and eCommerce platforms. Steven’s tactical business and client focused approach to drafting contracts, polices and corporate documents results in favorable outcomes at a fraction of the typical legal cost to his clients. Steven received his Juris Doctor degree at New York Law School and his Bachelor of Business Administration degree at Hofstra University.

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Bukhari Nuriddin is the Owner of The Nuriddin Law Company, P.C., in Atlanta, Georgia and an “Of Counsel” attorney with The Baig Firm specializing in Transactional Law and Wills, Trusts and Estates. He is an attorney at law and general counsel with extensive experience providing creative, elegant and practical solutions to the legal and policy challenges faced by entrepreneurs, family offices, and municipalities. During his legal careers he has worked with entrepreneurs from a wide array of industries to help them establish and grow their businesses and effectuate their transactional goals. He has helped establish family offices with millions of dollars in assets under management structure their estate plans and philanthropic endeavors. He recently completed a large disparity study for the City of Birmingham, Alabama that was designed to determine whether minority and women-owned businesses have an equal opportunity to participate in city contracting opportunities. He is a trusted advisor with significant knowledge and technical experience for structuring and finalizing a wide variety of complex commercial transactions, estate planning matters and public policy initiatives. Raised in Providence, Rhode Island, Bukhari graduated from Classical High School and attended Morehouse College and Howard University School of Law. Bukhari has two children with his wife, Tiffany, and they live in the Vinings area of Smyrna.

John M. on ContractsCounsel

John has extensive leadership experience in various industries, including hospitality and event-based businesses, then co-founded a successful event bar company in 2016. As co-founder, John routinely negotiated agreements with venues, suppliers, and other external partners, swiftly reaching agreement while protecting the brand and strategic objectives of the company. He leverages his business experience to provide clients with strategic legal counsel and negotiates attractive terms.

Conner H. on ContractsCounsel

Patent attorney with master's in electrical engineering and biglaw experience.

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Benjamin S.

Benjamin Snipes (JD/MBA/LLM) has 20 years of experience advising clients and drafting contracts in business and commercial matters.

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Experienced Attorney with a demonstrated history of working in the law practice industry. Skilled in Preparation of Wills, Trial Practice, Estate Administration, Trusts, and Estate Planning. Strong legal professional with a Juris Doctorate focused in Law from Howard University School of Law.

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  • Conveyancing
  • Transfer of Equity FAQs

How to transfer equity in a property with a mortgage

Transferring ownership in a property is known as ‘transferring equity’. The process can be straightforward, but if there's a mortgage on the property, or you intend to remortgage at the same time, you will need your lender's consent. Your lender will also require you to instruct a conveyancing solicitor .

Here’s what you need to know about transferring equity in a property with a mortgage:

Property transfer form being signed

Why might I transfer equity in a property?

A 'transfer of equity' is when an existing owner of a property adds or removes one or more people to the title (ownership) of the property.

You might, for example, decide to transfer equity if you want to:

  • Add a new spouse, civil partner or unmarried partner to the deeds of your home
  • Gift a property (or share in a property) to a child, spouse, civil partner or other family member
  • Buy out an ex-partner after a separation
  • Buy out a joint owner
  • Sell your share in a property

How does the transfer of equity process work?

When transferring equity, you or your solicitor must:

  • Review the property’s title documents
  • Prepare transfer deed and other legal documents
  • Obtain the appropriate consents from the mortgage lender, landlords etc.
  • Register the Deed of Transfer ( TR1 or TP1 Forms) at HM Land Registry (HMLR)
  • Complete the Stamp Duty Land Tax (SDLT) return form. (even if there is no SDLT payable).

Do I pay Stamp Duty Land Tax (SDLT) on a transfer of equity?

Do I need to tell my lender if transferring equity in my home?

If there is an existing mortgage in place, but you intend to pay it off before the equity is transferred, there is no need to tell your mortgage lender .

If you intend to keep your mortgage after the transfer of equity, you will need to tell your lender and obtain their consent before the transfer can complete.

Obtaining consent from your lender

Any change in the ownership of a mortgaged property will require the consent of the mortgage lender.

The lender will need to satisfy themselves that the new joint-owner can afford to pay their share of the mortgage.

The lender will also want to look into the proposed new ownership structure and set out any conditions for the existing mortgage to stay in place.

Lending criteria varies from lender to lender, and individual lenders frequently update their lending criteria.

When do I need to notify my lender?

If you do intend to keep your existing mortgage, the sooner you inform your lender, the sooner you will obtain consent for the transfer.

Adding someone to the deeds (title) of the property

You may want to add another person to the title of your property if, for example, you get married or enter into a civil partnership.

If you want to pay off the mortgage

If you intend to pay off the existing mortgage before the date of transfer, having a mortgage won't complicate the process.

If you want to pay off the mortgage at the same time as you transfer the equity, your solicitor will obtain a redemption statement from the lender. The mortgage can then be paid off at the point of transfer.

You want to retain the mortgage

When the original mortgage was granted, the lender will have carried out various affordability and suitability checks on the owner/s .

As the ownership structure will change when the equity is transferred, the lender will need to carry out similar checks on the new owners.

The lender will need to ensure that the new owners can afford to pay the mortgage and that their lending criteria are met.

It is a good idea to contact the lender and agree on a mortgage Decision in Principle (DIP) before starting the legal process.

The lender will require you to instructor a solicitor to complete the remortgage work.

Your lender will also need legal representation. If your conveyancing solicitor is an approved member of the lender's legal panel, your solicitor will be able to act for the lender at the same time. This is usually a much quicker and cheaper option than paying for another solicitor to act for the lender.

Our panel solicitors can act for over 100 mortgage lenders

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Buying out a joint owner or removing someone from the title of the property

You may wish to buy out the other owner/s share in the property if, for example, you are separating from a partner.

In this case, the lender will need to confirm that you are able to repay the mortgage on your own . If you don’t pass the lender’s affordability checks, you may be refused a mortgage. If you can, it would be a good idea to obtain a Mortgage Agreement in Principle before starting the legal process.

Gifting the property to a family member or child

If you want to gift a property, the mortgage will need to be paid off before the transfer of equity can complete.

How to gift a property to a child, spouse, civil partner or family member

What are my options if the new owner/s do not pass the lender’s eligibility checks?

Whether you will be the sole owner or are adding a new person to the deeds, it is a good idea to obtain a mortgage in principle from the lender. The lender should be able to confirm that you can afford the amount you're looking to borrow and that you meet their lending criteria.

If the lender is not prepared to offer a mortgage, you will have the following options:

  • Borrow a lower amount
  • Approach an alternative lender
  • Seek a guarantor for the mortgage
  • Pay off the mortgage in full

Will transferring my equity remove me from liability?

Yes. If you are transferring your equity to an existing co-owner or new party, you will pass your liability under the terms of the mortgage to the remaining owners of the property.

What if I want to remortgage at the same time as transferring equity?

In a transfer of equity where a property is jointly owned, and one party is leaving, the remaining party would normally buy out the leaving party.

The remaining party will may decide to remortgage the property with the existing lender or a new lender.

If you will be remortgaging at the same time as the equity transfer, there is no need to tell your existing lender, as the existing mortgage will be paid off before completion of the transfer.

Our panel conveyancing solicitors can handle the legal work for the remortgage at the same time as your transfer of equity.

Will a remortgage delay a transfer of equity?

It may. If you are remortgaging the lender will need to complete its due diligence into the property and the new owners (where applicable).

Delays can occur when lenders are backlogged with mortgage applications, and some lenders move faster than others.

It may be faster to remortgage with your existing lender than with a new lender.

Will a transfer of equity delay a remortgage?

Transferring equity in a property without an existing mortgage is usually straightforward and can be completed in 3 to 4 weeks.

A remortgage typically take 6 to 8 weeks. As the legal work on the transfer of equity can be completed in parallel with the mortgage, the transfer should not delay the remortgage process.

Transferring equity in a leasehold property

If the property is a leasehold flat, the conveyancing solicitor will need to obtain a copy of the lease and comply with the terms therein.

Your conveyancing solicitor will need to notify and obtain the consent of your landlord or freeholder .

How we can help you

Quittance Panel Solicitors

Whether you are gifting a property to a child, getting married or separating, or transferring equity for any other reason, our solicitor panel can help make the process as straightforward and stress-free as possible.

If you are also planning to remortgage as part of the transfer process, the remortgage legal work can be completed at the same time as your transfer of equity.

  • Transfer of equity experts
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Chris Salmon, Director

Author: Chris Salmon, Director

About the author

Chris Salmon is a co-founder and Director of Quittance Legal Services. Chris has played key roles in the shaping and scaling of a number of legal services brands and is a regular commentator in the legal press.

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People also read:

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You may be interested in:

Can i do a diy transfer of equity in my property.

There are several reasons why you may want to transfer ownership of a property, in full or in part, to someone else. See our easy-to-read guide.

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Everything you need to know about transferring equity in a second home. Read our easy-to-follow guide.

Everything you need to know about transferring equity in a property. Find out how the process works, and what steps you need to take.

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  1. Equity Transfer Agreement: Definition & Sample

    An equity transfer agreement is a contract between two parties, one of whom transfers their ownership rights in a business to the other. The agreement outlines the terms and conditions of the transfer, including how much money will change hands.

  2. Share Transfer Agreement Template

    Share Transfer Agreement Template Prepared for: [Transferee.Name] Prepared by: [Transferor.Name] This is an agreement for the transfer of shares (or stocks). This share transfer agreement template is suitable for the transfer of shares in both private and public companies and can be used in place of a stock transfer form, or in addition to one.

  3. Equity Transfer Definition: 121 Samples

    Equity Transfer refers to the assignment of Equity Interests in the Company held by Party A to Party B or its designated third party in accordance with the provisions of the exclusive purchase option agreement (the "Exclusive Purchase Option Agreement") executed on June 1, 2009. Sample 1 Sample 2. Based on 5 documents.

  4. A guide to transfer of equity

    Land Registry. When transferring equity, you need to register the changes with the Land Registry. This will typically cost between £20 and £455. 4. Freehold consent (if applicable) If you are transferring equity of a leasehold, you'll need to get consent from the freeholder of the property. This can cost up to £250. 5.

  5. Equity Interest Transfer Agreement: Definition & Sample

    An equity interest transfer agreement is a contract between two parties where the owner of equity transfers ownership of it to the second party. In business, this type of agreement is used when a company trades equity in their company for something other than cash.

  6. Equity Transfer Agreement

    Equity Transfer Agreement Shanghai Newegg E-Business Co., Ltd. The Transferor owns % of the total Equity in the Company and the interests in connection therewith ( the parties agree as follows: Unless otherwise indicated, the following terms in this Agreement shall have the meanings set forth below: as defined in Recital B above;

  7. What is a Transfer of Equity?

    The transfer-of-equity is the legal process if you require changing the legal ownership of a property. Not all transfer of ownership is simple as they may sound. It is a process needed when one of the original owners remains on the deed. It means that in some cases, more than two parties might be involved in the process.

  8. Transfer of equity guide

    Transfer of equity is when a person is added or removed from the title deeds of a property. This means that a person is either no longer the owner of the property or becomes a part owner of the property. At least one of the original owners must remain on the title deeds. Considerations such as, if there is a mortgage or if there is equity ...

  9. Share Transfer Agreement: All You Need to Know

    The share transfer agreement is a legal document which regulates the transfer of shares between shareholders in a company in a particular location or situation. It serves as a legally binding contract that establishes the rights and responsibilities of the parties involved in the share transfer process. Share transfer agreements are commonly ...

  10. What Is an Equity Purchase Agreement and Why Do I Need One?

    An equity purchase agreement, also known as a share purchase agreement or stock purchase agreement, is a contract that transfers shares of a company from a seller to a buyer. Equity purchases can be used to acquire a business in whole or in part. They are frequently contrasted with asset purchases, which achieve similar objectives but have a ...

  11. Template Equity Transfer Agreement (Genie AI)

    1 8 3 This legal template likely pertains to the transfer of equity ownership in a company or property, specifically referencing the use of an AI tool called Genie. It is designed to comply with the legal requirements set forth by the United States law.

  12. Transfer of equity: What's the process?

    Transfer of equity is when a person is either added to, or removed from, the title deeds of a property. Equity is the legal term for the percentage of the property you own. Why would I need to do a transfer of equity?

  13. Founder's Guide to Equity Investment Agreement

    Equity, also known as shareholders' Equity (or owners' Equity in the case of privately held corporations), is the amount of money that would be returned to a company's shareholders if all of the company's assets were liquidated, and all of the debt was paid off in the event of a liquidation. In the case of an acquisition, equity is the ...

  14. Transfer of equity

    Transfer of equity is an English legal term for the process where the ownership of a share or interest in a property is transferred from one entity to another, a partial conveyance. Transfers of equity can take place for multiple reasons. Examples include:

  15. Drafting Equity Agreements

    Establish the company's capital structure (e.g. how much of the company will be owned by the founders, how much by other investors, etc.) Decide the type of equity or debt to be issued and to whom. Issue equity or debt to the founders, investors, or other parties as needed. Draft and execute the equity agreement.

  16. Transfers of LLC Ownership

    The buy-sell agreement typically applies to all ownership change scenarios, ranging from a sale of the whole LLC to the death of one of the LLC members. A primary goal of the buy-sell agreement is to define the terms under which any transfer of ownership may occur in order to avoid future legal battles over ownership and control.

  17. Transfer Of Equity Process: Your Questions Answered!

    Transfer of equity is the process of adding or removing someone from the title deeds of a property - in effect, of adding or removing them as the owner of that property. Transfer of equity is distinct from a sale as at least one of the original owners of the property will stay the same, however, the complete list of owners will change.

  18. Equity Transfer Agreement Sample Contracts

    This equity transfer agreement is signed by the following two parties in Yi Chun City, Jiangxi Province on January 1, 2019 on the basis of friendly consultation, equality, voluntariness, mutual benefit and reciprocity. Sample 1 Sample 2. Equity Transfer Agreement.

  19. Step-by-step DIY guide to transferring equity in property

    A 'transfer of equity' is when an existing owner of a property adds or removes one or more people to the title (ownership) of the property. You might, for example, decide to transfer equity if you: Sell your share in a property Buy out an ex-partner after a separation Buy out a joint owner

  20. Transfer of Equity Sample Clauses

    Transfer of Equity. 2.1 SAIAM agrees to transfer to Xing Yuan Dong and Jinbei Industry 9% equity and 1% equity, respectively, that it holds in Xinjinbei Development, and Xing Yuan Dong and Jinbei Industry each agrees to accept the transfer of such equity in Xinjinbei Development.

  21. Shares Transfer Agreement: Definition & Sample

    A shares transfer agreement, also known as a stock purchase agreement, is an legal document used to transfer the ownership of shares of stock. The party transferring shares could be a person or a company. This agreement type is usually entered into by a buyer and a seller where the seller wishes to sell a specific number of shares to the buyer ...

  22. How to transfer equity in a property with a mortgage

    A 'transfer of equity' is when an existing owner of a property adds or removes one or more people to the title (ownership) of the property. You might, for example, decide to transfer equity if you want to: Add a new spouse, civil partner or unmarried partner to the deeds of your home

  23. Agreement on the Transfer of the entire equity interests

    1. The Transferor agrees to transfer to the Transferee, who agrees to accept, the Transferred Equity the Transferor owns, according to the provisions of this Agreement. 2.

  24. Equity Transfer Agreement

    Equity Transfer Agreement that such regulations have not been violated. means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

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