Adding someone to your house deeds might seem like a big task, but it’s manageable if you know what to do. Whether you’re adding a partner, spouse, or family member, it’s a legal process called a "transfer of equity." This means updating the official ownership records with the HM Land Registry so that the new person’s name is legally recognised.
You'll need to fill out a few forms, including a transfer form (TR1) and an identity form (ID1), and get the right permissions, especially if you have a mortgage or your home is leasehold. In most cases, working with a solicitor can help make the process quicker and ensure everything is done correctly.
This guide will walk you through the steps, so you know exactly what to expect when adding someone to your house deeds.
In addition to this, it will also cover:
The legal requirements for making a change to property ownership in the UK
Tax and financial implications of this significant change, and
Reasons that could warrant the change to the ownership of a property.
So, let's get into the details.
Reasons for Adding Someone to House Deeds
Property owners can amend their deed of title for many reasons, including:
Marriage or Partnership
A common way married couples show their commitment to each other is by adding their spouse's name to the house deed. Adding a spouse to property deeds has many advantages, including:
It ensures that you both have equal legal rights and responsibilities over the home
If any of you die or get separated, the deed will also provide much-needed legal security.
When any of you die, the surviving partner will also be exempt from paying inheritance tax (IHT).
It will also give your spouse peace of mind knowing that matters like inheritance and future inheritance of the property have been sorted out.
Shared Ownership with Family Members
If you have a big family and don’t want issues relating to inheritance to cause a huge rift after passing away, you can add your family members to the deeds. Adding your family member to your property deeds means that:
They will all jointly be responsible for the maintenance of the property.
Each party is also legally accountable for the property.
Financial Contributions
If someone has made valuable financial contributions to your property, you can also decide to add them to your house deed. Adding them as co-owners will not only ensure that they are recognised legally but will also help prevent future disputes.
Legal Process for Adding Someone to House Deeds
The legal process of adding someone to your house deeds involves updating the official records to reflect the change in ownership. It requires completing specific forms, getting any necessary approvals, and ensuring all steps are properly followed to make the change legally binding.
Step 1: Check the Mortgage Status
If you have a mortgage, you must get your lender's approval before adding someone to your house deed. The new co-owner will have to be added to the mortgage agreement, possibly changing the terms of your mortgage.
Step 2: Instruct a Solicitor
While you can do a property ownership transfer yourself, it is still advisable to hire a solicitor because they are more current with UK laws regarding changes to property ownership. Property solicitors are trained to handle property transactions such as:
Drafting transfer deeds
Managing legal paperwork
Vetting documents to ensure compliance with the Land Registry’s requirements.
They will also guide you through any legal obligations or restrictions that apply to your property.
Step 3: Complete the Transfer Deed
You can either transfer the entirety of the property or part of it. If you are transferring the whole title, you will fill out the Transfer of Whole of Registered Title (TR1) form. The information included in this form typically consists of:
Title number(s) of the property you are trying to transfer
Brief description of the property
Date (you will fill this in after you have completed the transfer)
The registered name of the person trying to transfer their property and their signature
The full name and addresses of the entity/entities the properties are being transferred to.
Include how much you were paid. And if you gift the property out, also indicate it.
Title guarantees.
Declaration of trust (provided the transferee is more than one)
Documents to be included while submitting the form include:
Stand Duty Tax Certificate
Form API If you have registered the property, or form FR1 if you haven’t.
Evidence of identity.
In contrast, if you are only transferring part of the property, you will fill out and submit the TP1 form (which will be accompanied by a form AP1 or form FR1) to the Land Registry. You will also include forms ID1 and ID2 for identity verification.
Step 4: Register the New Ownership with HM Land Registry
Once the transfer deed is completed, you must register the new ownership with the HM Land Registry. This process involves paying a service fee, which varies depending on the property's value. Ensuring the registration is done correctly is crucial for the legal recognition of the new co-owner.
Tax Implications of Adding Someone to House Deeds
While you may be eligible for certain property tax reductions or exemptions when someone transfers ownership of their property to you, there may still be significant tax implications.
Stamp Duty Land Tax (SDLT):S Introduced in the 1600s, Stamp Duty Land Tax is levied on property purchased or transferred in the UK and is calculated based on the property's purchase price. The tax may be payable if the property is mortgaged or the new co-owner pays for their share. The tax is calculated based on the transaction's value, which can become a significant cost, depending on the circumstances. SDLT must be paid to HMRC and remitted within 14 days of completing a property purchase or transfer.
Capital Gains Tax: You will also be mandated to pay a capital gain tax (CGT) if the property is later sold and has increased in value. For example, if you buy a property for £10,000 and sell it for £30,000, you will be mandated to pay CGT from the £20,000 profit. As a property owner, CGT is something you have to consider when planning for future property sales, as adding a co-owner now may affect how much tax is paid later.
Inheritance Tax: Adding someone other than your husband, wife or civil partner to your property deeds could affect your inheritance tax liability. This is because if you later pass away, the property may be included in your estate, which could lead to IHT implications depending on its value. In the UK, the standard inheritance Tax rate is 40%, and it applies only to the portion of your estate that exceeds the threshold of £325,000.
Financial and Legal Considerations
When adding someone to the house deeds, you must choose between joint tenancy and tenants in common. Joint tenants have equal ownership shares, and when one dies, ownership automatically transfers to the other. Tenants in common, on the other hand, allow each owner to retain a specific share of the property, which can be passed down to heirs.
If you add an individual to your deed, it could impact mortgage payments in many ways:
Your mortgage lender may have to reassess the mortgage terms or conditions before a new co-owner is added.
Both of you will be responsible for repaying the mortgage.
For whatever reasons, if the other party fails to pay their own portion, you will be obligated to cover the full amount.
The new co-owner will also be responsible for property-related debts. If the property is sold or repossessed, both parties may be held liable for any remaining debts or obligations.
Challenges and Risks for Homeowners
Loss of Sole Ownership: One of the major risks of adding a co-owner is losing sole control over the property. This can cause complications, particularly if the new co-owner has different plans for the property.
Disputes Among Co-Owners: Another challenge that homeowners often face when they add someone to their deeds is miscommunication and disagreement, which can lead to disputes and possibly the dissolution of the co-ownership agreement. Disagreements can arise over decisions such as financial management, long-term plans for the property, and more.
Impact on Property Sale: Adding a co-owner can complicate future property sales. For instance, if one party wishes to sell but the other does not, it could lead to legal disputes and delays.
Best Practices for Adding Someone to House Deeds
When adding someone to your house deeds, following certain best practices is important to ensure a smooth and legally sound process.
Use a Deed of Trust: A deed of trust is a legal document that specifies each co-owner's share of the property, their financial responsibilities, and what happens if one party wishes to sell. This document will not only help prevent future conflicts but also provide legal clarity and protection to all parties involved.
Consult a Financial Planner: Adding someone to the deeds can impact long-term financial goals like retirement or inheritance; hence, it is essential that you consult a financial planner to ensure that the decisions you make fit well with your financial strategy.
Review Legal Documents Regularly: As life circumstances change, such as marriage, divorce, etc., it’s important to review the legal documents related to property ownership. This ensures that the agreements remain relevant and in compliance with UK property law.
Legal and Regulatory Considerations
Ensure that the process complies with UK property law. For instance, you must register the new ownership arrangement with HM Land Registry. Also, hiring a solicitor who understands UK law would be beneficial so that the transfer is properly and legally done.
It is also crucial that all related taxes, such as capital gains tax (CGT), Stamp Duty Land Tax (SDLT), etc., are properly attended to. Failure to comply or pay all relevant taxes to the HM Land Registry can lead to costly penalties later.
Hiring a property law expert can save you both time and money. They will ensure that all steps are carried out legally and efficiently.
FAQs
How to add someone to house deeds UK?
You'll first need to check the mortgage status of your property, as any changes will require approval from your lender. Next, complete a transfer deed by filling out the necessary forms, such as the TR1. Finally, register the new ownership details with the HM Land Registry to officially update the records.
Do I need to pay stamp duty when adding someone to my property deeds?
In some cases, Stamp duty land tax may be payable, particularly if the property is mortgaged or the new co-owner is contributing financially.
What is the difference between joint tenants and tenants in common?
The main difference between the two forms of ownership lies in the right of survivorship. In joint tenants, the property passes to the others upon death. In tenants in common, the shares pass to the heir(s).
Can I add someone to my house deeds if there is a mortgage?
Yes, but you will need your lender’s permission, and they may need to reassess the loan.
What are the tax implications of adding a co-owner to property deeds?
While you will be exempt from some taxes, you will still be required to pay stamp duty, capital gains tax, and, in some cases, inheritance tax.
Conclusion
Adding someone to your house deeds is a significant legal and financial decision that needs to be executed carefully. By following the steps outlined in this guide, you can ensure that the process is handled smoothly and in accordance with UK law.
If you need expert guidance, Lawhive can assist you. Our property solicitors are professionally trained and experienced in handling deed transfers and other property-related matters in the UK. Get a free legal assessment today.