Transfer Of Property Ownership After Divorce
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Property is normally the single most significant asset in a marriage and, therefore, it is at the core of most financial settlements in a divorce.
Often during the transfer of property ownership after divorce, the matrimonial home is sold and the proceeds are divided between the two parties.
But sometimes the property is transferred so that one spouse becomes the sole owner – the way you decide to divide the property you own is up to you and should be looked at as part of the overall divorce settlement you reach.
There is no one-fits-all answer, but for the purpose of this article, we’ll be walking you through everything you need to know about property law concerning the transfer of equity process after divorce and the potential tax implications.
Property settlement agreement after divorce
A property settlement agreement after divorce is simply the part of the financial settlement reached between a divorcing couple that relates to property which needs to be separated.
In most marriages, the property which needs to be separated is the matrimonial home (the main residence where they lived during the marriage), but it can also include second homes or investment properties which are either jointly or individually owned.
Once a divorcing couple has agreed what to do with their assets within a property settlement agreement it is then wise to record the details in a consent order. This is a legal document, usually prepared by a solicitor, setting out what both parties have agreed.
The consent order is normally presented to court to make it legally binding when the divorce reaches the ‘Decree Nisi’ stage. The consent order then becomes legally binding on both parties once the Decree Absolute has been granted.
Obtaining a consent order is the only way to finally sever your financial obligations after a divorce, providing financial certainty for both parties by ensuring any future claims are dismissed.
Can my ex-spouse sign the house over to me?
Yes – if the matrimonial home is mortgage-free, it may be transferred between either divorcing parties as part of the overall financial settlement. What this essentially entails is removing the name of one ex-spouse from the property deeds, leaving the other party as sole owner.
If there is still a mortgage on the property, it will be necessary to ask permission from the mortgage provider, and financial ability to pay the whole mortgage will be taken into account.
Normally the divorcing couple will agree to a property transfer as part of the divorce settlement, following negotiation and possibly mediation. Read advice on divorce and property to find out more.
On occasion, a court may decide to make a ‘transfer of property order’ which imposes a court decision regarding property transfer. However, this type of order is quite rare and will normally only be intended to protect the interests of any children under the age of 18.
Removing a name from the land registry
A transfer of equity solicitor can draw up a title deed transfer that effectively transfers the property to one of the divorcing parties and removes the name of the other ex-spouse from the deeds.
Alternatively, this can be done directly with the Land Registry, which involves removing a name from the land registry using the following process:
Transferring ownership of a house with mortgage
If a property still has a mortgage, permission will need to be sought from the mortgage lender before ownership of the house can be transferred.
In this case, the mortgage company will assess the ability of the ex-spouse who wishes to take on the entire mortgage, subject to certain affordability criteria.
Any property intended to be transferred as part of a divorce settlement should be transferred as soon as possible in order to avoid potential tax implications (see below).
Transfer property to spouse capital gains tax
There is usually no CGT on transfer property to spouse (Capital Gains Tax) where the principal matrimonial residence is being transferred; these are treated as being made on a ‘no gain, no loss’ basis for CGT purposes as long as transfers are completed before the end of the tax year of separation.
What counts as ‘marriage separation’ can be subject to interpretation, but government guidance refers to circumstances where “the marriage separation is likely to be permanent”.
Separately, Principal Private Residence (PPR) relief can normally be claimed for a certain period of time.
If one party moves out and transfers the home to their ex-spouse, the party moving out can only claim relief from CGT if the transfer is agreed upon within a period of 9 months after moving out.
Transfer property to spouse stamp duty
If the property is being transferred as part of a divorce settlement, there is no Stamp Duty Land Tax (SDLT) to pay.
It is also important to note that transfers which take place after the decree absolute may potentially be subject to inheritance tax (IHT) if the transferring spouse dies within seven years of the transfer.
Transfer of equity legal considerations
A transfer of equity, or transfer of property ownership, will generally form part of the overall financial settlement.
On its own, a financial settlement just outlines the terms of the agreement between the divorcing parties and is not legally enforceable (although it can be used as evidence in court).
From a property law perspective, to give a financial settlement legal standing, a consent order is required – this will allow any agreement regarding property transfer and other assets to be enforced in the courts.
A financial consent order also prevents one party from making financial claims on their former spouse at some point in the future, providing a clean break.
Managed Clean Break Consent Order Service – £399
This Clean Break Consent Order service will help you legally split any properties you own, whether that is solely or jointly. Using solicitors to obtain this type of agreement will often cost over £1500 + VAT.