Transfer Of Property Ownership After Divorce
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 the matrimonial home is sold and the proceeds 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 the transfer of property ownership after divorce and the potential legal implications.
Can my ex-spouse sign the house over to me?
Yes – if the matrimonial home is mortgage-free, it may be transferred between the 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.
However, 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.
How and when do you transfer property in a divorce?
A conveyancing solicitor can draw up a property transfer deed 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 the following steps:
What if the property is mortgaged?
If a property still has a mortgage, permission will need to be sought from the mortgage lender before the property 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).
What are the tax implications of transferring property?
There is usually no capital gains tax (CGT) to be paid 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 (ie 5 April).
What counts as ‘separation’ can be subject to interpretation, but government guidance refers to circumstances where “the 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.
Do we need to consider Stamp Duty when transferring properties?
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.
Legal considerations to understand
An agreement to transfer property 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).
In order to give the settlement legal standing, a consent order is required; this will allow any agreement regarding property and other assets to be enforced in the courts.
A consent order also prevents one party from making financial claims on their former spouse at some point in the future, providing a clean break.
We offer a variety of consent order services to suit your needs and budget whilst saving you over £1000 compared to your high street solicitor.