Joint Tenants vs Tenants in Common (split 50:50)

You need to be a careful with this, especially if you have a mortgage on the property because the transfer might attract Stamp Duty and you might also need to remortgage unless you make the transfer using a Declaration of Trust.

Please see my recent article linked below which is entitled “New SDLT Rules Can Help Smaller Landlords”

https://www.property118.com/new-sdlt-rules-can-help-smaller-landlords/

Sorry, I didn’t fully answer your question in my last comment.

Joint Tenancy means that if one of you was to die the property belongs to the survivor. However, where the property ownership is divided 50:50 as Tenants In Common the 50% owned by the deceased passes to beneficiaries in accordance with Intestacy Law or the Last Will & Testament of the deceased.

HMRC’s default tax position for property ownership on Joint Tenancy Tenancy is 50:50. If the Joint Tenancy is severed or if the ownership is registered with HM Land Registry as Tenants in Common from day one, taxation will follow the beneficial ownership split subject to Form 17 being filed with HMRC.

Reply to the comment left by Mark Alexander at 09/04/2018 – 08:06
How is a Deed of Trust different to whatever the usual method of doing this, Mark?

Reply to the comment left by Luke P at 10/04/2018 – 09:43
Hi Luke

I consider the use of a Declaration of Trust is the usual method.

Please define your understanding of the “usual method” and I will try to answer your question.

Reply to the comment left by Mark Alexander at 10/04/2018 – 09:56
Hi Mark. That was, I suppose, part of my question -I didn’t know what the ‘normal’ method was. It was because you said: “…unless you make the transfer using a Declaration of Trust.” I wondered what the alternative was (if there is one).

Reply to the comment left by Luke P at 10/04/2018 – 10:05
Hi Luke

That makes more sense now, thank you.

The alternative would be to arrange a remortgage in both names and for a conveyancing solicitor to amend the legal records of ownership at HM Land Registry. That is likely to be a far more expensive and drawn out process because you would have to pay for searches, valuation fees, mortgage arrangement fees and conveyancing fees. Also, you may have particularly attractive mortgage terms which cannot be improved upon. Sometimes there are mortgage redemption penalties to pay too.

In most case, the use of a Declaration of Trust is significantly more economical, hence for us, it is our “usual method” of dealing with transfers of ownership between family members, especially for tax planning purposes.

Does that answer your question?

Reply to the comment left by Mark Alexander at 10/04/2018 – 10:27
That does indeed! Thank you Mark ?

Reply to the comment left by Mark Alexander at 10/04/2018 – 10:27
Hi Mark. When you use a Declaration of Trust, is it the case that this must then be sent to HMRC with Form 17? And that if the amount is under £40,000 there will be no SDLT to pay and also no CGT if the amount is kept at a rate where no more than the ‘vendor’s’ annual allowance of £11,300 (or the latest amount) is used? If so, is there any way in which HMRC and your lender could link up and the lender become aware that there had been a transfer of equity, with people not named on the mortgage or title deeds, now having a stake in the property?

Reply to the comment left by Dr Rosalind Beck at 14/04/2018 – 13:36
Hi Ros

You only need to submit Form 17 if the property is already in joint names.

There is no reason your lender will find out about the Declaration of Trust unless you tell them. However, that’s not the point. There is nothing wrong with telling them after the event unless their T&C’s prohibit the transfer of beneficial interest (most don’t). The important thing isn’t whether they find out or not. The important thing is not to seek consent, because they cannot give it without completely re-underwriting the mortgage. If they find out after the event they haven’t broken any rules and neither have you.

Reply to the comment left by Mark Alexander at 14/04/2018 – 18:32
Thanks, Mark. Yes, I was referring to property that is currently in joint names but would have to change to tenants in common if adult children’s names are added. I am not confident that the lender wouldn’t find out if this change were made at the Land Registry following HMRC being informed via Form 17 and a Declaration of Trust. It is leading me to believe that the safest option is only to do this with unencumbered properties.