What is a Transfer of Equity?
In terms of a transfer of equity, the ‘equity’ in a property is defined by market value less the amount of outstanding mortgage. ILA is required when there is a change to the mortgage/ownership of the property.
An example of this would be the transfer of equity into joint names as a result of marriage. Alternatively, there may be a need to transfer equity from joint to sole ownership.
What is gifting a deposit or equity in a property?
More people are using gifts (usually from family members) to fund all or part of their deposit for a house purchase. As part of the mortgage process, a lender will normally ask for confirmation that it is a gift, that no part of the gift is repayable and that each gifter will have no stake in the property or live at the property.
As the gifter will effectively be giving up any rights to repayment or entitlement to the property,, a lender may not allow the mortgage to complete until they have received confirmation that the gift giver has taken independent legal advice.
What is a transaction at an undervalue?
A transaction at an undervalue is, in simple terms, a transaction where an individual or corporate entity acquires a property for less than its market value.
For example, parent’s gifting property to their children to help them onto the property ladder, a gift between family members as part of estate planning or even a transfer between husband and wife following divorce proceedings. These may all be considered a transaction at an undervalue.
Whilst there are benefits for the seller and buyer in each of the above scenarios, it carries inherent risks whereby a lender may ask for independent legal advice to be provided prior to completion of the mortgage or loan facility.
Why do I need independent legal advice?
The third-party formality is required to protect you from entering into any of these transactions without knowing the potential risks involved. iLA’s independent advisor will ensure that you are not being “induced” (persuaded or convinced) into the transaction and that you understand what it is you are agreeing to (your obligations and associated risks).
Whilst having ILA can feel like an inconvenience and an additional cost, it is important to bear in mind that it is not just a formality - it is a serious legal requirement to make you fully aware of future risks and possible liabilities, and without the ILA, you will not be able to complete the wider legal transaction.
How can you help?
Our dedicated team is here to make sure that you do not experience any delays or inconvenience and, by using our decades of expertise helping clients with banking, finance and property matters, and deploying leading technology, we can deliver the ILA need in the most fast, efficient and cost effective way