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Changing interest in property

I have a situation where an individual owns a property, and wishes his wife to benefit from the rents and the property from now on.

He has drafted a deed, which gives his wife the property.

The Financial advisor says that is all that has to do - he can hold the legal ownership - and not tell the Land Registry (and I assume the mortgage company) - as he has transferred the equitable interest to his wife.

In other words created a trust.

The deed says that he did this on 6th April last year, but it is dated today.

Is this ok?

They did not own the property jointly?

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02nd Feb 2013 21:04

Small matter
There is the small matter of telling HMRC (I forget the form number). There's a time lmit for doing this.

As for not telling the LR or lender ... I assume the solicitor that he (presumably/should have) used to draw up the deed agrees with the FA's opinion?

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What form should go to HMRC?

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By ACDWebb
03rd Feb 2013 08:44

Form 17

and for tax the change only works from that being registered with HMRC

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There is of course...

... also the small matter that backdating a deed is both ineffective and fraudulent.

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All all echo my thoughts! Seems a bit much to say in the deed - though it is not the deed

It says:-

 

 

As from xxx I give my interest in the property to my wife and so on ..

 

Mark

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03rd Feb 2013 15:20

Backdating is not acceptable and Form 17 has to be submitted within 60 days of the creation of the trust document. Regards Peter

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Ok  -

Ok  -

 

I have looked at the document, and it is headed "trust deed".

 

the intention is that he holds it on trust for his wife.

 

He owned it 100% - so it was never owned jointly - so I assume HMRC form 17 will not apply, as now wife has 100% benefical interest. I thought From 17 would only apply is there was a joint ownership.

 

While it is dated 2nd Feb, it says

 

"The owner gave the whole of the benefical ownership to the Donee on 6th April 2011 and now records that"

 

So I am not saying the deed it self is backdated - just recording the event.

 

My concern is

 

i. Is there anything that needs to be recorded at LR and

ii. I would assume there is no stamp duty? Conderationn -

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No

It doesn't needed to be recorded at the Land Registry.  The person with the legal interest (hubby) is recorded at the Land Registry, whereas the deed evidences that it is actually the wife who has the equitable interest in the property.

There's definitely not any Stamp Duty; land transactions are no longer liable to Stamp Duty.  Nor is there any Stamp Duty Land Tax, because, as you say, there's no consideration.

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By MBK
04th Feb 2013 12:41

Actually, there may be consideration

Which is the assumption by the wife of the equitable liability for the mortgage (if any). SDLT is payable by reference to the amount of the mortgage. 

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But then...

... a deed of gift would be inappropriate, because it wouldn't be a gift surely?

Edit: Ah! I'd missed the bit about not telling the mortgagor in the OP. There would indeed be consideration in that case. So was it a deed of gift? or a deed of trust?

Edit 2: I now see that it was a gift of trust! I do agree with MBK, that if there was any mortgage on the property, then there is consideration and there is then the small matter of an SDLT Return that should have been filed by 6 May 2011, penalties for late filing, as well as any SDLT liability and the interest thereon.

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04th Feb 2013 13:24

I have often wondered in these cases, if the property has a mortgage, how can you give, say 50% away if you have, say a 75% mortgage.  You only own 25%, so how can you give away 50%.

Presumably you must tell the lender if you do this.  As the lender would not agreee to you giving away 50% if you only own 25%, then it would be ineffective for the mortgage.

I have seen this type of question asked again and again, and I have not seen a real authoritive answer.

Is anyone able to point to the legislation on this?

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Nemo dat quod non habet

I believe, that as a matter of common law, you can only give something to someone on the terms that you hold it.  So when you give the 50% of the property, you give it subject to the 75% mortgage.  The donor holds the donated property on the same terms that you held it.

For SDLT purposes, the legislation in paragraphs 8(1A) and 8(1B) of Schedule 4 to FA 2003 makes sure that this is the case for SDLT purposes.

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04th Feb 2013 14:52

Can you back date a gift?

What event happened on 6 April 2011 that constituted the gifting that the 2 February 2012 Deed says it is recording.

If nothing actually happened on 6 April 2011 there couldn't have been a gift on that date.

At most there might be a gift of the property from 2 February 2012 but, given that the Deed does not say there was a gift of the property on that date, there may not be any gift at all.

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I read about a man today...

... who gave his wife a good hiding a few years back.  She subsequently claimed to have been driving his car too fast when it was really him behind the wheel.

That particular gift has only just been documented, but nonetheless occurred in the past.

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By law man
06th Feb 2013 14:34

Secret gift of beneficial interest in house

The following is not comprehensive, but gives you a few ideas.

You should consider why the man (Husband) wishes to give the beneficial ownership of the house to Wife; and why H will not transfer the legal ownership as well. It seems suspicious.

I suspect stamp duty is payable, unless there is some exemption for gifts to spouses.

Consider implications for Capital Gains Tax: inter spouse gift with hold over?

I do not know if transfer of benefical interest has to be registered at HM Land Registry.

If the lender/ mortgagee does not consent to the transfer, then probably H is in breach of undertaking to the lender.

Outsider creditors will be protected in that the house will remain an asset of H available to his insolvency office holder for distribution to creditors.

W should receive separate independent advice on the transaction.

Take care of your own position. Do not rely on a 'financial adviser', tell H that you assume no duty of care in this matter, and say he should instruct a competent solicitor.

 

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