Transfer of Equity / SDLT question for a married couple?

[maths]

What exactly was the intention of the parties on the purchase of the current property?

If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage. However, proof would need to be provided of evidence of this intention.

There should have been an execution at the time of purchase of a declaration of the respective beneficial interests or an appropriate declaration on the LR Form TR1; why was this not done?

[section 44]

sounds like any equitable co-ownership would be as a result of a resulting trust

[maths]

The resulting trust concept has effectively been superceded for matrimonial properties following Stack v Dowden where determinations as to beneficial interests are concerned.

[Mpoonshine]

Hi
I started this thread or rather raised the question in December, but I have only just seen the last 4 posts from January this year (from ‘maths’ and ‘section 44’). Thank you for those.
Completion of the remortgage is due to take place on Monday, so wanted to have one final last check on this issue which is that we are not hugely happy about paying more SDLT (around £2k) when we have already paid SDLT once when purchasing.

What exactly was the intention of the parties on the purchase of the current property?
If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage.

Maths, in answer your above question: the intention of the parties (ie my wife & I) on purchase of the current property and indeed on purchase of our previous property was to own the property on a 50/50 basis. We applied for a joint mortgage when buying our previous house, but were rejected by the lender, so I had to get the mortgage in my name only.

However, proof would need to be provided of evidence of this intention.

There would be proof that we applied for a joint mortgage, but were rejected (wife’s credit rating), so the only option was then to obtain a mortgage in my sole name. That mortgage was ported from the last house to current one.
Other ‘proof’ includes:
1. Probably not relevant, but my wife had to sign an occupiers consent form for the lender.
2. Bank statements going back many years showing that everything has been equitable 50/50 between us.
3. My wife got a document from somewhere like WHSmiths which she drew up herself showing that she paid 50% of the deposit for the previous purchase.

There should have been an execution at the time of purchase of a declaration of the respective beneficial interests or an appropriate declaration on the LR Form TR1; why was this not done?

The above was not done because we didn’t realise we would have to do that. In hindsight, a decade ago we should have probably thought this (or been advised by the solicitor). At the time we were buying the house before our current one (our first house together)… the property market was moving very fast / things were being snapped up straight away, and after agreeing that purchase, joint mortgage rejected we had to immediately apply for mortgage in my sole name to avoid losing the place.
I still have not been able to find any document or weblink that would provide a definitive answer to our situation.
Is there one?
Many Thanks in advance, if anyone wants to comment further.

[PropertyTaxAdviser]

I am afraid that my opinion is that it will be easier for you to pay the SDLT on your remortgage if your wife wishes to go on the title deeds and the mortgage.
The SDLT would be chargeable by reference to the 50% of the mortgage balance she assumes liability for.

You could simply make a declaration of trust (applying retrospectively to the date of acquisition) that you acquired legally as bare trustee for the two of you beneficially and not remortgage. However you would have to get the bank (current lender) to accept this. If they did they would require third party guarantees from her and this would take you close to the very widely drawn legislation which refers to any change in respect of the obligations of the parties in relation to the debt secured on the property.

I have managed to get banks to agree to this in the past with some careful drafting with the wording of the guarantee given but only with high value property and where I was dealing directly with the underwriting and legal teams. I would not expect such co operation from a high street lender. To boot, You would need to pay legal fees in the drawing up of the declaration of trust which must be done by deed and I would expect the bank would charge you legal fees for the drawing up of the guarantees. If you are anticipating SDLT at about £2k it is hardly worth it in terms of economics.

If you were to make the declaration of trust and then go to a new lender your wife would need to call for the legal title to be conveyed to her so she could then enter into the new mortgage. You would argue that there was not a new acquisition for SDLT purposes and thus the remortgage was irrelevant - so no SDLT .... BUT you would be putting in writing the trust and then collapsing it again quite quickly. This makes it all a bit wobbly.

In terms of evidence - when you entered into the mortgage did your wife not have to sign something saying she had no interest in the property? Most mortgagees would require this to overreach any rights she would have in equity.

If she did not sign anything to this effect you might have a stronger basis of argument.

To do this all carefully will take some legal time. Have you spoken to your solicitor or mortgagee - you could try discussing it?

[Mpoonshine]

Hi Maths
I thought I sent you a PM earlier, but see that the message is still stuck in my ‘outbox’.
Not sure why it has not been sent. Anyway there’s nothing really ‘private’ about it so a copy is below.
Any thoughts or feedback?
Much appreciated.


SDLT / ToE
Sent at: Fri Feb 21, 2014 1:26 pm
From: Mpoonshine
To: maths
Hi Maths

Last night, I only just saw your comment at http://www.taxationweb.co.uk/forum/post ... ml#p162238
and I posted a further comment on that thread.

You post included:

‘If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage.’

I too also assumed that this was the case. It is only logical and fair but I have not been able to find anything definitive.

The conveyancing solicitor thinks that the SDLT is still due, but it’s still unclear.

Do you know if there is any legislation, documentation, case history or anything that states this is the case ie ‘If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage.’

Many Thanks

[section 44]

You could simply make a declaration of trust (applying retrospectively to the date of acquisition)

How do you retrospectively declare a trust?

[JAB]

Here's how: http://www.hmrc.gov.uk/manuals/cgmanual/cg70291.htm

[section 44]

I can't see anything there about retrospection

[Mpoonshine]

Are you anywhere out there Maths?

As said above, I tried to send you a private message in February but I don’t think ‘the system’ allowed it to be sent? So I was left with no option, but to copy that message and include it in a post on this thread (4 above this one).

Anyway, in the end we actually had to pay half the stamp duty again when we remortgaged / 'TOE' that in real terms we had already previously paid in full when we bought the property). You know the history, and it’s in this thread, so I won’t bore everyone by repeating it all.

But I am still interested in the comment that Maths made:

If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage. However, proof would need to be provided of evidence of this intention.

Although we have already paid this ‘extra’ stamp duty, it’s now a point of principle (although maybe we can try and claim back that unfair ‘extra’ stamp duty back, as in our case their can surely be no other possible rationale explanation other than state theft).

So, as said above : Maths - Do you know if there is any legislation, documentation, case history or anything that states that what you said is actually the case (which of course logically and fairly.. it should be the case) ie ‘If the intention was that each spouse was to have a (eg) 50% beneficial interest even though the legal interest was to be held only in the name of one spouse then no SDLT should arise on the remortgage.’