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The property market today has a greater divide than ever between the haves and the have-nots. On the one side, those who have money will almost certainly invest it in property – it is one of the few investment types that realises any sort of yield in these difficult financial times.
On the other, those who are starting out in life are finding it difficult to accumulate sufficient funds to put down a deposit and become property owners. In some respects, this makes an ideal market. Property owners are on one hand, potential tenants on the other and the rental market is booming. Little wonder we have been handing out so much advice on drawing up tenancy agreements over recent months!
Some, however, choose to short-circuit the system. Many of those in their twilight years see the possibility of transferring their property to the next generation as a meaningful way of really helping them to make a start in life. Here, we take a look at what is involved.
What are the mechanics of gifting a property?
The good news is that transferring property as a gift is not as convoluted as going through a sale. Having said that, it is still not straightforward, and you will need to use the services of a conveyancing solicitor.
They will set about transferring the legal title to the receiver. To do so, they will have to go through the same land registry changes that they do with a sale. In other words, they will check to whom the property is officially registered and whether there are any ties, orders, mortgages or other legal provisions that might affect the transfer. These could include conservation orders, preservation orders, access rights and a variety of other things.
With this established, both parties then need to complete form TR1 in front of a witness. The solicitor will then lodge the form with the land registry to inform them of the change of ownership.
What are the tax implications?
There are various taxation issues surrounding gifting a property, and it would be impossible to go into them here. It is worth spending an hour with a tax advisor to understand which, if any, of these considerations are applicable to you. One thing to keep in mind is that if the donor of the property passes away within seven years of the transfer, you might find that it is still subject to inheritance tax.
Occupation of the property
Sometimes the giver wants to make a gift of the property as an asset, but still wishes to live in it for the remainder of their life. This is fine, on completion of the transfer, the receiver simply needs to give the donor a lease for life. Legally, this becomes a 99-year lease, and terminates on the death of the tenant.
Gifting a property can be a perfect and cost-effective way to help the next generation get a head start in life. But always make sure you take expert advice and go into the transaction with eyes wide open.
