Stamp Duty and declaration of trust when buying out ex-husband’s share

[PoesieAndPeaches]

Hello

Currently in the midst of divorce and buying my exH's share of our marital home which I have been living in (initially alone, and in the last year with my new boyfriend of 5 years).

The mortgage was paid off 15 years ago from an inheritance I received.

We have been advised that if my exH transfers his share of the house to me alone, we would not be liable to pay any Stamp Duty.

My boyfriend and I will then set up a Declaration of Trust (as we will both contribute to the mortgage payments; he will pay a larger percentage than me as he is the higher earner) to show our equal interest in the house, despite my name only being on the Title Deeds.

I am just looking for confirmation from anyone in the know that this is correct. Everything I have been told and heard says it is but my solicitor is asking me to be certain so I wonder if anyone knowledgeable in this area or with experience of this same situation can confirm it is right.

Thanks in advance!

"We have been advised that if my exH transfers his share of the house to me alone, we would not be liable to pay any Stamp Duty."

That is correct. It comes from Schedule 3, para 3 of the Finance Act 2003.

However, things can get complicated if you own more than one home.

If you own another home as well (eg a holiday home or investment property etc) then you will face the 5% stamp duty for people who own more than one home.

[Just as an aside, if your exH has already bought another house then he would not have had to pay the extra 5% as there is a special dispensation for divorced people who still own a share in a property but cannot sell the home due to a court order]

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I am confused by what you say here:

"The mortgage was paid off 15 years ago"

and

"...we will both contribute to the mortgage payments"

Do you mean that you will taking out a mortgage yourself in order to buyout your exH?

And you will then be doing a Deed of Trust stating that your boyfriend owns half of the house and will be paying whatever percentage of the mortgage? Will he be named on the mortgage?

This is where things get tricky.

If your boyfriend will be assuming any share of the mortgage, either by being named on the mortgage or having it mentioned in the Deed of Trust, then the share of the mortgage that is equivalent to his share of the house (so, if he owns half the house then he is taken to be responsible for half the mortgage) he takes on is subject to stamp duty (Finance Act 2003, Schedule 4, para 8(1)(b) ).

It will then depend on the size of the mortgage and whether or not your boyfriend is a first-time buyer.

I would really strongly recommend that you speak to somebody with specific knowledge of this area.

Can you clarify the mortgage situation OP. You say paid off and that you will both be paying it.

Thank you both. No second home.

My boyfriend and I are taking out a mortgage to buy my exH's share of the property now.

Before that, 15 years ago, the mortgage my exH and I had on the same house was paid off.

"My boyfriend and I are taking out a mortgage to buy my exH's share of the property now."

OK, that's even more tricky.

If your boyfriend is taking out the mortgage with you then he will be jointly and severally liable for the mortgage along with yourself.

Has your boyfriend made a Declaration of No Interest? That is, that he will not have a beneficial interest in the house (ie there is no Deed of Trust saying that he does in fact own half the house).

So that he is acting as more of a guarantor?

If not, then I believe that he is party to the transaction with your exH, and so stamp duty is payable on the full amount of the house that is being transferred to you and your boyfriend.

I would very strongly recommend you to get professional advice from an accountant who is experienced in this area before you do anything.

My boyfriend will own half of the house. This is what the Declaration of Trust is required - to show that we own the house 50/50.

OK, in that case you will be paying stamp duty on the value of your exH's share of the house that is being transferred to you and your boyfriend.

So, for example, if the house is currently worth £400,000 and his share of the house is worth £200,000 then you and your boyfriend will be facing stamp duty on that amount.

If the house is worth £250,000 or less, and so his share is £125,000 or less then there will be no stamp duty to pay.

(I'm assuming here that you are not a first-time buyer)

My exH's share of the house is being transferred to me only. Not part of it is being transferred to my boyfriend.

I guess this is why my solicitor is confused and so am I now.

Just to clarify:

ExH will transfer his share of the house we owned together when married to me only. The house has no mortgage on it.

Boyfriend and I will obtain a mortgage to buy exH's share of the house.

Declaration of Trust was recommended as legal documentation that boyfriend and I both own the house.

Am I right is thinking the mortgage being in joint names is the problem?

Thank you for your help, everyone and sorry if I am not being clear.

I do appreciate all the advise.

So your boyfriend will be on the mortgage but not the deed?

Presumably your lender has agreed to a joint borrower sole proprietor mortgage with you and your boyfriend on the mortgage but only you on the title? But you then want a deed of trust to outline your boyfriend’s legal interest in the property despite not being on the title? The deed of trust can / may create an SDLT liability because your boyfriend has acquired an interest in the property via the deed of trust. You’re going to need a specialist solicitor’s advice, a regular conveyancer won’t necessarily have handled a lot of situations like this.

"Am I right is thinking the mortgage being in joint names is the problem?"

That's part of it, yes.

But the other part is the Deed of Trust. This gives your boyfriend a 'beneficial interest' in the home. (He would also likely get a beneficial interest anyway, if he just paid the mortgage, but that's beside the point).

When HMRC consider stamp duty they don't just look at who the legal owner is (the person whose name is on the Land Registry) but also at who the beneficial owner is.

If you were to have a mortgage in just your name and the house was transferred to you (without your boyfriend having any beneficial interest) then there would be no stamp duty to pay on the transfer of your exH's share of the house to you.

If you then do a Deed of Trust afterwards saying that your boyfriend owns whatever percentage of the house, then that would be okay as he is not taking on any of the mortgage and so there is no transfer of debt.

However, if the Deed of Trust says anything about your boyfriend contributing to the mortgage then that likely will count as transfer of debt and so there will be stamp duty payable on the share of the house that passes to him under the Deed of Trust.

Once again, I would very strongly recommend that you take professional advice on this matter.

I think I understand now!

Thank you everyone so much.

So is your DP getting a 50% interest in the whole property or just a 50% interest in the share acquired from your ex (for which he will be part funding the mortgage? Not sure why you would give him your existing equity.
So let us say house is worth 100 (no mortgage). You already own 50 of value. You take out a mortgage of 50 to pay ex 50 for his share. DP will part fund the mortgage so fair i thin that he gets an interest in the 50 acquired form your ex. I would expect the deed of trust to allocate 75% of house value to you (50 plus half of 50) and 25 to him