In our recent podcast, we discussed inherited properties and how this can impact upon Equity Release applications. This covers requirements needed to release equity from an inherited property, transferring the property into the client’s name, acquiring the correct paperwork, considering other beneficiaries, and how to achieve this process in the timeliest manner possible.
Releasing Equity from an Inherited Property
The requirements to release equity from a client’s inherited property will depend on the circumstances, the inheritance, and the lender. We will need to gather information from the client to determine what initial action needs to be taken in each case.
To begin with, we’ll need to know if there are any third parties involved. For example, if the property has been left not just to the client but to other family member’s as well. These other beneficiaries will also need to be involved in the transaction. As another beneficiary has an interest in the property, the client would need to agree with them for the property to be transferred into the client’s sole name. The other beneficiaries may request financial consideration in return for relinquishing their interest in the property.
If an agreement cannot be reached mutually on the financial amount, it may be necessary for the client to instruct an independent valuer to determine the value of each person’s share in the property.
Transferring the Property into the Client’s Name
Before we can transfer an inherited property into the client’s name, the formal legal power to transfer the property from the estate of the deceased person will need to be obtained. This can be obtained through the appointed person or representative of the deceased estate. This may be the client or a third party and there may be more than one person represented appointed. They would need to apply to the court to obtain the legal power to transfer the property. This can be required by obtaining a grant of probate where the deceased died leaving a will.
However, in the case where a will was not left, they would need to obtain letters of administration instead of a grant of probate. Practically these both work in a similar way by giving legal power to the deceased personal representative to transfer the property.
What Happens if a Grant of Probate or Letters of Administration Cannot be Obtained?
It is important to consider worst-case scenarios where a grant of probate or letters of administration cannot be obtained. If this is the case, a specialist will and probate solicitor will need to be instructed to obtain this. We will place our file on hold until this has been obtained as we are unable to progress with Equity Release transaction without it.
The time frame for this depends on how complex the deceased’s estate is. For example, how many assets they had, the type of assets, and also the parties involved. The solicitor instructed to obtain this will be able to provide an estimated time scale.
In some cases, a client may not know of any solicitors that can help within the wills and probates. As an advisor, we can pass on their details to a specialist solicitor we have regular contact with. The solicitor would then be able to contact the client directly and provide a quote and estimated time scale for obtaining the grant of probate or letters of administration. If the solicitor agrees to defer payment of their fees, we can also settle this on completion of the client’s Equity Release. Alternatively, the law society’s online find a solicitor service will provide details of a specialist solicitor in the client’s local area.
The Grant of Probate and Letters of Administration Have Been Obtained. What Next?
Once this has been achieved, the transfer documents will then need to be drawn up and approved by the parties involved, including the lender’s solicitors. Preparing the transfer documents and representing the clients in the transfer can all be done by us. However, we do have an additional fee to represent the actual work involved and we will confirm this fee with the client as early as possible, prior to undertaking any work in relation to the transfer.
In relation to the other third parties and beneficiaries, unfortunately, we would not be able to represent them. The other beneficiaries or personal representatives of the estate would need separate legal representation as they must receive independent advice for that of our client. As a minimum, the other parties will generally need to have their identity verified by a solicitor and their signature to transfer documents will need to be witnessed by an independent adult, although this doesn’t necessarily have to be a solicitor. Some lenders will, however, require any other beneficiaries to receive independent legal advice on the effects of the transfer and of relinquishing any interest they have in the property. They may also require a form to be signed by a solicitor, acting for the beneficiaries in the transfer. We will be able to confirm that once we have received the lender’s requirements.
What if Other Beneficiaries Don’t Want any Payment for Consideration in Transferring Their Interest to the Client?
If the lender requires other beneficiaries to obtain independent legal advice, they will not rescind this requirement on the basis that no payment is being requested by the beneficiary in return for their interest in the property. In fact, if the beneficiaries do need to obtain independent legal advice, they’re likely to be advised in their interest of the property may have a monetary value. If this is the case, the client may need to negotiate any requests of payments with the other beneficiaries before the transfer of the property can proceed. We will be able to obtain the lenders full requirements once the mortgage offer has been issued.
Additional Considerations
There are a few additional considerations that may arise in transactions involving inherited properties, in our experience. For example, in some cases, lenders will treat these types of transactions like a purchase. This is because the client is currently not the registered owner of the property title and will become the registered owner over the course of the transaction. This does mean that the lender may require the usual conveyancing searches to be undertaken as if it was a purchase. The fee for these searches would need to be paid upfront by the client to enable us to order these. This amount unfortunately can’t be paid out of the Equity Release funds on completion.
Essentially, these are the same searches that the client would take out if they were purchasing a property. Typically the local authority search can take approximately three weeks to be received back in. However, this does also depend on the local authority as each has their own time scale for these. But once the searches have been ordered, we’ll be able to indicate an approximate time scale for their return. In these cases, it is important to leave some additional time.
If the client is paying any other beneficiaries to relinquish their interest in the property, we’ll also need to consider whether stamp duty will be payable by the client. This is because they will be treated as a buyer in the transaction. Assuming that the client does not own another property and has owned a property previously, the standard position would be that they would pay stamp duty on any amount over £125,000.00.
What Happens When the Client is the Only Beneficiary?
If there are no further beneficiaries other than the client or any representatives, the process that has been previously explained will generally remain the same, in that they would still need to obtain the grant of probate or letters of administration through a specialist solicitor before the matter can be progressed. They would not, however, need to settle anyone else’s interest in the property by a payment as the client would be the only one with an interest. Where there are no third parties involved in this way, the transaction can generally progress more quickly, as we are not reliant on any other third parties, other than the lender’s solicitors, to achieve completion.
If the client has already completed the property transfer prior to the Equity Release application, we would need to wait for the transfer to be registered with the land registry before the lender will agree to set a completion date. The lender’s solicitors will also need to see copies of the property title showing that it is registered in the client’s solely. In our experience, if the property is unregistered, it can take in excess of five months, depending on the circumstances of the case, for the transfer to be registered with the land registry. You can ask them to prioritise registration of their transfer, although the land registry will consider the circumstances of each case when deciding whether to prioritise it or not. However, there is no guarantee they will do so. Our information page on unregistered land can provide more information on this process.
It is therefore important to consider realistic time frames and be aware that some lenders will also treat the case as if it were a purchase. They would therefore require the usual property searches, where the client has been the registered owner for less than six months.
How to Achieve a Completion Date as Soon as Possible
It certainly helps to have as much information as possible at the outset. The types of information we need are, for example, details of the client’s relationship with the deceased, the approximate value of the property at the date of the deceased death, details of any assets other than the property that the deceased had at the date of their death, original death certificate and will if available, contact details for any other beneficiaries, and confirm whether they are in agreement to transfer the property and any agreed amount to be paid to them in return.
It is also beneficial to have contact details for the personal representative’s if there are any, the original grant of probate or letters of administration if these have been obtained, and contact details of any solicitors acting for any part in the transaction, if they’ve already been instructed. Essentially, we need as much information as possible from the outset to ensure realistic time management and meeting the client’s expectations.
