Higher Rate SDLT

Can I avoid paying the higher rate SDLT by taking out a mortgage with my girlfriend and putting the deeds solely in her name? I am living in rented accommodation but have a buy to let property of my own. She is selling her main residence and buying a new main residence which I will also live in.

5 Answers

In that case she buys the property and the property is hers.

In theory this should work. A higher rate transaction is one where, amongst other criteria, you are purchasing a "major interest" in a dwelling. The term major interest is defined in s117 Finance Act 2003 as being the freehold or leasehold interest, so if your girlfriend purchases the property and holds it on trust for the two of you, she is acquiring a major interest but you are not. I doubt whether this is much use in practice however.

First, your girlfriend would have to get the mortgage on her own - there are lenders who will allow two people to be on the mortgage and one on the title but it's rare. Second, the lender would have to be informed that you intend living in the property, providing part of the purchase price and securing a beneficial interest. Most lenders won't agree to all this and if they do, your interest would be subordinate to theirs, so that if your girlfriend defaulted on the mortgage you could be evicted and the lender would apply the proceeds first to pay of the debt it was owed. If there was nothing left for you, all you could do is sue your girlfriend.

Third, you would not be able to exercise any control over when or if the property was sold or for how much, at least not without going to the courts, so you would be in a vulnerable position if the two of you were to fall out.

Would it be possible to transfer your girlfriend's current property into joint names? If so then although you may still pay stamp duty on that transfer (if she owes more than £80,000 on her mortgage) you would avoid the duty on the purchase so may save money. If it is possible it would involve plenty of hassle and some extra legal fees but depending on the sums involved it could be worth it.

Thanks for the reply, it is not possible for joint names on her property as the wheels are in motion she has a buyer for her property and has found a new property to buy. Our bank has also agreed a joint mortgage with my girlfriend as sole name on the deeds. I am happy with this position at present. I intend to sell my buy- to -let property sometime in the not to distant future and will then buy in to her property. But for the moment I just need to know if this will avoid her having to pay the 3% surcharge on SDLT as she will own one property and I will own one property therefore I think (but not sure) that the surcharge will not apply. At present I cannot get a definitive answer from the solicitors. Thanks again for your time.