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What is a Transfer of Interest?

By M. Lupica
Updated May 16, 2024
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A transfer of interest is a transfer of ownership of any object, real property, or business entity from one party to another. Most often, though, this term refers to the transfer of one party’s ownership in a business, and it may refer to an interest in a partnership, a limited liability company (LLC), corporation, or other business entity. Generally the transfer will be executed through a transfer of interest agreement.

Though people rarely refer to it as such, every purchase that is made technically involves a contract, and through that contract a transfer of interest in property is made. The purchase of food from a supermarket is a contract that results in a transfer of the interest in the food from the supermarket to the purchaser. Likewise, the interest in clothes purchased at a store is transferred through a contract between the purchaser and the store.

These transfers can be made through an agreement to any terms, notwithstanding any special restrictions or legal stipulations on the type of interest to be transferred. The agreement just must clearly state the parties, the interest to be transferred, and the consideration being given for the transfer. Once the intent to make the transaction is manifested in the words or actions of the parties, the agreement is officially executed and the transfer is complete.

One in real property is often referred to as an “assessable transfer of interest.” This is in reference to the fact that because ownership in real property has tax ramifications, certain transfers require a revaluation of the property after the following tax year. Any conveyance of real property through deed, trust, or contract, as well as any lease with a duration of 20 years or more, fall under this category. The purpose for this is to ensure proper assessment of taxes on the transaction.

Similarly, there may be times in which the sale of a business entity will be deemed an assessable transfer of interest. This occurs when there is a sale of 50% or more of the business. This, however, is not generally the case in the event the transfer occurs through foreclosure or forfeiture, if the transfer is not subject to income tax, or if the transfer is among members of an affiliated group, among others. The tax ramifications of these transactions are so significant that governments generally require a reevaluation after the transaction's execution.

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Discussion Comments

By sweetcheeks — On Feb 17, 2014

My mother signed over her share of the house to me, but how do I remove her from the land register? She has never made any contribution towards the mortgage whatsoever and she moved away to her council house five years ago.

By miriam98 — On Aug 25, 2011

@Charred - Yeah, I know someone who does that switch on his credit cards just about every six months; in other words, he takes advantage of every offer that comes in the mail like that.

I don’t believe that’s a good idea however. Those balance transfer offers may seem like a good deal, but after awhile it could hurt your credit rating.

The reason, I believe, is that the banks issuing the cards do credit checks on you. Every time someone does a check on your credit score, it lowers your score, if only by a notch.

Therefore my advice is not to try to be too clever. Simply stay with one card, and pay it off at the end of the month. Stay away from gimmicks.

By Charred — On Aug 24, 2011

@everetra - I can tell you one place where you have plenty of leverage. It’s with your credit cards. Every now and then I get offered 0 interest credit cards in the mail. They also offer a zero percent balance transfer to switch the balance from the old credit cards to the new one.

Of course, I am well aware that the zero percent is just an introductory offer. Usually it lasts six months or so. After that, if you read the fine print, you’ll notice that the annual percentage rate is much higher than your typical credit card.

I’ve also noticed that if I don’t make a minimum payment within the six month promotional period, I will be assessed the annual percentage rate, retroactively. Credit card companies are not dumb. However, if you are smart, you can use these things to your advantage.

By everetra — On Aug 24, 2011

We had a mortgage on our first house for several years. Then we received a notice in the mail that our mortgage had been transferred to a new mortgage lender.

Other than changing hands from one company to another, nothing else really happened. In general interest rates were lower on conventional mortgages at the time the transfer took place, so I wished that with the transfer we could have gotten a lower interest rate, without having to go the usual process of refinancing and incurring all of those closing costs.

Alas, that is not the case; we just stuck with the old terms. The mortgage lender has no incentive to change our terms just because a transfer has taken place. It’s not like people can easily go somewhere else in these circumstances. But it would be cool if we did have more leverage when this stuff happens.

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