Declaration of solvency when gifting your house. advice from SAM Conveyancing
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Declaration of solvency for Gifts - What do you need to do?

24/10/2021
(Last Updated: 24/10/2021)
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3 min read
A declaration of solvency is required by a mortgage lender and or a buyer when the owner is gifting their share in a property for zero consideration. Gifting a house means the owner no longer owns the property/asset that was once theirs and has a value. You cannot gift property under value if you know that you can't afford to repay your debts/liabilities. In these cases the transaction could be reversed by the Trustees in Bankruptcy to pay off your debts.

To be able to declare you are solvent your assets (assets meaning valuable things you own like money in the bank, car, jewellery or houses) must outweigh your liabilities (HMRC taxes, loans, mortgages, contracts with suppliers). If you were made bankrupt after the gift then the transaction could be reversed in order for the property to be sold to pay off the creditors. Mortgage lenders would be at risk of not getting repaid which is why they ask for a declaration and also Insolvency Indemnity Insurance.

Insolvency Act 1986: Section 339 - Transactions at an undervalue

(1)Subject as follows in this section and sections 341 and 342, where an individual is adjudged bankrupt and he has at a relevant time (defined in section 341) entered into a transaction with any person at an undervalue, the trustee of the bankrupt’s estate may apply to the court for an order under this section.

(2)The court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if that individual had not entered into that transaction.



Here is a declaration of solvency format template which you can use to evidence you are solvent:

Assets
Liabilities
Balance
  • £500,000 Current value of home
  • £5,000 Current value of car
  • £5,000 Money in bank

  • £400,000 Current mortgage on home
  • £4,000 Current hire purchase on car
  • £10,000 Current credit card debt
  • £20,000 Current loan

£510,000
£434,000
£76,000

In the above example you can see that the assets outweigh the liabilities which means you are solvent.


Speak to your own solicitor or mortgage lender to confirm their own prescribed format.
Frequently Asked Questions
Procedure
Meaning
WindingUp
Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.