Assuming the lender has charged the property, if the property is transferred into the mortgagee?s name and a formal write-off of the loan is made, the loan written off is chargeable consideration for SDLT purposes.
The way around this is for the mortgagee to go into possession. A mortgagee in possession is not obliged to sell the property within any specific time, but on a subsequent sale (to a third party), as mortgagee, the mortgagor?s interest and any subsequent mortgages will be overreached and the property will be sold free of them. The mortgagee will remain protected, even though the property remains in the mortgagor?s name, as there will be the usual restriction on the title preventing any sale without the mortgagee?s consent.