The Bank of Mum and Dad

So one of the children is going to move in with their partner and has seen the ideal property but the deposit is slightly out of their financial reach.  After a quick discussion, Mum and Dad are considering helping out, but what legal steps should everyone involved be thinking about to secure this gift or loan?

If this rather substantial amount of money is going to be a loan to the couple (rather than the individual child), the parents should consider having a formal loan agreement drafted, and registering a charge against the property which is akin to a small mortgage. 

The couple themselves should own the property as Tenants in Common which permits unequal ownership.  This ensures that upon sale, any larger capital contribution is paid back to the payer before the remainder of the sale proceeds are split.

In the case where the parents gift the money to their child, but not their child’s partner, and that couple are unmarried, it is wise to have a Cohabitation Agreement drafted or if they are to be married a Pre-Nuptial Agreement which sets out who is to take what in the event of a relationship breakdown. They couple will also need to buy the property as Tenants in Common so that their unequal ownership of the property is properly recorded. 

Given the difficulty of getting a first foot on the property ladder, gifts or loans of this nature feature regularly in purchase arrangements. Steps taken to ensure clarity at the outset can ensure that practical help given out of love and concern does not become the focus for fierce future discord. 

Stephen Williams
T: 01473 849949

Stephen is head of the Family team at Ashtons and a member of the Solicitors Regulation Authority (SRA) Advanced Family Law and Children Panel Accreditation Scheme.

Ashtons Legal