It is common for us to be approached by parents who want to help
financially towards the deposit. They can do this in a number of
ways but two common ways are either by way of a gift or by a
Setting aside where you might stand in relation to a bank, there
are potential issues if your child is in a relationship at the
time, or even if they get into one after the property has been
purchased. This means you need to think carefully about how your
generosity is structured. The last thing you might want is for the
partner to benefit from your input should they separate.
By way of a brief explanation, if your funds are used to
contribute to the purchase of a home that your child and partner
live in, either at the time of purchase or in the future, then it
becomes the family home and they are entitled to share in it
equally. If there is a bank loan in place then the loan is
registered against the property and is taken into account before
the equity is calculated. It doesn't matter whose name the
house is in, or whose name the mortgage is in, it is a cost of
acquiring the relationship asset.
If you have made a gift to your child to assist in the purchase
it cannot be claimed as a cost of the purchase. There was no
intention of it being paid back and on any subsequent separation it
has been lost.
If a proper loan document is prepared clearly stating that it is
an "on demand" loan for the purpose of purchasing the
property there can be no argument later that it needs to also be
taken into account in assessing the equity in the property. Ideally
a mortgage or caveat should be registered but the bank may very
well have issues with a further mortgage being registered.
Regardless, if your child later separates your loan can be called
up. If your child is already in a relationship when the house is
bought and the funds advanced, the loan can be in both your child
and their partner's name. If the relationship starts after the
house is bought the loan is still a valid debt.
While we would always encourage couples to consider an agreement
under the Property (Relationships) Act they can be difficult for
clients to discuss. These agreements cannot be forced onto a party.
Having your advance recorded as a loan does at least ensure this
family sourced money is protected.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
To ensure that all possible problems are considered and addressed, the transactions must be appropriately documented.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).