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The Bank of Mum and Dad and its pitfalls

More and more young people are receiving financial assistance from the Bank of Mum and Dad when purchasing a property. It is natural, then, for the parents to want to protect their interest should their child’s relationship breakdown. How can this be done?

Option 1
So long as the young people agree then the parents can arrange for a legal charge (akin to a mortgage) to be registered against the property at the Land Registry. The house could not be sold until there was an agreement in place in respect of the repayment of the charge. If the buyers are purchasing with the benefit of a mortgage, however, the lender might not agree to another charge on the title.

Option 2
Another option for a parent would be a “declaration of trust”. This is a document that provides details of any contributions towards the purchase price, as well as subsequent repayments or reimbursements on a future sale.

Option 3
If the young people are intending to marry, a prenuptial agreement between them could also be a useful tool to identify the parties’ contributions towards the purchase of the property and any repayments required should the relationship breakdown and the property be sold.

Bear in mind that such agreements cannot be guaranteed as legally binding but would be highly persuasive to the court.

Please note that with any of these options, the parties are advised to take legal advice. The parents should also take advice on any possible financial consequences of a contribution or loan to a child in respect of a property purchase.

If you are considering helping a child in this manner speak with our experienced Family Team who will listen and advise on the best way forward for your family.

Call Valerie Henley, Partner, Solicitor and Head of the Family Team on 01633 867000

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