Question
We are thinking of contributing to our child’s first property purchase. What sort of things do we need to think about before we do this?
Answer
Simon Pook, Head of Residential Property, Clarke & Son replies:
Recently it is becoming more and more common for parents to assist their children by financially contributing to their first home. In the process, they are making major sacrifices, either by remortgaging and or selling their home and downsizing. However, the vast majority have no protection in place for their gift, with many simply handing the money over with no legal advice and ‘hoping for the best’.
That means should their child’s circumstances change, for example splitting from their partner or falling into negative equity, the money could be lost. It also leaves children exposed to potential sibling disputes should a parent die.
Anecdotally, many parents do not take any type of legal advice before contributing to their child’s purchase. This is all the more surprising given the sacrifices they make to help their children out.
Surprisingly though, many buyers say they’ve not even had an ‘informal discussion’ with the other people that have contributed to their purchase about what would happen should their circumstances change, such as being made redundant, relationships breaking down or needing to sell the property.
Many parents see their contribution towards the property purchase as an investment, however without the proper legal paperwork in place, there is nothing to protect their contribution should their child view it as a gift. Parents need to be made fully aware of the legal implications and obligations of giving financial support to their child. First time buyers are as much in the dark as their parents and many do not understand fully the legal implications of getting financial support from a third party.
Our advice at Clarke & Son is that it is natural for parents to want to do as much as they can to help their children get a foot on the ladder. However, the research shows that often their goodwill is misplaced and can actually lead to more problems further down the line if something goes wrong.
Our message would be that protecting yourself isn’t a sign of mistrust – far from it. It’s actually the best way of protecting the long term relationships you value. Protecting yourself doesn’t have to be complex or costly and it can save heartache and tens of thousands in the longer term.
If you have a query or would like to book an appointment please get in touch with our First Contact team on 01256 320555 or email mail@clarkeandson.co.uk
