Getting on the property ladder: my parents are helping me buy a house but what legal documents do we need to draw up?

Question: My parents are providing finance to help me buy a property. Should this involve any formal — and probably expensive — legal documentation?

Can’t they just give me the money? It is something they are very happy to do.

Answer: This will depend on what basis the finance is being provided. Some parents will be in a position to provide an outright gift to their children with no strings attached.

In a case like that, the parent or parents should provide a letter of gift stating that they are giving up any interest or right in relation to the money and the property.

This will also be a requirement of any additional mortgage finance that you may obtain.

Some people do this successfully themselves but it is always prudent to take advice from a solicitor.

In other cases a parent may not be able permanently to part with the money but may be in a position to provide finance by way of a loan.

In this situation it might be appropriate for the parent to enter into a formal loan agreement and mortgage deed which is registered against the property at the Land Registry.

A loan agreement will allow the parent to charge interest and set out the terms on which the loan is to be repaid.

Again, if additional finance is being obtained from a mortgage provider, they may require the parent to enter into an agreement to ensure the loan you receive has priority for repayment when the property is sold.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

If you have a question for Piers King, email or write to Legal Solutions, Homes & Property, Evening Standard, 2 Derry Street, W8 5EE. Questions cannot be answered individually, but we will try to feature them here.

Piers King is a solicitor in the property department of Streathers Solicitors LLP.

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