Helping your children onto the property ladder: risks for the Bank of Mum and Dad

Partner Giles RobinsonApparently, the Bank of Mum and Dad has become the ninth biggest property lender in the country – and why not? Which parents would not want to help their children to get a foot on the property ladder if they have the ability to do so. After all, if the money is being invested in a property, it’s as ‘safe as houses’, isn’t it?

From the perspective of the family lawyer, such lending comes fraught with difficulties. If the child is in a relationship, or forms a relationship/enters a marriage at some point in the future, what does the Bank of Mum and Dad intend? Was the money intended to be a gift, or was it a loan? Was it meant to be for one person or for the couple? How will the money be treated in the event of a relationship/marriage breakdown? The question of whether money was a gift or a loan crops up time and time again when relationships break down.

If a couple are simply living together and they both have an interest in a property, the court will be concerned with what each actually owns (although that may not be as straightforward as it seems) and the shares in the property divided accordingly. If the couple have not entered into a clear declaration of trust, or the parents have not protected their position by having a charge on the property, or a declaration of trust made in their favour, there is a risk that some of the money will leave the family.

The position is more complicated when dealing with a marriage. The court then has the power to adjust the interest that each spouse may have in a property, taking assets from one person and giving them to another according to a range of factors detailed in the Matrimonial Causes Act. A pre-nuptial agreement between the married couple can be of great assistance in trying to protect money that has come from one side of the family. Or the Bank of Mum and Dad might want to think even more carefully about having a charge or declaration of trust made in their favour to try to ensure that their money stays within the family.

Expert legal advice on pre-nups, cohabitation agreements and declarations of trust

For more information about pre-nuptial agreements, cohabitation agreements and declarations of trust please email Giles Robinson or call him on 01323 435900. To learn about Giles’s skills and experience please view his website profile.

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