* Bank of Mum and Dad
There have been reports in the news this week quoting Legal & General’s research, suggesting a growing trend for parents to lend money from their savings or pensions to help young people get on the property ladder. Apparently, the Bank of Mum and Dad (or ‘BOMAD’) is now the ninth biggest mortgage lender in the country (although the Financial Times is quick to point out that BOMAD is not actually a bank).
Clear, personalised legal advice is absolutely vital for both parents and children in this sort of situation, to make sure that they end up with the outcomes they actually intend. This is particularly true when parents lend money to a son or daughter who is buying a house with a partner.
The law is still somewhat murky when it comes to unmarried cohabitants and how their assets should be divided upon separation (we’ve written about this before). Therefore, parents and their children need to ensure they have absolute clarity about what should happen if the couple were to separate, and how any equity in the property should then be treated. For married couples it is also important for there to be clarity over exactly what the parents intend and whether/how the equity should be returned to them in the event of divorce.
Parents should first consider whether they intend their contribution to be treated as a loan or as a gift. The couple should also decide whether they expect to own their new home in equal or unequal shares. It is all too easy to end up with a situation where a parent thinks they have made a loan to their child, when in law they have actually made a gift to the couple, meaning that some of all of that money could be lost to the parents altogether if the couple separates.
If you are in a situation such as this, you should discuss all of these issues right from the start, and speak to your conveyancer about making sure that you have all the right documentation in place.
For unmarried couples purchasing a home, a cohabitation agreement can be a really useful tool to clarify everyone’s expectations.
If you think you would benefit from tailored legal advice about these issues, one of Harbour Family Law’s experienced solicitors will be happy to speak to you.
Hannah Perry is a specialist family solicitor at Harbour Family Law Solicitors. You can contact her by e-mail at: email@example.com or by calling 01179 055141 or 01275 390458.
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