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Is blood thicker than mortar?

Property arrangements with friends, third parties and the Bank of Mum and Dad become more common as property value to earnings ratio increases; but do both parties know the risks, how to protect their interests and are they getting the right, or any, advice?

As it grows increasingly difficult to get on or move up the property ladder, more parents are contributing to their child’s first property purchase, with 45% gifting over £10,000 to their child and 17% over £50,000 research in the South East has shown.

According to new research from Quality Solicitors, over half (60%) of parents in the region said they did not feel fully aware of the legal implications and obligations of giving financial support to their child. Tricia Longmore, Private Client Solicitor at Large and Gibson has seen the problems that some face further down the line, ‘so often, clients come to us at crisis point. One lady had gifted money to her son and his wife to help pay towards their first home, but sadly they are now divorcing. Our client has lost control of the money which is now a part of the financial settlement in her son’s divorce. She feels her generosity has been wasted, that he needs the money mow more than ever to have a fresh start but it is lost’.

Considerations of the risks and effect of relationship breakdown, negative equity, bankruptcy, estates and tax planning and of course an unforeseen need to access the funds are all too often overlooked with 73% of contributors saying they simply handed the money over with no legal advice and 'hoped for the best'. 
Buyers also wrestle with the informality of these purchase agreements, over three quarters (79%) of first time buyers in the South East who have accepted financial support admitting to having concerns about accepting it and 53% say they did not fully understand the legal implications of getting financial support from a third party. Objections from mortgage companies, arguments with siblings and setting boundaries with generous but intrusive parents were not addressed before they became a problem.

Parents and buyers do want to know their options with regards to property ownership and interests, private loans and mortgages as well as the wider implications of property agreements but often feel put off of seeking legal advice because they do not want to cause offence or see it an unnecessary expense where they are dealing with their own relations.

Tricia Longmore says, '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 relationships you value. It is important to get some basic legal advice. My advice is often about helping my client to make an informed decision and to open discussions which are very necessary but often difficult, a lot of clients find this easier once they involve an independent person like myself who can give an outside perspective’.

It is important to remember that protecting the parties in these increasingly common arrangements does not have to be complicated or costly, as well as offering peace of mind for all concerned, getting the right legal advice and help can save heartache and tens of thousands of pounds in the longer term.

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