Home Finance “THE BANK OF MUM AND DAD”: A GUIDE TO GIFTED DEPOSITS

“THE BANK OF MUM AND DAD”: A GUIDE TO GIFTED DEPOSITS

by wrich gbaf

By: Rachel Maxwell, a solicitor specialising of Nelsons,

WITH average UK house prices soaring to £277,000 and the average UK salary only increasing by 0.3% to £25,971, according to the Office for National Statistics (ONS), getting a foot on the property ladder can seem like an almost impossible task for many first-time-buyers. 

Figures fromThe Money Charityshow that, over the past four years, the average adultsaved just 1.7% of their income meaning that it would take 68 years to save the £33,806 deposit a first-time buyer typically puts down.

Rachel Maxwell, senior associate and solicitor at Nelsons, said: “When buying a house, it’s not uncommon for people to require the help of their parents to fund the deposit needed. In these cases, any balance that is being used towards the deposit that is not coming directly from the purchasers’ own funds must be confirmed as a gift – this means that the person giving the money confirms that they will have no legal interest in the property, nor any claim for the money at a later date.”

Why would I protect a gifted deposit?

“If they are in a position to be able to,many parents would be happy to financially support their children in buying their first house without any conditions or legal documentation setting out the terms of repayment or any ownership interest in the property. However, if you’re buying a property with a partner or friend, they may be a bit more nervous. 

“If this is the case, the parties involved in buying the property should consider having some form of protection in place to ensure that the money gifted is paid tothe intended person specifically when the property is sold, as opposed to being split and shared between both of the property owners.”

How do I protect a gifted deposit?

“When it comes to ensuring the protection of a gifted deposit, there are a couple of options available. You can enter a declaration of trust, which sets out in writing the contribution of each party in detail and can also set out what will happen if the property is sold. 

“Additionally, you can support the declaration of trust by entering a restriction on the land registry title documents, which identifies the existence of the declaration and prevents the property from being sold – unless a certificate is supplied by the parties involved or by a conveyancer. This certificate would prove that the sale is in accordance with the terms of the declaration of trust.

“By completing these two processes, it would provide another level of reassurance and protection for the gifted sum as well as providing clarity to the property owners about the unequal contributions made to the deposit. Ultimately, it could prevent the risk of dispute arising in a relationship should it reach a premature end.”

For more information on how to protect unequal contributions towards a deposit, please visit: www.nelsonslaw.co.uk/house-sales-purchases/or call 0800 024 1976.

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