Getting onto the property ladder nowadays is a challenge. With soaring house prices and astronomical mortgage rates, many first-time buyers feel that that first rung is out of their reach unless they have help from family.
It is becoming ever more common for first-time buyers to use gifted funds as a deposit for their home. However, while this kind and very generous gesture can be invaluable in buying a home, both the gift giver and the recipient should ensure that the money is legally protected.
Why protect gifted funds?
Often parents will give an adult child all or part of their house deposit. When they are buying a property alone and can afford all of the running costs of that property and are unlikely to default on payments, parents often do not feel the need to stake a claim. Indeed, they may be required to sign a legal document stating that the funds are freely given and there is no expectation of repayment
However, if that adult child is buying a property jointly with a friend, romantic partner or spouse, there is always a possibility that the relationship will break down and require the property to be sold. In this instance, there is a possibility that all or part of the gifted deposit could be lost, so they may be interested in seeking legal protection.
How can gifted funds be protected?
There are two ways in which gifted funds can be protected. Firstly, the recipient of the gifted funds and their co-owner can purchase a property as tenants in common with their ownership shares apportioned based on their contribution towards the initial deposit.
The second option is to write a Deed of Trust which details how proportional ownership of the property is shared between the joint owners. Legal experts such as Parachute Law will ensure that the agreement is legally binding.
Protecting gifted funds is vital to safeguard against a future relationship breakdown, to protect a parent’s investment in their child’s future and to clarify joint owner rights and responsibilities.
