First Time Home Buyer Guide

Legal implications of helping your children buy a first home

Blood is thicker than water but ink is thicker still. So if you have financially contributed to your child's first home, don't be afraid to draw up the relevant legal contracts to ensure that no one else – such as your child's partner – walks off with your money.

Joint tenancy: If you are buying a home with your child – whether for an investment purpose or to help your child get on the ladder – there are two possible ways in which joint ownership can operate. The first, ‘joint tenancy', means that neither individual can sell without the others agreement and should one party die then the survivor inherits the others share without the need for probate and regardless of any provisions stipulated in any will. The alternative, ‘tenants in common', allows each owner to dispose of their share as they wish and in the event of one owners death their share passes to the estate to be distributed in accordance with the provisions of their will. Should you be unsure of how you would like the ownership of a property to operate you should consult a specialist . Contact our property solicitors.

Wills: If you have taken the route where your name is on the mortgage agreement but not the property deeds, you have no automatic right to the property in the event of your child's death. In this case, should your child wish to name you as a beneficiary then this would have to be reflected in their will

If your child's partner moves in: If, after a few years, your child has a partner move in and he or she contributes towards the mortgage, the couple may want this legally recorded. If your name is on the property deeds – regardless of what proportion you own – you qualify as a joint owner so any additional interest in the property will also have to be agreed by you.

However, if your name is not on the title deeds you do not represent any legal ownership of the property. Therefore you have no say in who takes an interest in it. Even if you have contributed a large deposit or have stated your name on the mortgage agreement, you will have no legal hold over the property. In this case, if your child splits from their partner who been assigned a proportion of the house, they could quite legally walk off with half of your deposit. A court might even favour a partner who had a verbal agreement – or ‘implied trust' – with your child, if financial contribution towards the mortgage can be proved.

Protecting yourself legally: If you wish to ensure your interest in the property is legally preserved, you need to reflect your contribution by means of a ‘declaration of trust' otherwise known as ‘deed of trust'. This is a private legal document separate from, but running alongside, the property deeds. Its purpose is to make any arrangement you have drawn up with your child legally binding. For example, if your contribution for the deposit was £20,000, the declaration of trust could state that £20,000 will be reclaimed on sale of the house.

You could also make a loan of the £20,000 but have it secured against the property, stating that the loan is repaid when the house is sold.

Otherwise a promissory note – which makes a promise legally binding – can be drawn up by a solicitor for a small fee.
 
More Information about Parental Help for First Time Buyers 

Helping with a deposit l Helping with the mortgage l Making a gift l Tax Implications of parents helping children l Seeking out the right financial advice

• To find out the costs of drawing up the right legal documentation and for any conveyancing costs associated with buying a new home, contact a property solicitor
• Contact a professional advisor to seek quotes for equity release, remortgaging or a secured loan