Following the Government announcement that Stamp Duty rates will be reduced significantly until March 2021, there has been a huge influx of mortgage applications and conveyancing instructions. For first time buyers however, it may not be as straight forward, and many potential buyers are having to rely on loans or gifts from family members to purchase their first home.
First time buyers often struggle to save the average 10% deposit required by most mortgage lenders to purchase a property. Mum and Dad are likely to want to assist their children in providing a helping hand in taking that first step onto the property ladder. However, if parents are lending a helping hand, they will usually want to ensure their contribution cannot be claimed by any other person, usually a co-owner of the property.
How, therefore can parents provide assistance, but also protect their contribution and their child’s interests from any future disputes between co-owners and in the event the property is sold?
A Declaration of Trust is an agreement between two or more persons relating to a property, which regulates the way the beneficial interest to that property is owned and details how any sale proceeds are split in the event of a sale. In the example of parents contributing a sum of money by way of a gift, that contribution can be protected within a Declaration of Trust. Or if the parents are providing the sum as a loan rather than as a gift, a Legal Charge or Secured Loan Agreement may be more suitable.
It is advisable for any unmarried parties purchasing property to seek legal advice as to whether a Declaration of Trust is suitable, especially in the event the parties are contributing different amounts to the purchasing price or any family members or third parties are making additional contributions.
Here at Curwens LLP, we can offer expert advice on co-ownership for both married and unmarried couples purchasing or transferring property. Contact our property department today on 020 8363 4444 .