Solicitor's fees relating to gift financing

Daneel

I am in the process of buying a house, financed by my own savings, a mortgage, and a gift from my parents.

I received a letter today from my solicitors telling me that due to the gift element, there would be two additional charges.

1. £165 for an Insolvency Act indemnity to protect my lender (why am I paying to protect my lender, and why is that fee going to my solicitor rather than the mortgage provider?)

2. £95 + VAT to the solicitor for having to deal with fact that there is a gift involved

Can anyone tell me if this is normal?

Thanks

loubel

1. The indemnity is to protect your lender in case your parents go bankrupt and the official receiver looks to reverse the gift. It's a type of insurance policy and your lender will require this to proceed with the mortgage. Your solicitor needs the money so that they can purchase the policy.

2. It's not an unreasonable fee for the additional work and they are doing the right thing by being up front about it with you.

Richard_Webster

I don't agree. The property being purchased is not being purchased more cheaply than it s market value is it?

I think the solicitors are wrong. The insurance is not necessary because it is not a gift of the property but of cash to buy it.

bris

Richard_Webster wrote: »

I don't agree. The property being purchased is not being purchased more cheaply than it s market value is it?

I think the solicitors are wrong. The insurance is not necessary because it is not a gift of the property but of cash to buy it.

The gift could still be seen as deprivation of assets and the insurance is needed if the council come calling asking for it back to pay for care etc.
However it is not always required, so it must depend on the banks policy towards gifted deposits.

kingstreet

Is this a solicitor with a low "headline" fee but a list of additional charges, like "completion of SDLT return" and similar hidden in the disbursements?

arbrighton

Richard_Webster wrote: »

I don't agree. The property being purchased is not being purchased more cheaply than it s market value is it?

I think the solicitors are wrong. The insurance is not necessary because it is not a gift of the property but of cash to buy it.

We are also being offered the option of this indemnity insurance as my half of the funding for our house is a gift from my parents, and they are also required to sign a declaration regarding having no interest in the house etc. No lender involved as we are lucky enough not to need a mortgage. We are buying at 10k below asking so it's not about being cheaper than market value.
There does seem to be an implication that should insolvency occur for the gift givers, redress could be sought through the equity in our property

DVardysShadow

Richard_Webster wrote: »

I don't agree. The property being purchased is not being purchased more cheaply than it s market value is it?

I think the solicitors are wrong. The insurance is not necessary because it is not a gift of the property but of cash to buy it.

Are you saying that the OR could only reverse a cash gift and that if the money was put to a house, either

• the OR would not be able to reclaim
• or that the OR would be restricted to a general claim on the beneficiaries of the gift which would not override the interest of the mortgage lender in the property.

Richard_Webster

Are you saying that the OR could only reverse a cash gift and that if the money was put to a house, either
the OR would not be able to reclaim
or that the OR would be restricted to a general claim on the beneficiaries of the gift which would not override the interest of the mortgage lender in the property.

Not sure whether they could claim at all, but if they did it would only be a "general claim", i.e. have no direct connection with the property.

If one took these solicitors' logic through completely we would all be taking out indemnity insurance every time anyone gave us anything!

DVardysShadow

Richard_Webster wrote: »

Not sure whether they could claim at all, but if they did it would only be a "general claim", i.e. have no direct connection with the property.

If one took these solicitors' logic through completely we would all be taking out indemnity insurance every time anyone gave us anything!

OK, the conclusion I draw is that there is no need for such a policy and if the policy only benefits the lender, it will never be called upon.

Indeed the policy could be a listing against a block policy sold to the solicitor for peanuts because the risk is negligible, but sold at massive profit. eg £190 on a £195 policy.