Protecting my parents investment property in a divorce

mumps

Dunroamin wrote: »

My view remains the same, if not more so.

She hasn't even had her own home for all those years and she's supposed to be grateful because she's bought a few presents. I hope she goes back to her own country and takes the children with her if they manage to do this to her!

Would that be the best thing for the children? Would it even be legal? I don't know if the country she is from is a party to the Hague Convention but even if it isn't I think international child abduction is an awful thing to do (this is from personal experience and the children I know were horrendously damaged by the whole thing.) Sorry I know this isn't really relevant to the OP.

jamesd

thorsoak wrote: »

Fact: your "friend" and his parents have committed a fraud by attempting to circumvent the financial restrictions caused by the parents bad credit record.

That is not a fact. It is entirely lawful to transfer property between people and to have trusts. No formal documentation is even required to create a trust. A parent does it automatically if they create a savings account in the name of their child, and as trustee they are then legally obliged to protect the interests of the child in the money.

We don't know exactly what the mortgage company was told, nor the type of mortgage used. It might have been improper or it might not have been. It's entirely fine for a person to take out a mortgage for say a family member to live in a property, provided the mortgage lender accepts that and it seems entirely possible that a mortgage lender accepted this situation for some sort of mortgage-based lending. Though I think it is likely that a standard residential mortgage was used, which would be application fraud, though that's not really relevant for the situation we're being asked about and would not result in any criminal action against the son, particularly not at this late date.

thorsoak wrote: »

Fact: The property is registered with the Land Registry in your "friend"'s name. Therefore it will be legitimately recorded as part of your "friend"'s assets should his marriage breakdown.

That is also not a fact. It will depend in part on the money flows and those in this case tend to support the actual fact being a trust for the parents.

It's not just what is noted at the Land Registry that matters but rather the whole circumstances.

thorsoak wrote: »

In conclusion, your "friend" is going to have to pay out a substantial amount to a certain type of solicitor if he wishes to wriggle out of his obligations.

Protecting the interests of the parents isn't wriggling out of anything. Assuming the trust that the facts appear to support, as trustee he is legally required to protect the assets from the wife.

The actual facts in this situation appear from the information presented to be that the wife has not and never has had any financial interest in or entitlement to any part of the value of the house.

Even with no trust, the absence of any cash flows to or from him for the mortgage payments and property upkeep mean that it is unlikely to be part of the marital property to be divided.

ognum wrote: »

if the house is in his name then it's his house not the parents, it does not matter who paid for it.

That is not correct. Who paid it is critical to determining whether it is or is not held in trust for the parents. On the facts so far it's most likely that it is in trust for them.

But whatever the trust situation, it's likely that there is some sort of tax issue to sort out for son, parents or both. And quite possibly some additional record-keeping or correcting, perhaps also at the Land Registry.

margaretclare wrote: »

It always puzzles and amazes me why people put these complex situations on a forum like this.

I expect that after this discussion it's much clearer what the possible issues are and what questions to ask the pros giving personal advice. That's useful.

zzzLazyDaisy

jamesd wrote: »

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The actual facts in this situation appear from the information presented to be that the wife has not and never has had any financial interest in or entitlement to any part of the value of the house.

In divorce law that is irrelevant. The assets of both parties, regardless of whose name they are held in, and regardless who contributed what, fall into the marital pot for distribution. The flat is registered at the land registry in the sole name of the husband, with a charge in respect of a mortgage in the name of the husband, with no deed of trust, or restriction, in favour of the parents. The wife is entitled to rely on the land registry entry as evidence that her husband owns this flat and it is therefore a matrimonial asset. The fact that the wife has never had any financial interest or entitlement to the property is irrelevant - what is relevant is that the husband DOES apparently have a financial interest as the sole owner and she is the wife of a 15 year marriage about to end in divorce with three children.

The point is that the starting point is that he is the legal owner if the property which is a matrimonial asset and she is entitled to a share in that asset in the context of the divorce. You may be right, there may be an implied trust in favour of the parents, but the onus is on the husband to satisfy the court of this, otherwise the normal presumption that person named on the land registry title deed as being the legal owner, is in fact the legal and beneficial owner.

jamesd

I agree about the starting point being the Land Registry and since this has never been the marital home, it would initially appear to be an investment property owned by the husband from the Land Registry record. Then the money flows will contradict that.

I assume that the wife might claim that the property was a gift from the parents to provide a family home should one be needed at a later date. I don't think that's a correct description of the intent here but what was intended and what can be claimed can differ greatly.

This is just one of the many reasons why he needs legal advice. This situation is definitely not free from the risk of some part of the property value being included in any divorce settlement.

I really wish that the parents had asked about this before doing it so we could tell them about risks like this one. For anyone who contemplates doing something like this for inheritance tax reasons, what happens in cases of death, divorce or insolvency are part of my normal warnings about the significant risk being taken. The parents here just might end up with a very expensive lesson in what it means to create legal records of ownership that are different from what is intended to be the case. But going back in time is difficult.

Molly41

thorsoak wrote: »

1. You ask me why I keep using speech marks when typing the word friend. The reason I use them is because of the way you have headed the thread in the first place - and I quote "Protecting MY parents property investment in a divorce" (my caps).

When one uses a heading such as this, it is not unreasonable to conclude that the poster's "friend" is in fact the poster him/herself.

2. I preceded the points I made with the facts that I derived from your posts. I then posted my opinion.

And I still fail to see why your so-called friend's wife should feel appreciative that she had a better standard of living than yours!

or the brother "younger sibling"

locotoro

thorsoak wrote: »

In your very first post you say "Hi all,

I actually trying to get information on behalf of a friend. His parents own a property which is rented out - although it is in his name. They bought it possibly 30 years ago and when they decided to upscale they asked their son (married at the time) to take out a mortgage on the property as they were not able to due to age and bad credit

But you then say "I did say that his parents couldnt get a remortgage due to their age so the reference to credit is inaccurate. Please can you clarify where the fraud has been committed? As far as I am aware a person legally holding property on behalf of his parents is not fraud - its usually referred to as a trust when formalised".

So either the parents had bad credit or they did not - your statements contradict each other.

In order to obtain the mortgage the deeds were transferred into the son's name - not in the name of a parental trust. Therefore the mortgage was obtained under a false premise.

Re Bad Credit. You are correct - my apologies. I'm not sure why I wrote that, it could have been a flippant point but I don't think they have any credit problems

The main thrust of this thread - which maybe i didn't convey in my original post through lack of information as some have suggested or otherwise is whether he is able to protect this property.

My understanding was initially that although he is the legal title holder, his parents have equitable rights due to the payments to and from their accounts on the property. Obviously there are other considerations that I had not appreciated and I don't know if it is a residential or a buy to let mortgage but it has never been the marital home as far as I am aware.

I suggested to him that he formalise the means under which he holds the property for his parents but as I have been advised here there are other pitfalls that may prevent that from being being valid.

Whilst this is not directed at you I want to make clear that I'm not here to have internet arguments, justify who I am and who I am not, or discuss the political correctness of living with parents, appreciation or any other side topic that seems to have cropped up in this thread. I'm just trying to get information on a topic that i have come across.

Thank you for the helpful comments