Mortgages - Gift Procedure

timrhoffmann

Hi All

I’m in the throes of purchasing a property and have a query about deposits. I had about 90% of the deposit in my name, but needed my father to give me the final 10% to allow for the stamp duty etc. As such, he sent me the required amount but my solicitors are now being very picky about declaring this as a gift for money laundering purposes. I understand the intent, but have friends who say they didn’t have such troubles and their parents simple paid the amount straight to the bank. They have requested 3 months of bank statements, signing of various documents, background ID checks etc. The issue I have is that my father doesn’t live in the country and getting all these documents is proving extremely time consuming – this all seems a bit overboard for what is effectively a very small portion of the required deposit. Also, there are lots of extra hidden fees to pay my solicitors for this ‘extra’ work. Is there a way around this? It just seems bizarre given that if the amount had been in my account for 3 months, we wouldn’t have go through all these hassles. Thanks a lot!

holly_hobby

Assuming you can't complete without Dads funds you're stuck, as there is no way around money laundering regs - to which the solicitor can make as many enquiries and ask for as much evidence as they feel is necessary to satisfy the funds are from legit/lawful sources (ie not laundering from proceeds of crime etc) - so you may be in for the long haul if the evidence provided is sketchy, given that is also from overseas sources.

Hope this helps explain

Holly

Thrugelmir

timrhoffmann wrote: »

The issue I have is that my father doesn’t live in the country

The issue for the lender, who the solicitor represents, is that they have no idea where these funds originated from. Therefore they will require total certainty .

timrhoffmann

Thanks for your responses guys. I think I may have found a solution. My brother, who is based in the UK and has done rather well for himself, has offered to give me the gift. This will hopefully expedite things, if simply because he has a UK bank account. I'm just curious at what point they will need to consider it a 'gift'. For example, if someone sent me 100pounds, I doubt they would worry!

I should stress there is absolute no concerns in terms of background checks, the only annoyance is the delay it is causing as I had hoped to exchange quite quickly

getmore4less

The crazy thing is any money in your accounts should be launder free the bank has the responsibility to check the origin.

If they(solicitors) want to check every penny they need the accounts details going back to when the 1st pound of savings turned up.

The 10% of the deposit/costs is likely to have been small enough to cover a few month current spending so the saving accounts could have been loaded up from your current account.

How far back did the 1st 10% get saved have they checked where that came from.

amnblog

It is typical for a lender to ask for proof of the gift funds if the donor is not uk based and just a gift letter if they are uk based.

holly_hobby

ML regs are legal requriements demanded of the Solicitor, are not the same as the lender validating that the gift is being made without reservation.

Under ML regs and POCA, the sol has a duty to ensure that whomever the gifted funds are coming from, their origin and source fully satisfies ML regs - be that from the UK or overseas.

The lenders requirements are in respect of the Donor confirming that the gift is being made without reservation (ie not in exchange for interest in the property, or the requirement of repayment), and to which the lender will require a gift disclaimer letter (ie donor confirms they forfeit all future rights to the capital gift).

From a ML stance though things are no different to the exercise Dads funds are going through (although funding for oseas and particular countries are much more thoroughly checked). In that the sol must investigate and satisfy themselves they have met ML requriements re both the origin and legitimacy of the capital.

To which typically the Donor(s) (even when parents) are often asked to supply a copy of the bank or savings statement showing both the origin/withdrawl of the monies for the mortgagors deposit - if its been in the acct a while and obv from a legitimate source (ie the individal/firm/institutions name should show if monies were by bacs/direct deposit etc), then all's well and thats generally it.

However (and going to the other extreme), if the capital deposits were cash and only very recently turned up in the named account from non-traceable sources, then alarm bells will ring (although this doesn't necessarily mean they're dodgy, especially where you have the likes of peeps whom are market traders or whose trade income is mostly derived from cash receipts) ... and all cases the Sol will generally continue to dig until they are happy the funds do derive from legitimate sources - it can be a pain where there has been chain of transactions the monies have come through (say from multiple savings accounts to another), and it has to be said some Sols are more thorough/cautious than others, but nevertheless its a legal requirement they have to abide by.

To make this work (assuming ML regs are satisfied), and as discussed above, your bro must be making a true gift of the said monies, ie it isn't a loan, they don't want the monies back at any point, and don't want any part in ownership of the property - to which the lender will want formal confirmation of such (which is usually facilitated by the solicitor conducting the conveyencing).

Hope this helps explain the process and why its reqd .... and sure everything will turn out just fine ... good luck

Holly x

timrhoffmann

Holly, thanks so much for your very detailed response! Thanks all for your input..

A frustration, but seemingly nothing to be done. As before, completely understand the sentiment and necessity but it seems rather laborious given the small % of the deposit that it makes up. I have chosen to go down the route of my brother who will fill out all the necessary paperwork, but the annoyance is the extra fee the solicitor is charging!

Thanks again,
Tim