Declaration of Trust re money lent to daughter

MrGumby

I'm sorry if this has been answered but I can't find it.

We're giving £60K to our daughter towards the purchase of a house in her sole name. Her boyfriend will be a lodger under the rent-a-room scheme. It's entirely possible that they will get engaged/married while they live there. I want to make sure that, should they subsequently separate, the £60K is retained by my daughter or me.

Do I need a formal Declaration of Trust, drawn up by a solicitor? Or can I simply write a letter to my daughter telling her that I'm lending her £60K at 0% interest and would like my money back when she sells (not that I plan to ask for it back unless that's the only way of keeping it in the family)?

mrginge

Is she getting a mortgage?

Guest101

A partner cannot be a lodger.


If they get married you cannot dictate how assets are split, should they down the line divorce.

rtho782

The mortgage lender will require this deposit to be a gift, not a loan from you. The solicitor will ask you to sign a letter stating this.

So, the house will start off being your daughters, and the boyfriend won't have a claim over it. If they get married, this perhaps changes. She would need to deal with this via a pre-nup or similar, although if they divorce it's up to the court what happens to the prenup.

Guest101

rtho782 wrote: »

The mortgage lender will require this deposit to be a gift, not a loan from you. The solicitor will ask you to sign a letter stating this.

So, the house will start off being your daughters, and the boyfriend won't have a claim over it. If they get married, this perhaps changes. She would need to deal with this via a pre-nup or similar, although if they divorce it's up to the court what happens to the prenup.

He may have a claim if he pays rent, as he would gain a beneficial interest in the property.


A pre-nup (or anything similar) is not enforceable in the UK. It's an indication, but the courts have previously said, publically, that in the vast majority of cases the pre-nup is ignored once the marriage is long (over 3 years)

Pixie5740

Lodgers don't share a bed with their landlords. If there is a mortgage and he is contributing towards that mortgage then he will be building up a beneficial interest in the property. If I were him I wouldn't be keen on moving into a property that clearly wouldn't be my home, i'd continue living in my own place.

You can have a declaration of trust drawn up but if this is really a loan and not a gift then, if your daughter requires a mortgage, she will be restricted in the number of lenders available to her.

Cakeguts

This is one of those things that sounds like a good idea but when you look at it more closely isn't. The boyfriend is going to always be living in a house that he knows you put money into. So he is always going to be in debt to you. He will also know that you don't want him to benefit at all from the 60K apart from the house that he lives in.

The best thing here would be to not give this money to your daughter and let them buy their own property together where they have both contributed equal shares or shares that suit them both.

Mossfarr

I have a similar arrangement with my daughter. We have bought as tenants in common. Her half of the house is currently willed to me if she dies before me. My half of the house is currently willed to my husband but this can be changed at any time. We did it this way because she makes poor relationship choices so this is to protect her interests. At worst, if she married & divorced, only 25% could be claimd by an ex!
I put up a large chunk of money in cash for the deposit and to renovate & furnish. My daughter pays the mortgage but I also make a contribution. The expectation is that when she is in a stronger financial position (or marries) she can 'buy me out' or the house will be sold and my half of the value repaid to me. She can use her share of the value as a deposit on her next home.
You could do something similar with your daughter until her relationship is on a sounder footing.

AnotherJoe

rtho782 wrote: »

The mortgage lender will require this deposit to be a gift, not a loan from you. The solicitor will ask you to sign a letter stating this.

That is incorrect as long as you choose the right lender. Santander or (I believe from posts here) Halifax. I speak from experience having done it with Santander. The solicitor (lender) will most likely ask you to sign a letter stating that you will not live in the property.

Cakeguts wrote: »

This is one of those things that sounds like a good idea but when you look at it more closely isn't. .......

The best thing here would be to not give this money to your daughter and let them buy their own property together where they have both contributed equal shares or shares that suit them both.

This is wholly impractical in many areas of the country.

So OP yes you can indeed have a deed of trust, stating its a loan with no requirement upon daughter to make any repayments at all until the house is sold. Then you can rinse and repeat for next house or give it to her/them as you deem appropriate.

You can also add other conditions. For example I reserved the right to get back my lump sum pro-rated with change in house prices. eg if house is sold for 2x what it cost I get back 2x my lump sum.

As to, how to do it, its sixty thousand pounds. Spend a few quid with a solicitor

hazyjo

AnotherJoe wrote: »

That is incorrect as long as you choose the right lender. Santander or (I believe from posts here) Halifax. I speak from experience having done it with Santander. The solicitor (lender) will most likely ask you to sign a letter stating that you will not live in the property.



This is wholly impractical in many areas of the country.

So OP yes you can indeed have a deed of trust, stating its a loan with no requirement upon daughter to make any repayments at all until the house is sold. Then you can rinse and repeat for next house or give it to her/them as you deem appropriate.

You can also add other conditions. For example I reserved the right to get back my lump sum pro-rated with change in house prices. eg if house is sold for 2x what it cost I get back 2x my lump sum.

As to, how to do it, its sixty thousand pounds. Spend a few quid with a solicitor

Did you have a deposit though? Has the OP's daughter? Surely, if not, the property would be bought with 100% borrowed money. Are they allowing that?


Jx

MrGumby

Wow! What a very quick and very helpful range of replies. Thank you.

I've taken all that on board and will discuss it with both of them.

She is getting a mortgage and I'm happy to satisfy the lender by making the money a gift. She does have a significant deposit of her own.

The lender has told her she can take a lodger (but will not take rental income into account in deciding the maximum loan, hence the need for my £60K).

I'd be happier if they bought together but she is reluctant to do so after an earlier experience. We need to decide whether boyfriend will formally be a lodger or just informally contribute the equivalent of rent towards the mortgage. I accept that a lodger doesn't share a bed with his landlord but can see significant problems with the latter arrangement.

Good point that it's worth paying for a solicitor's help. I'll do so.