Acquiring part of parent's house

TBagpuss

It would be sensible to get advice becuase the potential costs of getting it wrong could be very high.

Once option is to have a deed of trust giving you a % of the property. They hold on trust for you and them. You need to get the declaration of trust drawn up correctly and think about things such as how the costs of maintaining, insuring the property are to be met, and the circumstance in which any of you can trigger a sale, and whether they can chose to move to a new property on the same terms if they wanted to.

You would potentially be liable for CGT when the house is sold.

A second option would be for you to lend them the money, with the loan being secured by way of a charge over the house (this could be for a set sum + interest, or for a % of the gross value). You and they would need to get advice and the charge could (should) be registered at the Land Registry.

Your parents may also want to think about whether they want to borrow or whether they would prefer to think about downsizing and raising capital that way.

tebthereb

gettingtheresometime wrote: »

& there was me thinking you were being charitable........


If you become a part owner (which is what you seem to be implying you want to happen) then if I was your mum I would expect you to stump up your share of any maintenance costs.


Also what if you fell out with them and then decided you wanted your share & tried to force a sale?


Not to mention if (and I'm making assumptions here so forgive me!) you split up from your partner then your share of the house would go into the pot - another situation where the sale of the house had to be forced.

My parents are not worried about maintenance costs. I am acquiring a bit of their property at a percentage of market value. E.g.10% of 300k = £30k. They would never realise that on an open market as nobody would pay 30k for 10% of a property with tenants. I will have no power to force a sale and will document that.

I am interested in your point about divorce. Why would that force a sale? I suppose we could work around that by saying 5% each rather than 10% between us - using the example above.

LEJC

tebthereb wrote: »

Thank you this is very helpful.

Can I just double check I have this right then - you are saying that even though we do not wish to change legal title we still have to file forms with Land Registry?

I have a template deed in hand which I am reasonably happy to deal with myself. I imagine a solicitor will charge a few hundred pounds which i wish to avoid given the amounts concerned. I appreciate it is always best to use a professional.

There is no mortgage.

I've just had a deed of trust completed at a solicitors...cost £120.

I considered it money well spent rather than dabbling in a DIY format

tebthereb

deannatrois wrote: »

Your parents spent hundreds of thousands bringing their kids up without a thought for profiting out of it. Now they are considering equity release. Why not just think, hey they are my parents, its not appropriate to think of making a profit out of them after they brought me up - and shocker, I will GIVE them a few thousand because its a pittance compared to what they spent bringing me up.

Yes this is a money saving site, yes we all try to save or make money to live on.. but there's times when its just not appropriate. Your parents must be in need to be thinking of equity release and you are thinking of making a profit on their situation, no doubt telling yourself you are doing both parties a favour. If they are in need and you can manage it, profit shouldn't come into the equation.

The words profit and parents shouldn't be in the same sentence. Even if they weren't perfect parents. Not everything of value appears on a profit and loss account.

You know nothing about my upbringing or relationship with my parents, and only know the very limited facts I have given about the proposed transaction and objectives. Therefore, I am surprised you feel you have sufficient grounds to be questioning the morality of it or why on a question about conveyancing you would feel the need to bring it up.

tebthereb

LEJC wrote: »

I've just had a deed of trust completed at a solicitors...cost £120.

I considered it money well spent rather than dabbling in a DIY format

Thanks, that is cheaper than I hoped so I shall bear it in mind but the template I have was from a solicitor albeit some time ago and so is not entirely DIY.

Assuming the deed stands up legally, which I think it does, I suppose my question is just whether it is sufficient on its own or whether Land Registry forms are needed also.

Mojisola

tebthereb wrote: »

However, to confirm I am not looking to loan them money. At least not without a significant return of interest; this is an investment for me and on sale I would be looking to get back more than I put in - i.e. based on growth in value of property.

tebthereb wrote: »

I am acquiring a bit of their property at a percentage of market value. E.g.10% of 300k = £30k.

So you could gamble on house prices continuing to rise and document that you will receive 10% of the property price when it is sold.

gettingtheresometime

tebthereb wrote: »

My parents are not worried about maintenance costs. I am acquiring a bit of their property at a percentage of market value. E.g.10% of 300k = £30k. They would never realise that on an open market as nobody would pay 30k for 10% of a property with tenants. I will have no power to force a sale and will document that.

I am interested in your point about divorce. Why would that force a sale? I suppose we could work around that by saying 5% each rather than 10% between us - using the example above.

Ok lets say we're married....then for whatever reason decide to divorce.


That part of your parents' house goes then into the pot & unless you could provide a cash equivalent then the property might have to be sold so that I can have my money.


Just thought of another reason why this is a bad idea....what happens if you die & the only way that the beneficiaries can get their inheritance is for the house to be sold ?


Your partner may get on with your parents now but mix money and death and that does strange things to folks.

LEJC

I dont really dabble in the why you are doing this....but I do question why you want to go down the DIY route and not get something formal should you be challenged by a whole host of other reasons or potential beneficiaries at a much later date.

Have your parents taken advice professionally in respect of this arrangement to understand what they are signing over?

My view remains get it all done above board and professionally and you hopefully face a lesser bumpy ride in the future should anyone claim that it was just an informal type of agreement with no consideration.
My guess its its cheaper to deal with the setting up now rather than having to pay to resolve fallout later.

chappers

tebthereb wrote: »

You know nothing about my upbringing or relationship with my parents, and only know the very limited facts I have given about the proposed transaction and objectives. Therefore, I am surprised you feel you have sufficient grounds to be questioning the morality of it or why on a question about conveyancing you would feel the need to bring it up.

Exactly, my Uncle did something very similar with my Grandmother, he could quite easily have just given her the money but that wasn't the arrangement that either of them wanted.
There may be advantages to both parties if you own part of their home and for example they need care, just be sure you understand the rules around deprivation of assets and the cut-off timescales involved

One thing I would re-iterate that others have said is take some advice from a financial advisor to find the most cost effective way to do this for both parties balancing the short term against the long term and possible outcomes.

tebthereb

gettingtheresometime wrote: »

Ok lets say we're married....then for whatever reason decide to divorce.


That part of your parents' house goes then into the pot & unless you could provide a cash equivalent then the property might have to be sold so that I can have my money.


Just thought of another reason why this is a bad idea....what happens if you die & the only way that the beneficiaries can get their inheritance is for the house to be sold ?


Your partner may get on with your parents now but mix money and death and that does strange things to folks.

Thank you. I do not quite follow the divorce scenario as my wife and I would hold say 10% of the property together? Therefore, I would expect that to remain the case after divorce and do not see that this would force a sale?

I see your point about my death. In the event of my death though I think my asset - the entitlement to say 10% - would just pass to beneficiaries which would most likely be wife and then children.

As holders of a minority percentage of a property with occupants I am surprised that anything in relation to our stake could force a sale.

We will be documenting that we have no power to force a sale. The "10%" would carry no rights other than to income or disposal proceeds in that percentage.

LEJC wrote: »

I dont really dabble in the why you are doing this....but I do question why you want to go down the DIY route and not get something formal should you be challenged by a whole host of other reasons or potential beneficiaries at a much later date.

Have your parents taken advice professionally in respect of this arrangement to understand what they are signing over?

My view remains get it all done above board and professionally and you hopefully face a lesser bumpy ride in the future should anyone claim that it was just an informal type of agreement with no consideration.
My guess its its cheaper to deal with the setting up now rather than having to pay to resolve fallout later.

Thank you. You are right of course....

I suppose I am loathe to pay a solicitor to help when the main issue seem to be identifying every potential outcome, understanding and documenting what happens in each event.

The declaration will make clear what happens in most situations - more situations than I suspect a solicitor would document - and shall make it clear this is a formal agreement for specific monetary consideration giving my wife and I nothing but a percentage of future sale proceeds.