Lending money to friends & family

OneLife_OneShot

I have only ever lent money to my best friend once this year, his mother was in a car accident and it was taking ages to get his careers allowance sorted out. He needed the money for some food and electric for them and his little brother.

He paid me back right away, I seen him put the money to good use as well, I suppose since I seen him often at his house and know his family like my own it didn't bother me, but I would never lend to anyone else apart from my father.

Sometimes you do get your money back, it wasn't a massive amount either but he bought me a few pints to say cheers

Conor_K

Hi guys, hope you can help me out. My partner and I recently went our seperate ways, over the last few years I have been renovating houses, and recently bought another house to renovate. As my money is tied up in the financing of the property, my best friend kindly offered to lend me money to fund the renovation project on this property. My plan is to renovate this one and sell it within a year. We have been good friends since childhood, and I in no way want to create any potential issues surrounding this. I am in a good job, however due to my situation and new mortgage I would not qualify for a personal loan to fund this project. I suggested we have an arrangement drawn up by solicitors to highlight the money involved, and conditions for repayment. He will have no entitlement to the property, and has only requested I pay back what I borrow on sale of the house. Quite frankly I feel honoured to have someone who is willing to help me out this much, but also borrowing does make me uncomfortable. My only debt is the mortgage on the property, everything else in my life is paid for.
I have consulted solicitors, and they want approx £200 to draw it up, and it will be double this as I intend to cover his costs also. However, I can't help but feel there must be alternatives? Are there any legally binding documents on MSE that I could use for this purpose perhaps?

All input welcome

GDB2222

Conor, does your friend want his money secured as a second charge on the property?
If not, a simple exchange of letters setting out what you have agreed is sufficient.

Conor_K

No, he has made no requests or securities to be laid out. I really wanted to get something on paper that we both agree on that reflects the arrangement. That is he is lending me x amount, and upon sale of property I will repay it. I'm acutely aware that money between friends or family can be a minefield, so it is very important for me that we are both clear on the arrangement so that this never effects our friendship.

Conor_K

Would a letter need to be witnessed? Is there any particular formatting required legally?

btw, many thanks for the speedy reply!

GDB2222

No. The worst thing you can do is dress it up in legalese.

I assume that you are not paying interest to him? If you are, he may need a consumer credit license. As this is just between friends, the main point is to get the agreement down in writing, so neither of you forgets. You really need to agree in advance what you will do if a) the building catches fire/falls down/etc, and b) the build goes well but you find that you can't sell the building at a profit at the end of the job.

For example, you might agree to pay him back within 18 months regardless of how the building work goes.

If you want a standard document to build on, just google "loan agreement template free".

Conor_K

Fantastic, we've agreed this is the way forward. Many thanks for your help GDB2222!

bennnn

Hi guys, hope you can help me out. My partner and I recently went our seperate ways, over the last few years I have been renovating houses, and recently bought another house to renovate. As my money is tied up in the financing of the property, my best friend kindly offered to lend me money to fund the renovation project on this property. My plan is to renovate this one and sell it within a year. We have been good friends since childhood, and I in no way want to create any potential issues surrounding this. I am in a good job, however due to my situation and new mortgage I would not qualify for a personal loan to fund this project. I suggested we have an arrangement drawn up by solicitors to highlight the money involved, and conditions for repayment. He will have no entitlement to the property, and has only requested I pay back what I borrow on sale of the house. Quite frankly I feel honoured to have someone who is willing to help me out this much, but also borrowing does make me uncomfortable. My only debt is the mortgage on the property, everything else in my life is paid for.
I have consulted solicitors, and they want approx £200 to draw it up, and it will be double this as I intend to cover his costs also. However, I can't help but feel there must be alternatives? Are there any legally binding documents on MSE that I could use for this purpose perhaps?

John_Pierpoint

Give the partner a cheque for the amount that is not dated.
Then the trust is the other way round. You are trusting that the cheque will not be presented in advance of the pre-agreed repayment date/completion as agreed.
That does not stop you bouncing the cheque but when it then goes to court you will be on the back foot.

GDB2222

Strange - a new user posting EXACTLY the same wording as Conor K. Somebody is spamming!