Home sweet home?

By Lee McClellan, Wi<!–>lls, Trusts and Probate partner

Gone are the days when those approaching or enjoying retirement need only consider buying a home where they and a long-term spouse could see out their later years.

The difficulties facing younger people in getting on the property ladder, rising divorce rates among older couples and increased longevity mean that many over-50s are now buying property with adult children, new partners or parents.

The complex issues these situations can create are often only considered when raised by a legal adviser when the transaction is well advanced and pressure to complete takes priority over less immediate problems. This article looks at some of those issues and why they must considered well before offers to buy are made and accepted.

Purchases by adult children

The high price of property in the South East, plus tougher bank lending criteria, mean that many adult children receive financial help from parents to buy their own property.

Often there is no formal documentation confirming whether the money is a gift, a loan or buys a share in the property. One common cause of arguments is where the relationship of the child with a partner/spouse break down, and the partner/spouse claims an entitlement to share in the equity produced by the advance.

If the parent views the money as an investment, or wishes to recover it if relationships break down, this should be recorded in a legally binding document.

If it is a gift, the recipient should consider entering a written agreement with any current or future partner, setting out their respective interests in the property and ring-fencing their entitlement to retain the benefit of the gift.

Purchases with a new partner

When relationships are formed later in life (or at any age) there may be unequal contributions to the purchase of a new, shared property.

The parties need to consider how sale proceeds should be shared if the relationship breaks down and formalise arrangements in writing, e.g. a declaration of trust or a living together or prenuptial agreement if there is to be a wider sharing of finances.

People with children from previous relationships also need to consider what happens following death. Should a new partner/spouse benefit at the expense of the children (or vice versa) or should trusts/rights of occupation be used within a will to create a balance between them?

Any agreement addressing relationship breakdown should be accompanied by a carefully thought-out will, to cover the event that the relationship lasts until death.

Purchasing with parents

More parents are buying and sharing a property with an adult child and their family, enabling everyone to enjoy the benefits of a larger home and ensuring the parent has support in later life.

Such arrangements do not always work and as a result of this, or the relationship of the child and their partner breaking down, a sale may be necessary.

Those involved not only need to address issues including whose names are to appear on the deeds and mortgage, who contributes what to the purchase and how living accommodation is to be used but should also consider how sale proceeds will be divided if the property is sold during their joint lifetimes and – where the parent has other children – what is to happen on their death.

A written, legally binding, agreement between those involved in the purchase and a carefully structured will are again essential to avoid future disagreements.

In all these situations, early advice from qualified, experienced professionals is essential to easing the progress of the purchase and ensuring that everyone’s interests are protected. Set against the costs of resolving disputes and the risk of an unanticipated outcome, such advice is likely to be a wise investment.

For more information, please contact our Wills, Trusts and Probate team or our Property and Conveyancing team.