By Admin Sep 25, 2018 CONVEYANCING SERVICES

Should I buy a Property with my Parents?

Buying a property with your parents may seem to be one way of getting a foot on the property ladder. Whilst this way of purchasing a property can be successful, it is important to consider some of the issues which may arise as a result.

Ownership of the Property

The first point to consider is who will own the property? If you are all going to have your name on the title deeds, then you will need to consider in what percentage each party owns the property.

Parents can often be capital rich and income poor, whereas children are more likely to be income rich but capital poor. This may mean that the children’s share of the purchase price comes from having a mortgage on the property.

It is therefore important to consider who is going to be responsible for the mortgage payments. You also need to consider what is to happen if the mortgage falls into arrears due to either ill health, unemployment or the death of the major wage earner. Death or major disability arising through accident or illness can be dealt with by taking out insurance to cover such events and it is important that your Financial Advisor gives you clear advice as to the circumstances in which the policy will and will not pay out.

The sale of the property

Another important matter to consider is in what circumstances the property can be sold. This can particularly be a point of contention for an elderly parent if they sold their home to help fund the purchase on the understanding that they could remain at the new property during their remaining years. There should be some clear agreement as to the circumstances in which the property can be sold to avoid any dispute in the future.

Who can live in the property?

What happens if an elderly parent forms a new relationship and wants their new partner to move into the property? Equally, if a single child has purchased a property with an elderly parent and then enters into a relationship, can that partner move in? What if that partner has children? Again, the question of who can live in a property and whether either party is to have a right of veto is something to think about at the outset.

Death of the parent

What happens following the death of the parent? If the co-owner is an only child then there should not be any difficulty, however, consider the situation if there a number of siblings and all are entitled to a share in the parents’ estate? How would those other siblings receive their inheritance? The following scenarios should be considered:

  • The property is sold, and the other children receive their share of the parent’s estate.
  • Regard is had to the fact that the child living with the parent has taken on the responsibility of caring for that parent. As a result, the other children receive a smaller proportion of the parent’s estate. It may be that that share can be paid by way of raising further mortgage finance on the property.
  • The child living in the property is given say two to five years to continue living in the property in order that they have time to rearrange their housing requirements or raise further mortgage finance.
  • Other siblings receive a smaller sum. Perhaps merely whatever cash assets the parents have left. It being acknowledged by all parties that if the parent had gone into care, most, if not all of their cash would have gone in care home fees in any event.

Conclusion

Inter-generational property ownership can be successful but it is important however that all parties go into the matter with their eyes open. There should be a written agreement in place which addresses the rights and responsibilities of all parties thereby avoiding any disputes which can be an expensive and time-consuming matter to resolve. An agreement will help each party to understand their responsibilities and structure of the purchase from the outset.

By John Doe

John Doe is a seasoned conveyancing solicitor. He serves as the lead of our operations in the UK.

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