What are the legal implications of your parents gifting you part of your house deposit?

There is often dispute on separation as to whether funds received from family members were a gift or a loan.  By way of example, a family member may provide funds to assist with the purchase of a property expecting this to benefit only their family member.  However, difficulties often arise as they may have been required to confirm on the mortgage application that this was a gift, whereas the mortgage application may be silent as to whether this was a gift to one party or both if this was a joint purchase.

Gifts and loans from the Bank of Mum and Dad totalled £8.8 billion in 2022, according to the latest analysis from property firm Savills.  This has increased by almost £4 billion since the start of the pandemic (2019) because of a more stringent mortgage market and higher deposit requirements (article published by credit connect on 16^th March 2023)

In total, 170,000 first buyers had family assistance in getting their mortgage in 2022 which is predicted to rise by 61% in 2023 – with 3 in every 5 buyers expected to receive support.  The proportion of couples that are cohabiting (not in a marriage or civil partnership) increased to almost 1 in 4 in 2021. 

As a Family Lawyer who deals with property disputes, I would highlight the importance of seeking specialist advice to ensure there is adequate protection in place and that preventative steps are taken to avoid a potential future dispute which can be costly and stressful.

It is advisable to give thought to the following when considering buying a property together:

• Are you each contributing equally to the deposit and the mortgage repayments, and if not, how do you wish to define your respective contributions?  If you are contributing different amounts what is your intention in respect of dividing future equity in the property?

• Are parents or family members providing financial assistance to the purchase of a property, and if so, is it intended they have an interest in the property?  Do they intend for any financial contribution to benefit only one party or is this a joint gift?

There are many issues to be considered when buying a house, and there are simple steps that can be taken to protect each party’s interests such as having a Declaration of Trust, Living Together Agreement or Will prepared which can avoid conflict and potentially significant legal costs on the future breakdown of a relationship. 

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