Monday, 15 September 2014

Gifts and buying a home

More and more property transactions are being funded in part by gifts from parents and other members of the family.  The involvement of a gift has implications which your solicitor is obliged to address and which will normally involve additional work.  

In this article I examine the obligations on your solicitor when you are purchasing a property with a mortgage and where you are receiving a gift to assist in the purchase of your home. 

The CML handbook ( which governs your solicitors relationship with your lender )  requires your solicitor to enquire of you as to how you intend to fund the balance monies - that is to say the difference between the purchase price and the amount borrowed under the mortgage. If your solicitor becomes aware that the balance is coming from somewhere other than your own savings or the sale of an asset (such as another property), for example a loan, or gift or second charge, then this must be reported to your lender.  

Your solicitor  will require your consent to make the report to your lender, and in the event that consent is not given your solicitor must return the lender's instructions (the mortgage offer) and explain that he can no longer act for you as a conflict of interest has arisen.  

If it is a gift of money your solicitor will need to obtain from the donor of the gift a letter to confirm that the monies to be advanced are a gift ( and will not be repayable) and that the donor will not by making the gift be looking to acquire an interest in the property. 

In addition, when acting in the purchase of a property at undervalue, or the purchase of a property by way of gift, your solicitor is required to obtain a clear bankruptcy search against the donor of the gift or seller  ( where there is a sale at undervalue ) and also obtain indemnity insurance. The reason for this is that if the donor of the gift or seller should become bankrupt within 2 years of the making of the gift/selling the property, the Official Receiver has the power to recall the gift.  Your lender therefore requires insurance to cover this eventuality. 

MJP Conveyancing  are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidpett@m-j-p.co.uk

No comments: