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Hi, My new wife and I are in the process of selling our

Resolved Question:

Hi,

My new wife and I are in the process of selling our flat in East London and looking for a house in North West London closer to work.

Her Canadian parents have kindly offered us some help (up to 25k) for the deposit but understandably want to protect their investment in the event of our marriage failing or my wife dying e.t.c.

I would like to know what the legal options are for protecting that investment - either as a fixed lump sum or as a % of the value of the property - without making a joint mortgage application or adding a charge to the deeds, which Santander will not accept. I have read this morning about promissory notes and declarations of trust. Are these legally binding and arranged independently of the mortgage?

Many thanks,
Scott
Submitted: 4 years ago.
Category: UK Property Law
Expert:  Thomas replied 4 years ago.

Hi Scott.

 

Thanks for your question.

 

A declaration of trust is the most appropriate arrangement for your circumstances. This can be a deed executed by both the purchasers and the contributers stating the circumstances (purchase, contribution, mortgage) and advising that following discharge of the mortgage either1) Parents to be paid a fixed sum first OR 2) purchasers/contributors to be paid fixed percentages.

 

This can be registered against he legal notice (if parents so wish) as a notice so that if the property comes to be sold then they will receive notice of the sale, although in practice they would hear about it a lot earlier as part of the pre-contract procedures.

 

Usually, they are independent of the mortgage, as it is subject to the mortgage. If you do not tell the mortgage company that the parents are contributing then you will be in breach of the mortgage conditions. You will also have to tell them about the declaration of trust, but they will most likely be fine with it (as opposed to with a charge).

 

Promissory notices are more like traditional loans in that they usually have a set date for repayment like a repayment loan and it would be a bit incongruous, in my opinion, to use one here.

 

If this is useful please kindly click accept so that I may be rewarded for my time. It will be gratefully received and you will be free to ask follow up questions.

 

Kind regards,

 

Tom

Thomas, Lawyer
Category: UK Property Law
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Experience: BA (Hons), PgDip, Practising Solicitor
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