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my sister is lending me some money to buy a house whilst i

Customer Question
wait for the sale of...
my sister is lending me some money to buy a house whilst i wait for the sale of my property in the UK to go through

i want to make sure that i have the right legal documentation so that we do not fall foul of tax authorities and to ensure that she has piece of mind that i will pay her back

what is the format for the legal documentation i need to use

thanks
Submitted: 6 years ago.Category: UK Law
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5/15/2011
Solicitor: Thomas, Lawyer replied 6 years ago
Thomas
Thomas, Lawyer
Category: UK Law
Satisfied Customers: 7,626
Experience: BA (Hons), PgDip, Practising Solicitor
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Hi,

 

Thanks for your question.

 

There are two options.

  • 1) She takes a charge. If you are purchasing with the assistance of mortgage finance then it will have to be a second legal charge behind the lenders first legal charge. You would need the consent f the lender first so, if you are doing this you need to speak to them first. The charge would be registered against the title of the property meaning that it cannot be sold without her consent, it could also specify when/how she is to be repaid. This is the most secure.
  • 2) You both execute a declaration of trust wherein you state that although you own the legal interest in the property she has contributed to the financing of the purchase and that she is to be repaid from the equity of the property upon sale either the amount she is purchasing or in percentage terms (eg. 30% of the equity). This could be registered against the title to the property in the form of a notice. This would not prevent the sale of the property but she would receive notice when an application to transfer the property is made to the land registry. It would cost around £100 + Vat for your conveyancing solicitor to draft this for you.

 

If this has been useful please kindly click accept so that I may be rewarded for my time. If you do not click accept your money stays with the site and I do not receive any credit for the time I have taken to answer your question.

 

I will answer your follow up questions you may have.


Kind regards,


Tom

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Customer reply replied 6 years ago
Tom

it is a short term bridging loan only to cover the time that the deposit is needed for the house i am purchasing until the other house is sold.

would a promissory note be sufficient

thanks
Solicitor: Thomas, Lawyer replied 6 years ago

Right.

 

It depends whether she is willing to accept a promissory note, they are not really that secure to be honest. Ideally, you would want a loan agreement in the same way that you would with an actua bridging loan company. You can ask your conveyancing solicitor to either draw the terms up for you or refer you to someone who could.


The reality is that if the loan is expressed in writing in a document that you both understand is legally binding and you execute it then she will be able to sue you for the money if it is not repaid under the terms of the loan agreement.

 

Trust this clarifies, if so please click accept.


Kind regards,


Tom

Thomas
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