As part of your purchase transaction your solicitor will ask you to confirm how you are funding the purchase, usually by way of completing some sort of money laundering form. For first time buyers, although not exclusively, this usually includes financial assistance by way of gifted deposit money from parents as well as a mortgage from the bank.
The principle of a gifted deposit is straightforward. However, it is not as simple as it seems. Are all parties clear on who owns the money? Is it a gift which does not require repayment or a loan that needs paid back? Identifying the intention of the agreement between the parent and child is of paramount importance. You may think that this doesn’t really matter as you are all family. However, your mortgage lender needs this to be confirmed definitively. Their reasoning is that if they have to repossess and sell the property in the future, they don’t want to have to deal with any claims from parents seeking repayment of money due to them. Therefore this needs to be clarified and formalised prior to completion of the purchase.
Your solicitor will have a duty to report the gift to the mortgage lender as part of your purchase transaction. The mortgage lender needs to be satisfied that the money is an outright gift and that the person gifting cannot ask for it to be repaid or claim any legal rights to it. Accordingly, a formal Gift Waiver Deed will be required. The format of the Gift Waiver Deed is important. A one liner email will not suffice or a tick in a box on a form confirming that it is a gift. It should be drafted by your solicitor and include details of the parties involved, the address of the property being purchased, the amount of the gift and a declaration that the gifted deposit is unconditional and non-repayable and does not give the person gifting any rights over the property. The person gifting should be afforded the opportunity to seek independent legal advice prior to signing the Gift Waiver Deed so that this can be fully explained to them. However, at the very least, this Deed must be signed and dated in the presence of two independent witnesses who must be over 18 and submitted to the mortgage lender prior to completion.
If it is a loan, then a loan agreement will need to be put in place and the mortgage lender will have to give their consent to the second charge being registered against the property. This is not usually allowed. It is essential that the correct documentation is executed to reflect the intended agreement between the parties as declaring that you are receiving a gift when it is actually a loan is mortgage fraud!
The requirement for a Gift Waiver Deed should hopefully not come as too much of a surprise to the purchaser as it should be something that was discussed at some point during the mortgage application process and is usually referred to within the special conditions of the mortgage offer.
Your solicitor will discuss this with you as part of your purchase transaction and will advise you on the necessary requirements.
Janeen McKay is a solicitor in the property department of Worthingtons Solicitors. She can be contacted on 028 91 811538 or email [email protected].
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