Bank of Mum and Dad

Clubbing Together with a Friend to Buy a Home? See a Lawyer First

Posted on January 14, 2021June 10, 2025 by Wellers

It makes sense for friends to club together so that they can buy properties they would be unable to afford by themselves. However, a cautionary High Court ruling showed that such arrangements are only wise if lawyers are consulted so that all concerned know exactly where they stand from the outset.

The case concerned two work colleagues, one of whom had £50,000 to put towards the purchase of a home of her own. Her credit rating was, however, too poor for her to obtain a mortgage. She had discussions with her colleague (the landlord) as to whether the latter might be able to assist her in buying a property.

A suitable property was purchased in the landlord’s name. The purchase was mainly financed by a buy-to-let mortgage, but the tenant contributed her £50,000 and the landlord £60,000. The tenant had lived in the property under an assured shorthold tenancy for eight years since its purchase.

After the landlord sought possession of the property, citing substantial rent arrears, the tenant asserted that it had always been agreed between them that the property was to be her own home. She claimed that the tenancy was a sham that had been entered into as a temporary device to enable the property to be purchased with the assistance of the landlord’s money. She said that it was understood between them that she would take over ownership of the property and the mortgage when she repaid the landlord for the investment she had made.

The landlord, however, gave a very different account of what had been agreed prior to the purchase. Pointing out that she alone had met the mortgage instalments, she said that the lease genuinely reflected their intentions. She asserted that the tenant had agreed that, once her credit score improved, she would purchase the property from her at its full market value, discounted by the £50,000 she had contributed to the purchase price.

Following a trial, a judge preferred the landlord’s account and found that the tenancy agreement was binding. The landlord was granted the possession order sought and the tenant was ordered to pay her more than £67,000 in rent arrears. The judge also ruled that the tenant had no beneficial interest in the property despite her £50,000 contribution. In dismissing the tenant’s appeal against that outcome, the High Court found that the judge’s findings were open to him on the evidence.

Get in contact to find out how we can help you if you are jointly buying a property or find out more about our experience and services here.

Estate Planning and Presumption of Advancement (or making sure your intentions are upheld)

Posted on November 10, 2020June 10, 2025 by Wellers

Advancement, as a legal principle, is a gift given during an owner’s lifetime, typically referring to real estate or large assets gifted by the transferor (title holder) to a transferee – “one day, this will all be yours” is the phrase that springs to mind.

Presumption of advancement occurs within specific relationships and the principle originally arose because wives could not hold legal title and fathers were morally predisposed to “advance” the prospects of their children. In English and Welsh law presumption of advancement occurs only between fathers and children, husbands and wives, a man and his fiancée

All other circumstances involving transfer of property are treated as resulting trusts (in the case of property) and resulting loans (for money).

Presumption of advancement was set to be abolished under section 199 of the Equality Act 2010, but has yet to be ratified and further attempts to end the legal principle, such as in 2016 when the private member’s bill entitled Family Law (Property and Maintenance) was entered into parliament, have failed.

But the issue of presumption of advancement and resulting trusts are knotty legal issues which can lead to acrimonious legal disagreements between families, so it’s always best to understand the ramifications and do as much as you can to prevent misunderstandings regarding money and property.

Presumption of advancement and resulting trust in English courts

In English law, it is presumed that when property is passed between individuals it is a gift – there is a presumption of advancement. In the event of a failure of the transfer (in cases of relationship breakdown and intestacy, for example) and where there is no evidence to support that the transfer was intended as a gift, the principle of a presumed resulting trust will be applied. Any litigation which takes place to restore the property to the transferee will need to clearly demonstrate evidence of advancement (it was given as a gift) or a court might rebut the principle if evidence is provided to show that no such gift was intended.

In some jurisdictions, for instance Canada, courts have been reluctant to uphold the presumption of advancement, particularly in cases relating to adult children. In Pecore v Pecore 2007 SCC 17 the court held that the presumption should not apply because the obligations of parental support typically end when the child is no longer a minor. The case created a principle in Canada in respect of gratuitous transfers to children being a presumption of advancement only if the transfer was made by a parent to a minor child.

Conversely, English courts are perhaps more likely to uphold the principle. In Wood v Watkin [2019] EWHC 1311 (Ch) it was found that although the transferee was an adult child, a presumption of advancement could arise. And in Kelly v Kelly [2020] 3 WLUK 94, a lack of documentary evidence to support the father’s claim that the purchase of a property for his son was a loan led to the court being unable to rebut the presumption of advancement. The father’s evidence was found to be inconsistent, with no mention of the purchase being a loan in any documentation that could be provided to the court. Witnesses gave evidence in support of the father’s claim that the purchase had been a loan, but the court found that this was after the fact

Documenting gifts and transfers

What the above cases highlight is that despite some solicitors suggesting that presumption of advancement can easily be disproved in English courts, a court is unlikely to rebut the principle without clear documentary evidence.

Ensuring that the intention behind any transfer of property or money is recorded accurately and adequately may not sound like a difficult thing to do, but it can be an emotionally fraught act. You may feel that your situation is clear, but in many a lawyer’s experience, these things are not always as straightforward as you would believe.

Loans and property transfers between family members can quickly result in differing opinions about the initial intentions and it is a surprisingly familiar story that a parent considered a money transfer a loan, while the child believed wholeheartedly that it was a gift. If evidence cannot be supplied to support the express intention of a transfer, litigation can be drawn out, complex and ultimately extremely costly both emotionally and financially.

Our tip: always document any transfer of money or property, especially if you cannot afford to lose the funds. If you are letting your child live in a property that you own, but that you fully intend to sell in order to fund your retirement, then this needs to be documented. If you are lending your child a sum of money so they can buy a house, but you cannot afford to gift them the money, you should draw up an agreement which sets out the terms of repayment.

How Wellers Can Help

Our website section on the Bank of Mum and Dad contains lots of information on how to go about drawing up a legally binding agreement, such as a declaration of trust and a family loan agreement. We also look at the choices you have in respect of gifts and loans and other ways you can help your children to get on the property ladder.

In circumstances where you wish to ensure that money or property is divided fairly after your death and you have allowed one child to borrow money or live in your home during your lifetime, your Will is the main document that will ensure this happens after your death. Drawing up a Will that is appropriate for your needs and wishes is a crucial estate planning tool in such circumstances. Wellers Will writing service provides a range of Wills suitable for complex family situations and we are able to tailor each type to your specific needs.

If you find yourself in a position where you believe assets or property, promised to you have been left to a third party, our litigation team will be able to help you understand your options. Please call on 0208 464 4242 for our Bromley office, 020 7481 2422 for London and 01372 750100 for our Surrey offices.

Why Legal Advice is Essential to a BOMAD Property Transaction

Posted on September 17, 2019June 10, 2025 by Wellers

Acting as the Bank of Mum and Dad (BoMaD) in order to help a son or daughter meet the cost of buying a property or undertaking any other significant capital expense may seem like the most natural thing in the world to do. However, unless the terms, detail and conditions of the parental monetary assistance are laid out to a professional standard, any vagueness or ambiguity risks placing the parties concerned at risk of acrimony and, potentially, financial insecurity.

This is why it makes sense to take legal advice when committing to any Bank of Mum and Dad transaction. In fact, it is precisely because the assistance is so deeply personal and familial that contractual terms should be laid out as they would in any other financial agreement; the potential for traumatic financial and relationship fallout is simply too high in the event that anything goes awry.

Perhaps the biggest question facing those engaged in a BOMAD transaction is whether the sum constitutes a gift or a loan. All too often, the parties involved neglect to clarify this simply because they do not want to have to negotiate the difficult details involved.

Sadly, an act of generosity in offering financial assistance to a loved one may, at the time, be carried out amidst tears of gratitude and vague promises of “I’ll pay you back as soon as I can”, but once the house is bought and the For Sale sign comes down, the legal position of the parties may not be clear.

How NOT to do it – a case study

In 2019 the UK courts heard the case of a woman, Mrs A, who sought to reclaim money from her deceased son’s £815,000 estate, claiming that she had loaned £130,000, her life savings, to help him purchase his home.

However, the court hearing the case accepted arguments presented by the deceased man’s widow that the money was a gift rather than a loan, holding that there is a presumption that payment from parent to child constitutes a gift unless otherwise stated; in common law this is known as the Presumption of Advancement.

Mrs A, informed the court she had possessed material proof that she had been providing a loan rather than a gift but that it had “now disappeared”. Had the mother been able to present such documentation to the court it is likely that the judge would have reached a different decision in the case; however, as it was incumbent upon her to prove the monies were a loan, her case failed.

The judge stated: “This is little more than a blatant attempt by [Mrs A] to reduce the residue of [her son’s] estate, which would otherwise go to [his] widow…which is something [Mrs A] clearly finds hard to cope with.”

Conclusions

In an era when BOMAD assistance is increasingly the only way for the children of baby boomers to get a foothold on the property ladder, legal advice from an experienced solicitor should be considered the only prudent course of action when undertaking such a transaction and, if the worst comes to the worst, when a BoMaD dispute ensues.

There is no substitute for having the terms and conditions of the financial transaction laid out in writing, usually in the form of a “Deed” signed by all the parties involved, so that proof is visible at a later date. This is likely to include details of the following:

The amount of the gift or loan
How much, if any, is to be repaid
How and when any money due will be repaid
Whether any interest will apply
What will happen in the event of the death of the child
If the sum is a gift whether it might become a loan in the event certain conditions are met

However, BoMaD lenders should know that many banks and building societies require the buyer of a property to provide written proof that a mortgage deposit sum is non-refundable and unconditional, so if you wish to help your child buy a home there may be alternative structures to consider, such as becoming a guarantor or making a joint purchase, although these have risks associated with them, and the latter option mayhave Stamp Duty Land Tax, and Capital Gains Tax implications. The impact on Inheritance Tax (IHT) also has to be considered, and parents, and children, should review their Will, for instance, if the child being assisted has siblings, who may need to be treated differently.

Wellers – BOMAD solicitors

Wellers is a multi-disciplined legal firm which brings together its expertise on property law, family law and private client services such as Wills and trusts so that you can have the level of confidence and clarity you need when proceeding with a BOMAD transaction.

Whatever your BOMAD issue, contact Wellers today for help.