What to consider if you’re thinking about buying a home with adult children

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Relationship / Family

It’s a topic that’s near-impossible to avoid: house prices. And as potential buyers look for alternative ways to get into a home, many are turning to parents to help. But while a financial contribution may be one part of that conversation, for many, the idea of blending households is one that also makes sense to consider. After all, this living arrangement can work well for all – with aging or elderly parents having help on hand, as well as a place to live.

This type of property purchase is often entered into with the best of intentions, but the vulnerability of elderly parents can mean intentions and agreements need to be carefully considered and documented.

A recent court decision has highlighted what can go wrong where elderly parents place too much trust in their adult children.  An adult son advised his parents he would help them buy a home. He arranged for a property to be purchased that was almost fully funded by a mortgage.  The son assured his parents that they owned the property, and the parents lived together with their son and daughter-in-law in the property.  The parents paid “mortgage payments” to the son, and they also paid all other property outgoings.

It transpired that the property was held in the son and daughter-in-law’s names. The parents’ names were not on the certificate of title for the property. A significant family dispute resulted, and while the Court found that the parents did have an interest in the property, the decision demonstrates the problems that can arise when independent legal advice is not obtained in relation to family arrangements. 

For the benefit of all, there are three central issues to consider when entering into these types of arrangements:

  • protection of financial contributions or contributions in kind;
  • protection of the parties’ right to live in the home; and
  • protection against the challenges of other family members who may be under a        misapprehension about who owns what. It is very easy, when living together, for financial contributions to become informal and therefore open to dispute later.

If you’re thinking about buying a house with your children, here are five practical considerations that will need to be discussed and documented:

  • What happens if the arrangement doesn’t suit or your circumstances change?
  • What happens if you need the money back in later years for greater care, if/when you need to go into a care home? The timing of these types of life changes can often not be predicted.
  • How will this property purchase affect your estate and the expectations of any other children?
  • What happens if your child’s relationship breaks down?
  • If there is a change in the house value, how do you expect to share in any profit on sale? What will the certificate of title say?

How do you ensure it’s a beneficial, binding arrangement for all?

Talking to a lawyer who is independent of your child, and without your child being present, can help you determine the way forward, and ensure that your intentions are documented. This can save money, and family relationships, later, if there is a dispute or a change in circumstances.

While family members may get along harmoniously, it’s simply a reality that changes in circumstances such as ill-health, a relationship breakdown, the introduction of a new partner, or unemployment can alter expectations.

A lawyer can also discuss with you the most appropriate way to own the property, whether as joint tenants, where one person’s share automatically passes to the surviving owner, or as tenants in common, where each owner can deal with their share of the property in their will, and leave it to specified beneficiaries, who may or may not be the other owner(s).

Key takeaways and next steps:

  • Instruct a lawyer who is independent of your child.
  • Ensure the documents reflect your intentions.
  • Consider how the property is to be owned with your child.
  • Ensure you see a copy of the certificate of title (land ownership record) for the property when the transaction is complete.

And if you need more information or help?

The team at Brookfields can provide practical advice and assistance tailored to your specific circumstances. Reach out, and we’ll find a time to chat through your situation and discuss how we can help.

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