Bank of Mum and Dad 'feels the pinch'

You may have seen recent coverage of Legal and General's research into 'Bank of Mum and Dad' which reveals the average parental contribution for home buyers this year is around £18,000; this is some 17% lower than last year’s figure of £21,600. Legal and General suggest the apparent drop is an indicator that parents are ‘feeling the pinch’. Despite this, Legal & General are expecting the Bank of Mum and Dad to still be a ‘prime mover’ in the UK housing market.

Such contributions from the Bank of Mum and Dad to assist a son or daughter with their first, second or even third purchase should always be legally protected. This is not only to ensure that any money that is due back to Mum and Dad is repaid but also to prevent it falling into the wrong hands.   

For example, if it is intended that the property is to be owned jointly as a couple or in a sole name but they intend to live with a partner a Cohabitation Agreement (or a Nuptial Agreement if the couple intend to or are already married) should be entered into documenting how the property would be dealt with if the couple were to separate. Such agreement can also document the responsibility for outgoings on the property and future contributions which can evidence what was agreed and therefore avoid any disagreements when the relations between a couple are less harmonious.  

If there is no legal document drawn to acknowledge the financial contributions made by one party or  from the Bank of Mum and Dad then the money contributed is potentially at risk of not being retained by the intended recipients i.e. son or daughter.

Link to the Legal and General report.