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Cohabitation Awareness Week: protection for the Bank of Mum and Dad

Posted: 27/11/2017


The family law team at Penningtons Manches is warning parents who give financial assistance to their son or daughter in order to help them buy a property that their investment could be at risk if their child starts living with a partner in the property, or buys the property jointly with a partner, unless legal protection is put in place.

There are 3.3 million couples living together (cohabiting) in the UK. Nearly a million of these couples live in London and the South East. High property prices mean that many young people turn to the ‘Bank of Mum and Dad’ for help in getting on the property ladder. Often they are buying a property jointly with a partner or intending to live in the property with a partner. Lack of clarity about whether the money advanced by the parent is a loan or a gift and whether there are any conditions attached to it, coupled with a failure to document what is agreed or intended, can lead to difficulties and sometimes protracted and costly litigation if the couple split up.

Couples who live together do not have the same rights as married couples when a relationship breaks down. During Cohabitation Awareness Week (27 November to 1 December, 2017), Resolution, the leading organisation of family lawyers in the UK, is highlighting this lack of rights and drawing attention to the steps cohabiting couples can take to protect themselves in the event of a relationship breaking down. The ‘Bank of Mum and Dad’, too, needs to be aware of these issues.

It is important to make clear in a formal, legal document, whether the financial assistance which is being given by a parent is a gift or a loan, and to specify any conditions. For example, if a couple buys a property jointly and one of them uses funds contributed by parents, then if it is intended that if the couple splits up, the money advanced to one of them by the ‘Bank of Mum and Dad’ ought to be returned before the proceeds of sale are divided equally between the couple, there should be a declaration of trust which spells this out.

If parents provide money to a child to buy a property and a partner moves in, there can be arguments later about whether it was intended to give the partner any interest in the property. If money has been paid by the partner towards the mortgage or household improvements, there can be a major dispute. In order to avoid such potential difficulties, couples who live together should enter into a cohabitation agreement which sets out clearly who owns what, what the intention is about future ownership of the property, who pays which bills and so forth. The greater clarity there is at the start, the less risk of a lengthy and costly legal battle if the relationship ends.

The key messages for cohabiting couples and their parents to take away from Cohabitation Awareness Week are:  

  • be clear about what is intended and what is agreed;
  • take legal advice;
  • have your intentions and agreements put in writing in a formal legal document;
  • do all of the above before money changes hands. 

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Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority.

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