Sav­ing is not our son’s strong­est point

Evening Standard - West End Final Extra - ES Homes and Property - - Ask The Expert - Fiona McNulty

QWE ARE think­ing of lend­ing our son some money to use as a de­posit so he can get a mort­gage and buy a house. He gets a de­cent salary and so will be able to af­ford the mort­gage re­pay­ments, but for some rea­son he has been un­able to save any of the de­posit him­self. If we do this for him, are there any is­sues that we should be wary of?

ADECIDE whether you wish to gift or lend the money to your son. If the lat­ter is the case, you need to agree the terms of the loan — such as when it should be re­paid, whether you wish to charge in­ter­est and if the in­ter­est would be paid monthly, or rolled up and col­lected when the loan is re­paid.

Your son will need to dis­close to his lender the source of his de­posit — that is, the loan or gift from you. Not all lenders are keen to pro­ceed if the de­posit is be­ing pro­vided by way of a third-party loan.

If you have a dec­la­ra­tion of trust to pro­tect your in­ter­est, that would have to be dis­closed to the lender and the lender’s con­sent ob­tained. If your son has a part­ner who will also be liv­ing in the prop­erty, it might be wise to ar­range a co­hab­i­ta­tion agree­ment. You could have an in­ter­est in the le­gal ti­tle but then you would have to be a party to the mort­gage and there may be tax im­pli­ca­tions, such as three per cent ad­di­tional stamp duty if you al­ready own a prop­erty. There may also be a cap­i­tal gains tax li­a­bil­ity when the prop­erty is sold. We re­gret that ques­tions can­not be an­swered in­di­vid­u­ally, but we will try to fea­ture them here. Fiona McNulty is a le­gal di­rec­tor in the pri­vate wealth group of Foot An­stey ( I HAVE found a re­ally lovely apart­ment which I am se­ri­ously con­sid­er­ing buy­ing. How­ever, the es­tate agent has warned me that the prop­erty is quite cheap be­cause the lease only has 70 years left on it. What dif­fer­ence does that make to me?

GEN­ER­ALLY speak­ing, apart­ments are lease­hold and leases are granted for a cer­tain length of time. Res­i­den­tial leases used typ­i­cally to be granted for a fixed term of 99 years but more re­cently have been granted for longer terms, in­clud­ing 125 years or even 999 years.

As the term of the lease short­ens, the value of an apart­ment di­min­ishes — so the price of the prop­erty should re­flect the shorter lease.

If you need mort­gage fund­ing to buy the flat that could be a prob­lem, be­cause lenders are of­ten re­luc­tant to lend when the lease is short, and they will usu­ally con­sider leases of less than 80 years to be short. Estab­lish your lender’s cri­te­ria.

A lender may be pre­pared to get in­volved if you could ex­tend the lease. If the ven­dor has owned the flat for two years, they should have ac­quired a statu­tory right to ex­tend the lease. You need to estab­lish whether the ven­dor is pre­pared to com­mence the statu­tory process and as­sign the ben­e­fit of that right to you.

The ven­dor would need to serve the statu­tory no­tice on the land­lord fol­low­ing ex­change and as­sign the ben­e­fit of the no­tice to you on com­ple­tion. This is a com­plex pro­ce­dure, so it is im­por­tant for you to in­struct a lawyer who is a spe­cial­ist in this type of work.

WHAT’S YOUR PROB­LEM? IF YOU have a ques­tion for Fiona McNulty, please email legal­so­lu­tions@ stan­ or write to Le­gal So­lu­tions, Homes & Prop­erty, Lon­don Evening Stan­dard, 2 Derry Street, W8 5EE.

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