Please or to access all these features

Add post

Watch this thread

Save thread

Start a new thread

Flip thread

Hide thread

My feed

Active Unanswered threads

Getting started FAQ's

Unanswered threads Acronyms Talk guidelines

Hide shortcut buttons

Talk

Legal matters

Mumsnet has not checked the qualifications of anyone posting here. If you have any legal concerns we suggest you consult a solicitor.

Flip

Original poster

Conveyancing Lawyers, a question!

23 replies

Starlive23 · 03/12/2021 20:37

My mum is selling her house at the moment. She plans to sell it to a family friend's daughter. The daughter can only get a mortgage which is 20k off the asking price. The family friend wants to ask my mum to drop the price by 20 grand and pay her in cash. No SDLT as the daughter will be first time buyer.

So essentially instead of paying 200k they will be asking my mum to sell for 180k and give the other 20 as a gift of cash but not to be included in the sale as it were.

This sounds to me like its dodgy. I'm not sure why, maybe money laundering? It's not going to affect the SDLT because there isn't any. Mum really wants to help family friend but obviously doesn't want to do anything illegal! Is this illegal or some kind of grey area? I'm sure it happens, but I just don't want anything to happen to my mum just for trying to help someone out.

Any advice would be appreciated, I will be contacting a solicitor in any event but just wondered if anybody knew more.

Thanks!

OP posts:

Original poster

Starlive23 · 03/12/2021 20:38

Sorry i mean drop the price by 20k as in the sale price which she will pay the normal way by way of deposit and mortgage but the title deeds will say the house was sold for the lesser amount. Hope this makes sense.

OP posts:

SomeoneInTheLaaaaaounge · 03/12/2021 20:45

Hi there, I’m not an expert but don’t think this will fly. The main issue being having a claim over the house.

If there’s a mortgage it will breach the terms to pay for part of the house separately.

Then there are also tax implications for the seller if she sells the house for less than it’s worth.

Then I guess the cash gift might even incur inheritance tax if the sellers friends die in 7 years.

I means that’s just off the top of my head. I don’t think this idea will work sorry.

MurielSpriggs · 03/12/2021 20:51

With that £20k passing outside the contract there's no guarantee that your mother will get it, and she'll have no legal redress if the buyers change their minds and decide to keep it.

Could either party have to pay CGT? (Because the house is not their main home.) There could be problems with that.

I'm wondering why the price can't be left unchanged and the £20k given by your mother's friend to her daughter and added to the deposit?

Cattenberg · 03/12/2021 20:52

I’m not a conveyancer either, but this sounds dodgy to me too. A couple of thoughts:

Would reducing the price by £20k affect the amount of stamp duty payable on the sale? If so, I suspect this would be illegal.

Also, presumably the extra £20k would be paid before completion, otherwise your mum might have no legal right to that money.

Original poster

Starlive23 · 03/12/2021 21:01

Thanks for quick replies! I honestly don't know why they can't just have it as the deposit. They plan to give my mum the money even before contracts are exchanged which even my mum understands is, to say the least, very trusting on their part!

I think honestly she's having trouble getting the mortgage and says it would be so much easier to get the lower mortgage and pay part cash. It's all a bit awkward, my mums already selling (in my opinion) slightly below market value ie it was the lower end of the valuation.

My mum is buying a house also (she's downsizing) and will be paying her own stamp duty in full and there won't be any for the daughter.

It all just sounds really uncomfortable to me, I know she wants to do them a favour but honestly I think she should just put the house on the market and they can put an offer in if they wanted.

OP posts:

MurielSpriggs · 03/12/2021 21:13

They plan to give my mum the money even before contracts are exchanged which even my mum understands is, to say the least, very trusting on their part!

I guess that this adds weight to the idea that it's a gift and not part of the consideration for the house!

As someone else has said, if the donor (the buyer's mother) dies within seven years of making the gift then your mother could be saddled with up to 40% inheritance tax (£8k) depending on the details. Is she prepared to run that risk?

Amberlulu · 04/12/2021 16:55

This reply has been deleted

Message withdrawn at poster's request.

Catmummyof2 · 04/12/2021 17:29

This reply has been withdrawn

This has been withdrawn by MNHQ at the poster's request.

Amberlulu · 04/12/2021 17:31

This reply has been deleted

Message withdrawn at poster's request.

PurplePikachu · 04/12/2021 17:59

@Amberlulu - you need to start your own thread, your issue is very different.

Dahliasrule · 04/12/2021 18:15

I don’t really understand why the friends are asking your mum to do this. Our DD had a similar problem when the seller of the house she was buying took ten months to find somewhere and in the mean time mortgage rules changed and the lender would not lend her as much as they originally stated. We gave her the money to make up the shortfall and it was added to the deposit. The building society did ask for a letter from us to say the money we gave her was a gift not a loan. If the money your mother’s friends are using is legal they could simply do this. If it’s not and they won’t, well...I wouldn’t do it.

PurplePikachu · 04/12/2021 18:16

Sorry didn’t see you’d already replied. If you look on the bottom right of your post there will be 3 dots, click on those and choose “report” then report it to the admin and ask them to move it into a new thread.

Amberlulu · 04/12/2021 18:24

This reply has been deleted

Message withdrawn at poster's request.

Original poster

Starlive23 · 04/12/2021 18:25

@Dahliasrule

This is exactly what I keep coming back to, if the money was legitimate I don't know why it wouldn't be added to deposit. They keep insisting it's not illegal and putting a bit of pressure on my mum to do this. They certainly don't seem to be into anything illegal but then why the secrecy? It just screams dodgy to me but I can't put my finger on why. They have now said its to buy the furniture if anyone asks...but my mum isn't leaving furniture! They know this though, it's not a misunderstanding.

OP posts:

saleorbouy · 04/12/2021 19:40

Your mum is still going to get 200k for the house under their mad buying scheme.
Surely the easiest way is to proceed as a normal sale at 200k but for your mother's friend to transfer her cash gift to the buyer.
This way there is no legal onus on your mother and she is guaranteed to receive the contracted sale price.
Any other way seems convoluted and open to abuse with your mother transferring ownership without getting 200k.

MurielSpriggs · 04/12/2021 20:48

Any other way seems convoluted and open to abuse with your mother transferring ownership without getting 200k.

If you read back up the thread, that's risk is being eliminated by the extra money being transferred before exchange of contacts. The only risk I can see for the seller is if the donor of the £20k dies within seven years then this will be regarded as a gift to the seller of the house, not the buyer, and the seller could be liable for inheritance tax.

I wonder whether the buyer wants to have a lower price recorded at the land registry for some reason, so that when people search it seems that she got the house for less. But how this week help her I don't know - bragging rights?

Cattenberg · 07/12/2021 12:37

The mention of the furniture makes me more suspicious that this is an attempt to dodge stamp duty. I used to hear of people offering one price for the property and a separate sum for the contents, as a way of lowering the purchase price for this purpose.

The government closed this loophole some time ago and nowadays sellers have to specify everything that’s included in the sale.

The fact that the buyers are pressuring your mum to do this is another red flag. What does her solicitor think? The seller should have their own solicitor and the buyer should have one from a different legal firm, to avoid any conflict of interest.

Cattenberg · 07/12/2021 12:47

Apologies, I should have read your OP properly. Are you sure there is no SDLT payable though? For example, if the family friend will also be on the deeds along with her daughter, the property could be classed as a second home.

whyohwhyohwhyohwhywhy · 08/12/2021 22:21

This feels to me a bit like when you have a minor car bump and the other person wants to go through insurance. You ask yourself why. You reason that it might be ok. You feel uncomfortable because actually you don't want to get into something. You dither. You go through insurance and breathe a sigh of relief

I think that regretfully this doesn't work for you,so you have decided to put the house on the open market and get expert advice from estate agents to ensure the sale progresses smoothly.

naynayisay · 08/12/2021 22:33

As a conveyancer, it would be much easier for the mum to give the daughter the 20k as a gift. She'd need to sign a few forms and the lender would need to know re: any interest in the property but it would still end up being a 200k sale.

This sounds dodgy.

Kite22 · 08/12/2021 23:04

Agree with everyone else.
I mean, I'm not a conveyancer, just someone helping my dc through the process of buying his first home.

I can see no reason why they would need to do this.
Surely the mother just gifts the money to her daughter and her daughter has a bigger deposit. It might even make her interest payments a bit lower as it means she has a smaller ltv than if she were buying the house for the £20K less ?

There's no way I'd mess around with £20k on a house sale - that is 100% different from accepting a cash payment to get a scratch on your bumper fixed IMO.

Original poster

Starlive23 · 08/12/2021 23:30

Thanks for replies and advice, very much appreciated. I've shown this thread to mum and she understands that it's dodgy but feels like it's going to cause a major fallout. Still, we have text friend's daughter this evening and said mum will be putting it on market and that she can feel free to make an offer. Think its gone down like a lead balloon but it just felt off, my mum doesn't need the hassle really. The family friend and her daughter have been sending lots of texts to my mum to put pressure on her which I'm really not happy about, but mum agrees she feels uncomfortable because it just doesn't feel right.

OP posts:

nightvision · 09/12/2021 03:41

"The only risk I can see for the seller is if the donor of the £20k dies within seven years then this will be regarded as a gift to the seller of the house, not the buyer, and the seller could be liable for inheritance tax."

I'm not a lawyer but I think you've got the above the wrong way round. If the donor of the gift dies within 7 years then whatever gift the donor gave away in the last 7 years of life would be regarded/included as still belonging to the donor for inheritance tax purposes. This makes sense as (say) e.g. a terminally ill person with a couple of months to live quickly gives all their assets away to relatives so as to avoid paying inheritance tax is not going to fool HMRC.

As for the "dodgy" £20K in this thread, the only reason I can think of is for stamp duty purposes. Surely, anyone who buys a property would want it listed as high as possible in (say) Zoopla for future resale?

No, OP, ask your mum not to do it. Helping a friend is one thing but doggy business is another thing.

Flip

Swipe left for the next trending thread