Protecting deposit for son

[MacavitytheMystery]

We are thinking of lending a significant sum to our son who is trying to buy a house with his partner, to whom he is not married. Her parents will give an equivalent amount. They currently have a child and are thinking of having another .

Our concerns are that we don't feel the relationship is at all good . In the event that they split, I imagine she will be given the house as she will have custody of their child, leaving our son homeless. I really have no idea what the situation would then be . We don't want to give them the money unless it is ring fenced in the event of a split so that he has a right to take the money back from the sale of the house.

Has anyone got any advice?

You need to see a solicitor and get the necessary paperwork done to ringfence the gift. It can be done but AFAIK it needs a solicitor to do it.

Or, I think the other way to do it is state that it is a loan.

if you have no faith in the relationship

don’t encourage him to make a major financial investment with her by lending him the money!!

If they aren't married they have no rights over each others assets.
so they need to buy the House as 50:50 each.

Assuming this is in England.

If they’re not married, then there are two options. Joint tenants is where they both own the house equally, and would be entitled to half each. Tenants in common is where they each own a defined proportion of the house, legally drawn up by a solicitor. There is no option for her to be “given” the house if they’re not married.

If you think your son would just walk away and leave her to raise their child if they split, then perhaps you should be thinking more about how to protect your grandchild.

You also need to be clear about whether this is a gift or a loan - there are very different implications for a mortgage.

If they are putting in equal sums, and are on the deeds as tenants in common with 50% each share, the deposit is protected in the event of a split.

If they are putting in different deposits, then adjust the % split between them as tenants in common on the deeds to match what they are putting in.

If they split, she won’t get the house. She will have to buy him out, pay him rent for his share or he can sell his % of the house without affecting her rights.
https://www.mattdevittlaw.com/post/selling-or-buying-out-a-tenant-in-common

If he dies, she won’t get the house, his child(ren) will inherit his % of the house.

Joint tenants is where they both own the house equally, and would be entitled to half each.

Yes but joint tenants mean if one dies, the other automatically inherits their share. OP and him may not want that, his girlfriend and her family may not want him automatically inheriting her half of the house either if she dies.

Tenants in common with 50% shares each means his share would be inherited by his child(ren) not his partner, the same for the girlfriend…if she dies her share goes to her child(ren).

The key difference between joint tenants and tenants in common is what happens on death.

If they own as joint tenants and one of them dies the entirety of the property passes to the survivor irrespective of relationships or any will. The joint tenancy can be severed by either party just by giving notice. Where couples separate as Joint Tenants severing joint tenancy is an early priority action.

Tenants in common own a defined share each which can pass via a will etc.

If the relationship between the two is 'shaky' then tenants in common would be the way to go. Lawyers may advise that anyway where a couple are unmarried.

Of course he wouldn’t just walk away but neither should he be homeless . The fair thing to do would be to sell the house and take the money out that they each put in. They are intending to marry at some point. How will that change situation.?
Thanks for the advice .

If they get married then that changes everything and in that case the house becomes a joint marital asset. If they then split it would depend on how long marriage was etc
I suggest that at least they do tenants in common as PP have suggested given both sets of parents are contributing. You may both be able to do some kind of gift with reservation but this does complicate things and so you'd need to get advice.
I'd pitch it as something both parents should do

I know. It’s very difficult though. We had promised the money before we began to see big cracks in the relationship.

difficult but not impossible

She will not be given the house. The worst that will happen is that she and their child(ren) will be allowed to live in it until the children are older, at which point it will be split between her and your son.

If they are not married, the assumption is that any equity in the house will be split 50/50. If a different split is needed, they should own the property as tenants in common and have a deed of trust setting out the split. As others have said, owning the property as tenants in common also has benefits if one of them dies.

If they marry, the house will go into the pot with all other marital assets to be split between them. How it will be split depends on a range of factors. They could enter into a pre-nuptial agreement to set out how things should be split. The courts will uphold a properly drawn up pre-nuptial agreement unless it is clearly unfair in the circumstances, e.g. they have had more children, and the agreement fails to make adequate provision for them.

Not without saying ‘No you can’t buy a house because I don’t think your partner is right for you’. Then our relationship with her is damaged for good. That affects access to our grandchild . It will also alienate our son.

In this situation I think I’d be saying that you’ve reviewed your retirement plan and finances and no longer feel in a position to provide the deposit. Don’t sink your money into a situation where, whatever the legal protections drawn up, retrieving it (you mention it’s a loan rather than a gift) is going to be complex.

I would do this

If they own the house as tenants in common then whilst they are not married, in the event of a split each should be able to get back whatever % they put in plus the same % of any equity gained from purchase.
Once they marry, they can still own as TIC, but the split of the house will be dependent on all sorts of factors. Primarily, there is no reason why he would not get 50/50 custody - it’s far from automatic that the mother gets full custody these days!

This.

There will be mortgage considerations if you declare it as a loan that is repayable. And it's already going to be complicated, because if you do that, her parents will likely do the same.

I think you have to either trust him that he'll take financial advice and is making smart decisions; or not. And if you don't, apologise and say you've reviewed your plans and can't do it anymore. That shouldn't damage your relationship. It may well mean that if you're right, and things go south, you've got money he can use to get back on the straight and narrow by himself.

I think they can get a declaration of trust which protects the initial deposit and then 50/50 anything else.. I think they become void when you get married though so still potentially risky.

Yes. Whilst they are not married, tenants in common in whatever division seems fair will protect his/your share of the deposit. But if they marry, that becomes irrelevant. So if that is likely to happen, think carefully as to whether you still want to continue.

But wouldn't your son go for 50/50 childcare though? Being 50% responsible.
And if not, why not?

Yes he would but I don’t know if that would be workable and I suspect she wouldn’t allow it . They are unlikely to be living near each other either so it would mean hauling the poor child back and forth. I feel awful speculating about this , but it’s hard not worry. One of the things, the main thing in fact that would keep him with her is their child.

She is extremely controlling. I suspect she would go home and live with her parents and the shutters would go down in the event of a split.