Fortunate Enough to Be Gifted a Property Deposit? Follow These Steps Carefully

With many first-time buyers still struggling to get onto the housing ladder, an increasing number of buyers are being given a leg-up by family – by way of a gift of cash to help with the deposit.

This is perfectly fine – and very welcome for many buyers – but if you are buying a property with a gifted deposit, there are some crucial steps you must take, in order to keep things above board:

• Tell your solicitor as early as possible – preferably as soon as your offer has been accepted. Legal checks will have to be carried out upon the person gifting you the money, along with enquiries on the source of funds in order to comply with anti-money laundering rules – this has to be done in every case.
• Tell your mortgage advisor from the outset that you are buying a property with the help of a gift. Your mortgage advisor will then inform the lender.
• Provide confirmation and details of the person giving the money. Your solicitor will issue the relevant paperwork to the person providing the money, asking them for written confirmation as to whether the money is a gift or a loan. Your solicitor will also need to establish whether the party providing the money is expecting to hold any legal interest in the property or not.

The person providing the money should seek independent legal advice to ensure that they are fully aware of the implications of giving the money to a third party, rather than providing a loan. This is crucial.

Where the money is a gift, the giver will be required to complete a declaration stating they have no interest in the property and do not intend to have one, even though they are providing money towards its purchase. Clearly, a mortgage lender needs to know if there is the chance, further down the line, of a challenge over the ownership of the property in the unlikely event of a repossession. They will want to be confident that they have the option to repossess, sell the property and repay their loan without anyone else making a claim based on the money they’ve provided.

Along with the written confirmation from the third party, the buyer’s solicitor will check proof of identity, and bank statements, or other evidence to show where the funds have come from. If they amount to savings, accrued over some time, then several months of bank statements will have to be provided.

Be aware that the giver cannot simply transfer a sum of money into the home buyer’s account months or weeks before any transaction has begun, in order to claim that the money belongs to the buyer. This will come to light during the conveyancing process. Evidence must be provided as to where this money originated from.

Solicitors appreciate that for some clients, this process can feel quite obtrusive, however, failure to make these enquiries have serious legal consequences and therefore cannot be ignored. By following these steps closely, unwelcome delays for your transaction can be avoided. Adhering to them is essential if you want the process to run smoothly – allowing you to focus on enjoying your new home as quickly as possible.

For property advice, please contact our specialist Residential Conveyancing Solicitors in:

• Swansea: 01792 773773
• Cardiff: 02920 225472
• Carmarthen: 01267 234022
• Caerphilly: 02920 860628
• Cowbridge: 01446 771742
• Haverfordwest: 01437 764723
• Fishguard: 01348 873671

Or request a quote for your conveyancing here.