Most of you will remember the American made series, The Waltons, set in the 1940/50’s in Virginian Mountains, America. It portrayed the lives and dynamics of three to four generations living under the same roof. It was a nice ideal but largely removed and unrealistic in our modern society. Surprisingly, we have had many parents buying with their children with the intention to live alongside their children and grandchildren. The promise of helping out with the grandchildren and helping son or daughter getting on the property ladder is largely the attraction. With it however, raises issues for the lawyer to discuss and ensure all parties are fully informed.
First: We need to identify who we are acting for and who may need independent legal advice. This is an important consideration as contributions made by the parties, especially Mum and Dad, are likely to be more than the son/daughter generation. Lending will be from one Bank and the parties are likely to be joint borrowers/mortgagors and therefore, Mum and Dad are taking on equal liability of son/daughter where, in reality, due to their equity they may not have needed to. If independent legal advice is required, and preferred then, those costs need to be factored into the transaction. A Deed of Indemnity is recommended to cover where one party ends up paying the borrowings owed by the other (ie Mum and Dad pay on behalf of the other couple).
Second: Ownership of these properties is mostly tenants in common, sometimes in unequal shares to reflect the equity of each couple/party. Regardless, a Property Sharing Agreement (PSA) needs to sit behind the ownership on the Record of Title and governs the obligations between the parties especially, should relations go awry. This is a very important step, but usually not considered by the parties with the excitement of entering into an agreement to buy the property. The PSA will cover lots of things, but mostly, what happens if the relationship turns sour ie: get out of jail card, what happens upon a party’s death, what happens if parties separate. It is also likely to cover obligations for maintenance and outgoings. Along with a PSA each party’s Will needs to be addressed to match the ownership on the Title and the PSA. If you take four (4) owning parties then, that’s 4 wills to complete and you can imagine along with a PSA and conveyancing – the costs now start to mount.
Third: Legal Fees – the reality is – this is not a cheap exercise. There is the conveyancing, Deed of Indemnity, independent legal advice, property sharing agreement and wills. All essential in these transactions and whilst it’s a substantial up-front cost, the cost of trying to sort out issues when these are not in place are extreme.
Our advice – get advice at the start, find out the costs and make sure you complete all the documents.