DECEMBER 2024 NEWSLETTER
Helping the kids into a house – what is the best way to do this?
Let’s face it – the dream of owning your own home seems to be getting harder and harder to achieve for many young people. “The bank of Mum and Dad” is a common phrase. But how exactly does this work? Especially if your child is in a relationship, but the parental support is coming from one set of parents, not both. As a parent wanting to help, you are naturally concerned about whether the current relationship will endure, and what that might mean for the support you would like to provide.
At its simplest level, Mum and Dad can lend the funds to their child AND the relationship partner. This means that if there is a separation then both parties have an obligation to repay. This should be clearly documented and signed. Best case scenario is that Mum and Dad should get an Agreement to Mortgage from the two borrowers – even if nothing is registered, it gives Mum and Dad the ability to register a caveat on the young couple’s title if things look like they might be going pear-shaped.
One issue with a loan from Mum and Dad is that it will not always be acceptable to the kids’ bank. The bank will want to see a certain proportion of any purchase price as equity. In this situation Mum and Dad can make a gift to their child, but this should be on condition that a Contracting Out Agreement is signed between the couple, BEFORE the funds are paid to them, agreeing that the funds provided remain the separate property of the child of the parents providing those funds. That way, if things don’t work out, your child still retains the benefit of the funds put in by their parents. Contracting Out Agreements are a little more complicated and expensive than a loan agreement, because each of the parties needs to be separately legally advised – but it is a relatively small price to pay when the alternative is that the funds paid by Mum and Dad become relationship property and shared equally on a separation.
If your child is single, then it is still good to document a loan if you can – after all, they could get into a relationship down the track, and if that relationship doesn’t work out then it potentially gives Mum and Dad the ability to call for their funds. Again, ideally with an Agreement to Mortgage. If a loan is not feasible because of bank requirements, then Mum and Dad can make a gift, but here it is VITALLY IMPORTANT that your child does not get into a relationship in the nature of marriage without a Contracting Out Agreement in place BEFORE their partner moves into the house you have helped to fund. This is because after three years in such a relationship, without a Contracting Out Agreement, the family home becomes relationship property and is shared equally on separation, irrespective of where the funds have come from. The tricky part here is that Mum and Dad are relying on their child to make sure there is a Contracting Out Agreement in place if the time comes – and if it doesn’t happen then the equal sharing regime under the legislation will apply.
And finally – if the funds are coming from Mum and Dad’s trust, the same principles apply.
If you would like to discuss a specific situation then please contact one of our lawyers who can provide advice in this area — Kathy Carr, Ibolya Little or Kayla McLellan.
Interest rates going down, things are looking up!
The consistent drop in the OCR recently has spurred the banks into competitive interest rates for home lending.
We are seeing an increase in the number of enquiries, both from existing homeowners looking to add to their portfolio by taking advantage of recent changes in interest deductibility, and from first home buyers.
With the new borrowing opportunities and a more active property market, there are a few things you need to be aware of when buying or selling your property. It is more common for banks to request registered valuations, title reports and building reports, and subsequent matters raised will affect your ability to borrow against (and insure) a property. Non-compliant flats plans (on cross lease titles), weather-tightness issues (or simply stucco clad dwellings), and Council hazard mapping have all affected banks’ willingness to lend in recent months.
If you are thinking of making a change, get in touch with us. We are very happy to review property records prior to putting together an Agreement for Sale & Purchase so you don’t get caught out when you get a successful contract.
Please feel free to contact one of our lawyers — Kayla McLellan, Ibolya Little or Carl Brandt; or our legal executives — Robyn Dewson or Nicola Calder.
Introducing Deborah Dye-Knighton Senior Solicitor (Litigation)
Deborah joined C & F Legal in November 2024 and is a Senior Solicitor in our Civil Litigation team.
Deborah graduated from Victoria University in 2011 and built her practice working in specialist family law firms in Wellington, acting for clients and as lawyer for the child. Deborah enjoys all aspects of her practice, whether resolution is reached through negotiation, mediation, or in Court. Deborah derives satisfaction from getting the best possible outcome for her clients while empowering them to make their own decisions.
Having grown up in Dunedin, Deborah has returned to the mainland with her family and found her “forever home” in Nelson, where her ancestors first settled.
In her spare time Deborah loves to explore the beauty that Tasman has to offer with her husband and dogs. She also enjoys volunteering at Riding for the Disabled, reading, gardening and curating wine.
Deborah can be emailed at deborah@cflegal.co.nz.
Introducing Niall Thrupp Solicitor (Litigation)
Having grown up in the Marlborough region, Niall joined C & F Legal at the start of 2024 in order to be closer to family and friends and experience the beautiful scenery that Nelson has to offer.
Niall has complemented and expanded his previous work with the Family Court, High Court and the Waitangi Tribunal since joining the C & F team, having been engaged in a wide variety of matters alongside Andrew, Rick and Mark.
Niall primarily deals with contentious, often complicated relationship property disputes, care of children matters, protection orders, employment issues and civil issues. Niall draws on his previous experience in resolving difficult issues and finding pragmatic solutions that suit each client’s specific needs.
Outside of work, Niall continues to push himself (and weights) at the gym, and enjoys the odd TV show and video game.
Niall can be emailed at niall@cflegal.co.nz.