The Bank of grandma and grandad: Have you helped your grandchild to purchase a property?

As with parents, grandparents are increasingly helping their grandchildren to purchase their first property. If your grandchild is in a relationship, chances are that their partner will move into the property with them when the purchase is completed or shortly afterwards. In such cases, it is possible that your grandson or granddaughter’s partner may gain an interest in your grandchild’s property and your monetary contribution. If their relationship breaks down, the partner may assert this interest or a greater interest in the property, which could include the deposit you provided. We are sure that most grandparents would want to ensure any monies given to help their grandchild to purchase a property are ring fenced for them, in the event of things going wrong.

Can my grandchild’s partner make a claim against my grandchild’s property even if it’s in their sole name?

Unfortunately, the answer is ‘yes’. Even if your grandchild is the sole legal owner of the property, their partner could assert they have an interest in it under the Trusts of Land and Appointment of Trustees Act 1996 (“TOLATA”). A claim under TOLATA can extend to include the lump sum you originally provided to your grandchild to help them purchase their property.

How much would defending a claim under TOLATA cost?

Defending a claim under TOLATA can prove costly, ranging from anywhere between £25,000 – £55,000, if not higher. There is also time and stress to factor into the equation, so it is vital that your grandchild records the ownership of the property and the occupation of it in a Cohabitation Agreement and/or a Declaration of Trust.

How does my grandchild protect their property against unwanted claims?

We strongly recommend that an unmarried couple living together enters into a Cohabitation Agreement. A Cohabitation Agreement will seek to debar any claims your grandchild’s partner may have to assert an interest in their property, should the relationship break down or if your grandchild passes away. These agreements also deal with the practicalities of living together and can include mechanisms that enable the property to be sold or for one party to leave at a subsequent date to save the costs and stress any proceedings under TOLATA would incur.

If you have gifted monies to your grandchild to assist them in purchasing a property, it is imperative that the sum is protected for your grandchild’s sole benefit by entering into a Cohabitation Agreement. If it is not, the gifted sum could be dissipated by an unwanted claim from your grandchild’s partner.

Even if the property is in joint names, it is still advisable to enter into a Cohabitation Agreement and/or Declaration of Trust, particularly where one party has contributed more to the deposit than the other. Please see our article “Is it worth entering into a Cohabitation Agreement or Declaration of Trust if the property is in the joint names of my child and their partner?”