Longridge: 01772 783314 | Garstang: 01995 602129 | Lancaster: 01524 581306 
 
Longridge: 01772 783 314 
Garstang: 01995 602 129 
Lancaster: 01524 581 306 
SOLD 'Subject to Contract' Sign
Sometimes, rather than spending hours trolling the internet to find your new house, you may decide that your parent’s house is where you want to live. You have a chat with them, and they decide: yes, they’ll sell it to you, and they’ll buy somewhere smaller or move to Spain (because, let’s face it, with the weather the UK is having at the moment, living abroad is becoming more appealing to all of us!). However, as they’re your parents and they love you dearly (or they really just want to move away from you, desperately), they decide that they will let you buy their property slightly cheaper than market rate. Our team imagines that you’ll be pretty happy with this, as we understand that buying a house is an expensive time for anyone, but you may be wondering if there are any other implications. 
 
Firstly, our property solicitors in Longridge would explain the process behind ‘gifted’ property. Essentially, you are purchasing the house for X, and the rest of the value of the property is being ‘gifted’ to you. For example, if your parent’s house is worth £500,000.00 and they’re letting you buy it for only £450,000.00 (bargain!), your parents are ‘gifting’ you £50,000.00. 
 
This may seem brilliant. However, some implications to consider are: 
Bankruptcy 
 
If your parents become bankrupt in the future, the Court will appoint an official to arrange payment of any outstanding debts to creditors (this person is also called an official receiver). This person has the power to overturn any under-value transactions, in certain situations. For full advice about how this could affect your purchase, arrange an appointment with our team, here
 
Tax Considerations 
 
Not only could you or your parents face Capital Gains Tax implications, there could also be knock-on affects with Inheritance Tax, as well as Stamp Duty Land Tax! The Tax issues could be – seemingly – endless. 
 
A different option, which your parents may wish to consider, is just fully gifting the property to you. 
 
By doing this, you can avoid paying Stamp Duty Land Tax, as it would be a gift (although this could affect this kind of Tax on any future properties you may decide to purchase). In addition, if your parents live longer than seven years after making the gift, and they do not reside in the property or gain any income from it, the property would be exempt from Inheritance Tax when they die. If they decide to remain living at the property, but they pay full market rate rent, this could, again, avoid Inheritance Tax. 
 
Like with a purchase at under-value, unfortunately there can also be draw-backs with the gift of a property. 
 
For starters, once your parents have gifted you the house, they no longer legally own it, and they therefore have no rights over the property, or to the income from the property. Likewise, if they intend to live there after they have transferred it, they will either need to pay full market rate rent, or there could be inheritance tax implications on their death. 
 
Secondly, if your parents have to go into care, the local authority could argue that by making the gift, your parents were trying to dispose of assets. They could therefore apply to the Court for this transfer to be reversed, for example, which could leave your loved ones homeless (if they are residing in the property). 
 
Thirdly, if you are married, and you then decide to divorce your spouse, your parent’s property (which is now legally owned by you) could be taken into account in any divorce settlement, and potentially you could end up having to share it with your spouse. 
 
Lastly, if you die before your parents, the property would pass as per your Will or, alternatively, would pass as per the Rules of Intestacy, which could leave your parents beholden to your beneficiary, even if they have never had any dealing with them or they do not get along with them. 
 
The risks of dealing with a transfer of your parent’s property into your sole name, or of them selling it to you at an undervalue are very real and, in most cases, generally outweigh any benefits. Our team of Property Solicitors in Longridge can advise you on all the risks and help you with the process. Contact them via email to property@mglegal.co.uk or call your local office (Lancaster – 01524 581 306, Longridge – 01772 783 314 or Garstang – 01995 602 129). 
 
MG Legal – Your Local Solicitors 
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