Gifted Deposits for Property Purchases: All you need to know.
Posted on 18th February 2020
As part of your property solicitor in Preston’s role, obtaining evidence in respect of source of funds is a vital aspect of your conveyancing transaction, in order to comply with anti-money laundering regulations. It is at this point that your conveyancing solicitor will be assessing where the funds being used to facilitate the purchase originate from. The funds may derive from savings, previous sale proceeds and mortgage advances, as examples. There are, however, certain requirements which your conveyancing solicitor is to follow, when the same is being gifted.
Gifts are very common, particularly with first-time buyers whom are purchasing their first property. Where funds are being gifted, whether this be from a family member or friend, your conveyancing solicitor will be assessing the following:
- The identity of the individual(s) providing the gift: Your solicitor in Preston would require sight of, both photographic and proof of residence, identification to confirm that the same adequately pertain to those supplying the gift. These are basic anti-money laundering requirements.
- Proof of funds: The next item for your conveyancing solicitor’s consideration relates to where the gifted funds originate from. A bank statement would be required, showing that the funds are, indeed, readily available, as well as checking the origin of the same. For example, if there is a casual deposit of £10,000.00 in the account, our conveyancing solicitors will be questioning where the same has arrived from. It may take 3 or 4 bank statements to clarify this, however, there needs to be a clear chain to confirm that the funds have been legitimately acquired.
- Is the gift actually a gift? Although the word gift may be used, this does not always mean that the funds are, in fact, a gift. Your property solicitor would be seeking confirmation as to whether the funds are to be repaid, or whether they are a gift in their entirety. Where the same are to be repaid, there are a number of further considerations for your conveyancer, for example is the same to be noted as a Charge, of security, over the property and to be registered at the Land Registry. In such instances, the same would not be a gift and would, indeed, be a loan which may require protection to ensure the same is repaid.
- Independent legal advice: Where substantial amounts of money are involved, it is important to consider whether the individual providing the same has taken independent legal advice. Advice may be sought on the implications of providing a gift, in that there is little recourse at a later date should they change their mind.
As you can see, there are a number of considerations for your conveyancing solicitor to take into account. One major point, which is to be at the forefront of your conveyancing solicitor’s mind, is the duty not only to act in the best interests of the client, but also the duty owed to the mortgage lender.
Where purchasing with the assistance of a mortgage, any gifted element is to be reported to the mortgage lender for their consideration. Your conveyancing solicitor should provide the lender with the information referred to above, in order that they may come to a conclusion as to whether they are still in agreement to lend the funds to the buyer.
The main concern of the mortgage lender is that their security in the property is protected. For example, in the event that a deposit has been supplied, and the same is repayable, the mortgage lender is to be satisfied that their own mortgage repayments are to be met, as priority, irrespective of any such ‘gift’ repayments. In effect, the lender needs to be sure that any gifted element will not affect the ability of the property owner to make and meet the monthly mortgage repayments.
Once the gifted element has been reported to the mortgage lender, and their approval has been issued, the conveyancing transaction can progress with business as usual. It is, however, imperative that any gifted deposits are discussed with your conveyancing solicitor during the early course of your matter, to avoid any delays at a later date.
If you are planning on purchasing a property and have a query in respect of gifted deposits, or any other conveyancing enquiry, contact our solicitors in Preston today at firstname.lastname@example.org.
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Tagged as: Garstang Solicitors, Longridge Solicitors, Property Solicitors Preston, Your Local Solicitors
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