With average house prices 8.3 times income, it’s becoming increasingly common for parents to help their adult children “get on the property ladder”, particularly for first-time buyers, who often rely on money for a deposit for their first home.
It is legal to gift a deposit for a property purchase but the solicitor handling the conveyancing must verify the source of the gifted deposit. It is also important to inform the respective solicitor and mortgage adviser of any gift from the beginning to avoid delays in the conveyancing process. The solicitor is required to obtain a photographic ID and proof of the funds from the gift or verify the source to comply with anti-money laundering regulations.
The lending institution usually requires a signed deposit gift waiver to confirm that the family’s contribution is a gift, not a loan, and they claim no interest in the purchased property.
What is a Deposit Gift Waiver?
A deposit gift waiver is a legal document signed by someone who is gifting money to someone else to help with the deposit for a property purchase. This waiver acknowledges that the gifted deposit is not a loan, does not need to be repaid, and that the giftor acknowledges that they have (or will have) no ownership of the property.
The giftor needs to be fully aware of the terms of a gift waiver. This means that whoever provides the gift should seek independent legal advice before signing the gift waiver to ensure they fully understand its implications.
The Importance of Independent Legal Advice
A deposit gift can be beneficial when buying a property and is often a way that family or friends can help someone get on the property ladder. However, to avoid any technical issues and minimise the risk of disputes later, it is essential to understand the legalities of the gift. All parties must know their rights and responsibilities, so getting independent legal advice is important.
Where do you go for Independent Legal Advice?
At Phelan Independent, we specialise in providing fast, fixed-priced, independent legal advice tailored to these transactions. Our experienced solicitors can provide comprehensive guidance and clarify any potential risks or implications of the waiver.
Our ILA services include:
• Explaining the legal implications of the deposit gifts waiver and address any concerns.
• Thoroughly reviewing the document to ensure the giftor’s interests are protected.
• Providing personalised advice and guidance throughout the process to understand the terms of the waiver and offer any recommendations.
• If necessary, our solicitors can represent clients in negotiations with lenders or conveyancers to protect your rights.
If you or your clients need to discuss a deposit gift waiver, our team is here to provide expert, independent legal advice. Call us on 07597 589 266 or email enquiries@phelanindependent.co.uk to book a consultation.
Frequently Asked Questions (FAQs)
1. What are the potential risks associated with a deposit gift waiver?
A deposit gift can help a homebuyer purchase a property, but there are potential risks to consider. These may include disputes over the nature of the gift and implications over inheritance tax liability.
2. How much does independent legal advice for a deposit gift waiver cost?
We offer fixed fees starting from £225 (inclusive of VAT) with discounted rates for multiple instructions or clients of NACFB members.
3. Why is independent legal advice necessary for a deposit gift waiver?
It is imperative to get independent legal advice to ensure that all parties fully understand the implications of a deposit gift waiver. Clarifying their rights and obligations is important for protecting the interests of the homebuyer and the person providing the gift. Many mortgage providers and lenders insist on such waivers if a deposit gift exists.
4. Who typically provides the deposit gift?
Deposits are usually gifted by family members, such as parents, grandparents, or close friends, enabling the buyer to get on the property ladder. In many cases, and to avoid future issues, the gift provider must sign a declaration confirming that the funds are genuine gifts, not loans.
5. How long does providing independent legal advice on deposit gift waivers take?
We guarantee advice within 48 hours of instruction acceptance and documents being provided (usually the same working day)
