Is this correct? Deeds and debt

Discussion in 'General Chat' started by DVD-Man, Aug 8, 2013.

  1. DVD-Man

    DVD-Man
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    Need some advice folks.

    If my parents house is put in my name and my 2 brothers would the house be at risk if one of my brothers got into debt and the lender wanted a bit of the house to cover it?
     
  2. Goooner

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    No expert, but if your brother used the house (or part of it as security) then I'd imagine the lender would be entitled to claim it if he defaulted. I would think all three of you would have to sign the loan agreement though, if the house was up as security.

    I know when I looked at a secured loan a while back, because our house was in mine and the wife's name, even though it would've been just me taking out the loan, she'd have had to sign the agreement too.
     
  3. NewfieDrool

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    You need to go and get advise about trusts which can be setup to help to limit inheritance tax if that is what you are worried about.
     
  4. DPinBucks

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    What do you mean 'put into my name'?

    It's not as simple as that. You can't take over ownership of a house without the mortgage lender's say-so, which I guess is what you mean.

    In effect, it would be a new mortgage in you & your brothers' joint names, and the bank would have to agree to lend you the money.

    If any of you defaulted, the other two would be liable for the debt. So long as you kept up the payments between you you would be OK, because the bank wouldn't care who's paying. But if you didn't keep it up, then the bank could foreclose and take over the house to clear the debt. That's standard practice, though only done when all else has failed. You must bear in mind that you won't each owe a third of the money; you'll each owe all of it, so you can be sued for your brother's default, if it ever came to that.
     
  5. imightbewrong

    imightbewrong
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    You are of course assuming there is a mortgage...

    It sounds to me like the OP's scenario is:

    - Parents give children house
    - One child gets into debt
    - Same child defaults on that debt
    - Lender of that debt wants (part of) house to pay debt
     
  6. Eric

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    He would not be able to take out a secured loan on it anyway without your (and the other brothers) signature.

    For example, if our house was mortgaged in my wife and my name, she would have to co-sign any secured loan. All parties HAVE to agree.
     
  7. Begonia

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    One really good way to keep on providing a roof over your parents' head might be to protect their right to carry on living there with a Deed of Arrangement.

    The parents continue to be the legally Registered Owner of the property. However, BEHIND this ownership the Deed of Arrangement can be produced, IF EVER NECESSARY, to say who the true owners actually are (ie. You three children in proportion to your investment in the property - and here I am suspecting that you all three actually have one and that your parent's don't, although you haven't actually said so).

    The Deed would say, that with everyone's permission (and everybody would need to sign it: ie. the three children and the two parents), even though the property is Registered in the names of the parents, that the true ownership lies with you three children.

    1. The Deed of Arrangement takes precedence over who can live in the house (ie. only your parents) and

    2. Who can use the property as collateral for a loan (ie. no individual child without the written permission of everyone on the Deed. Actually, a new one would need to be written or the old/existing one scrapped with everyone's permission). Practically therefore, no one can use their share as collateral. It's too difficult to do without getting everyone's permission

    A good solicitor would be able to write such a Deed and give each party the protection they require. He would also advise as to whether the Deed needs to be Registered. I suspect not. This means that anyone out of the three children and also the parents can always produce it should they ever need to. But they shouldn't need to.

    • Your parents now have the right to live in the property until they wish to cease living there and without needing to ask the children's permission. However, they cannot sell the property - the production of the Deed by any of you three children prevents them doing this.
    • Each individual child's right to protect their investment in the property, if indeed you actually have one - and/or the proportion of it relative to the other two children ( I suspect you all clubbed together to buy it as a 'good property investment'). No one can really use the property as collateral because the Deed of Arrangement can always be produced showing the interest belonging to other parties. It stays hidden but could be produced should the need arise.
    • At the end of the day, hopefully your parents can bequeath the property to you all (or the sale proceeds in any proportion relevant to your individual investments in the property after the Executor in their estate has made a sale). Now the proceeds are even sheltered from Capital Gains Tax (ie. The Deed is never ever produced and you children would not need to pay CGT on a sale as you have inherited a share in the property).

    Hey! I'm not a solicitor but I do hope you get the idea. This kind of thing does work and I believe this kind of set up has been used on numerous times.

    A good solicitor will be able to advise best how to protect everyone's interests.
     
  8. DVD-Man

    DVD-Man
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    Thanks folks, I understand now that the other parties would have to co-sign any security to the house.

    The scenario is my parents are downsizing and have sold their house and wish to move, initially my brother was going to add money to it and take a bigger portion of the value when my parents pass on - now the plan is to split the proceeds of the house straight away and my brother will fund the purchase of the new house and have it in his name only.
     
  9. Ste7en

    Ste7en
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    Unsecured debt can still have charging orders placed against them.

    Is a brother more likely to mess creditors around? If so, chances are he will be gagging to sell his stake of the property.
     

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