I bought an apartment for my daughter and her boyfriend several years ago. It is supposed to pay us back gradually at zero interest.
However, he stopped paying us and now my daughter has broken up with him.
The names of my daughter and her ex are both on the property deeds. How to get our money back?
Loan Dilemma: Parent Wants To Know How To Get Money Back From Daughter’s Ex Who Stopped Repayments (Stock Image)
Christian Butler, lawyer at Silk Family Law, responds: It is more and more common for parents to financially help their children to buy a house and I am asked more and more to advise clients who are in a situation similar to yours.
What is fundamental in these matters is to establish at the outset the exact nature of the agreement, in this case between you, your daughter and her ex at the time of the purchase of the property.
1. Was the money provided by you in the form of a loan? If so, was it a loan for both your daughter and her ex, or a gift to your daughter and a loan to the ex?
2. If the money was provided as a loan, was there a formal loan agreement made or was the agreement only verbal? If a formal loan agreement has been made, has the loan been secured by a charge on the property? Does this have the effect of securing the debt on the property?
3. Alternatively, was it expected that you would have a stake in the property and that, in effect, the ex – or your daughter and her ex – were in fact to purchase the property from you in monthly installments?
How can you get your money back?
Christian Butler: “Concretely, it is obviously judicious to seek to reach an agreement with the ex of your daughter”
The use of the words “pay us back” and “zero interest” implies that you are concerned with the non-payment of a loan.
Whether it is an informal verbal loan agreement or a formal written agreement, steps can be taken by law to seek recovery of the money loaned.
In the event that it has been agreed that the apartment was financed by a loan granted to the ex and / or your daughter, you must ensure that there is sufficient security to allow the recovery of the balance due.
If the loan is unsecured – meaning there has been no charge against the property – then you can take the following steps to rectify the situation.
First, go to court and get a judgment confirming that the money is owed to you.
Second, ask for an injunction against the apartment. And third, file a notice with the land registry to make sure it’s officially registered.
An imputation order would secure the loan, just like a mortgage.
In other words, on the sale, the charge would be “biting” and the amount owed to you would be collected – assuming of course there was enough equity in the property to settle the debt.
An invoice order does not automatically force the sale of the property. However, if the loan remained unsatisfied following a demand for immediate payment of the full amount, then a request for a sale order could be brought before the court.
Directions would be given by the court regarding the mechanics of the sale itself and ensuring that the property is sold with vacant possession.
If the loan was a joint loan to your daughter and her ex, you will need to think carefully about whether you want to take legal action against your daughter.
Unless otherwise specified in a formal written loan agreement – which is very rare when family loans are made – your daughter and her ex will both be “jointly and severally” responsible for the loan.
This means that you can sue one, or the other, or both for its recovery.
The legal process would remain the same; however, if you have only taken action against the ex, he may be able to ask your daughter for a contribution.
Concretely, it is obviously wise to seek to reach a settlement with the ex of your daughter, perhaps with the help of a lawyer, but without it being necessary to go to court, because a legal action to collect funds can be time consuming, stressful and expensive.
Usually, the threat that you intend to take legal action will be enough to persuade someone that it is in their best interests to reach a settlement.
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Mediation, where a qualified and impartial dispute mediator would try to help you resolve issues, should also be considered.
How to do are you protecting your position when helping children buy a house?
For all parents who wish to financially help their children, I would strongly recommend either:
1. A formal loan agreement and a charge on the property – the loan agreement should be prepared by a lawyer who specializes in these matters.
It would clearly record any agreement regarding repayments, interest rates, etc.
The loan must then be secured by taking a charge on the property, in effect a mortgage, which provides security in the event that repayments stop and the loan falls into arrears; Where
2. A Declaration of Trust – Strictly speaking, this would not be a “loan” as such, as the parent would either own all or retain part of the property.
There could be an agreement for the other co-owner (s) to increase their share and decrease the parental share, via capital payments.
It should be noted, however, that if you do this there may be tax issues that the parent (s) should be aware of.
In addition to the above, if the beneficiary child is to cohabit, a cohabitation agreement between him and his partner – or if the child is married or is due to marry, a nuptial agreement – would also be advisable.
This would hopefully protect a parent’s position even more, should a child’s relationship break down at a later stage.
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