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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3557
Experience:  Solicitors 2 years plus PQE
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I want to lend my son the money to buy a flat in London, rather

Resolved Question:

I want to lend my son the money to buy a flat in London, rather than him spending thousands of pounds a year on renting and never being able to save a big enough deposit to buy.
The property would be in his name and he would repay me without interest - at around the price he pays (currently about £600 per month) which would be my pension - rest of my life ( 30 years max I'm guessing!)
It seems like a win-win situation. He get's a foot on the property market I get a regular income, it reduces inheritance tax when I die. We want a proper legal agreement - to cover what will happen if he is unemployed or has a long-term illness or gets divorced, should it be index-linked to inflation and lots of other scenarios we haven't even considered. What do you suggest? What kind of specialism should we looking choosing a lawyer?
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Alex J. :

, Thank you question and welcome. My name is ***** ***** I will assist you. Given the fact that you are lending your son money you will have to obtain advice on this following reasons:

Alex J. :

1. If anything goes wrong, if you have used a solicitor you will have the benefit of indemnity insurance;

Alex J. :

2. You will need a legal charge over the property secure your money against other creditors in case he becomes unemployed or goes bankrupt etc;

Alex J. :

What you need is a loan agreement and a legal charge of the property. This can be done an property solicitor who should be able to act you given your relationship.

Alex J. :

You should pick a normal rate of interest to go in the loan (anything less than 6-8% would be enforceable) - you can then just waive the interest, or let it accrue and only charge it if he sells the property or goes bankrupt.

Alex J. :

If you go to the Law Society they will be able to recommend a solicitor close to you -


solicitors.lawsociety.org.uk/

Alex J. :

Will your son need a mortgage as well?

Customer:

Thank you so much. That all make perfect sense. No, he won't need a mortgage too - that's what seems to be the beauty of it it - investing in his future rather than a buy-to-let property. Why do I need a normal rate of interest? I understand that if I don't charge interest I won't have to pay tax as it's just repayment of a loan.

Alex J. :

, Thank you. If you have a very high rate of interest it may cause the following problems:

Alex J. :

1. You may not be able to get a solicitor to act of you - because a high will mean that a solicitor is less likely to justify any potential conflict of acting of you;

Customer:

I wasn't planning on asking interest at all just repayments linked to inflation perhaps.

Alex J. :

2. A high rate of interest may not be enforceable against any creditors of he went bankrupt.

Alex J. :

Inflation linked to me seems very sensible. I would have personally said 1-6% would be ok.

Alex J. :

Can I assist you any further? Any feedback is gratefully received. Kind regards AJ

Alex J., Solicitor
Category: Law
Satisfied Customers: 3557
Experience: Solicitors 2 years plus PQE
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