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Help!! Any Solicitors in the house?


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To secure the purchase of my building plot, I have to first lend a large sum on money to a family member. It'll be a short term loan, basically bridging the gap between when he buys the whole property and we successfully obtain planning permission for the subdivided plot, roughly 3 months we think, at which point legal ownership of the plot will pass to me and the loan will be cleared.

 

It's a great opportunity, we all want it to work, but we do need some legal backup "just in case".

 

I have downloaded what looks like a fairly convincing loan contract, personalised to our circumstances. If this is signed by both parties in the presence of independent witnesses, are we fairly safe?

 

I'm happy to pay for the right advice if anyone here is suitably qualified to offer it? I'd also welcome constructive opinions. It's a pivotal time for this and it's stressing me out a lot at the minute.

 

 

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Funnily enough I have just lent a “chunk” of money to my stepson to help him buy a house after his split with his partner so he has a decent home for their daughter, against some peoples opinion it’s just an informal loan with no paperwork but I trust him 100%. Life is a gamble and I believe in gut feeling, but I know most people will think I am bonkers. Fastest way to fall out with friends and family is over money issues.

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6 minutes ago, joe90 said:

Funnily enough I have just lent a “chunk” of money to my stepson to help him buy a house after his split with his partner so he has a decent home for their daughter, against some peoples opinion it’s just an informal loan with no paperwork but I trust him 100%. Life is a gamble and I believe in gut feeling, but I know most people will think I am bonkers. Fastest way to fall out with friends and family is over money issues.

 

Yes, my Uncle (the 'borrower') is a handshake kinda guy, but this isn't just a couple of grand either and I know money can make people do weird things.

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You can easily record the parties, the loan amount and the terms (repayment date etc) in writing and both sign as a DIY agreement although I would not do this for a very large sum.

 

You need to consider what happens should one party renege, die, divorce, go bankrupt, become mentally ill etc.

 

I think the planning consent / plot subdivision / whole property bit makes it a lot more complicated and if you want this included, get it drawn up by a lawyer.

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2 minutes ago, Mr Punter said:

You can easily record the parties, the loan amount and the terms (repayment date etc) in writing and both sign as a DIY agreement although I would not do this for a very large sum.

 

You need to consider what happens should one party renege, die, divorce, go bankrupt, become mentally ill etc.

 

I think the planning consent / plot subdivision / whole property bit makes it a lot more complicated and if you want this included, get it drawn up by a lawyer.

 

Those are interesting points. I guess in the event of death, there could be a provision for that from the estate, but how about bankruptcy? What could be expected there?

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Get it drawn up properly by a solicitor. It's not worth scrimping on a few hundred when there are many, many thousands at stake. One of my biggest regrets of our build was taking the word of a trusted main contractor and not having things in writing, only for our verbal agreement to be reneged upon in the final stages.

Hope for the best but plan for the worst.

Edited by vivienz
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As a sign of the times, my old cleaning lady had a law degree and she advised that all agreements have written terms. If you think of all the possible permutations and unforeseens that could conceivably happen you will save a lot of money, as their job is to make you aware of just these issues. At the very least, if you decide to DIY get signatures witnessed. 

I might need to borrow from a family member but will do this to protect other members of my family who stand to inherit and would not be pleased if this was not clear, in case the worst happened. I guess you need to have wills too.

 

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1 hour ago, Jilly said:

Why don't you buy it if it's going to be in your name at the end? Also, the planning process can be slower than you might think, if there is any controversy, it might take a lot longer than 3 months.

 

Weary of doing this in case we can't get planning through.

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Consider what happens if the relative drops down dead the day after purchasing the place. You might have no contract with whoever inherits it or the tax man. Ideally you should buy the place together and get your respective shares listed in the title deeds. 

 

Lets assume all goes well. I don't think he can just "give" you the plot as there are tax rules on the transfer of land. I believe it would be counted as a sale at the new improved value it has once planning permission has been granted. The relative might have to pay CGT if the land isn't part of his garden/PPR.

 

I think you need proper legal advice.

 

 

 

 

 

 

 

 

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14 hours ago, Temp said:

Consider what happens if the relative drops down dead the day after purchasing the place. You might have no contract with whoever inherits it or the tax man. Ideally you should buy the place together and get your respective shares listed in the title deeds. 

 

Lets assume all goes well. I don't think he can just "give" you the plot as there are tax rules on the transfer of land. I believe it would be counted as a sale at the new improved value it has once planning permission has been granted. The relative might have to pay CGT if the land isn't part of his garden/PPR.

 

I think you need proper legal advice.


This was exactly the two points I was going to make:

 

Death and Taxes! 
 

You definitely need to get some decent legal and tax advice. 

Edited by Barney12
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Can't you just register a 'charge' on the property, if memory serves this is done with land registry, so if the property is sold you get the money owed. Likewise when you split the title of the plot you will be able to remove the charge when the land registry is informed of the split.

 

I'm not a solicitor, but this is how I borrowed from family against a property - just so it's formally recorded.

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Yes, also know as a Property Charge. There's a guide here

https://www.gov.uk/government/publications/notices-restrictions-and-the-protection-of-third-party-interests-in-the-register

 

If you have a mortgage or loan secured against a a property, or a CCJ against it, these are lodged as charges against the deeds with the land registry. (my wife runs accounts for a conveyancer and had to deal with a property with 8(!!!) separate charges on it thisnweek, a record in a year there)

 

Several other guides out there. Search for "agreed Vs unilateral charges" to get an idea

http://www.land-registry-documents.co.uk/information/charges-register/

https://www.tsplegal.com/solicitor-articles/what-is-a-legal-charge/

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I think you ca; also register what is called a Beneficial Interest in it, which avoids some buggering about.

 

Take advice on that, but it is what 3rd party restorers  I know do to avoid the need to change ownership.

 

Also, putting charges on is relatively straightforward.

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If he owns the property when you make him the loan then you can have a 1st charge over the property which guarantees you are 1st in line to have your loan repaid if the property is liquidated.  You can specify the terms of the loan such that a default would give you the right to call in the loan, forcing him to sell to liquidate and pay you.  So you are covered in the event of his death or incapacity, or indeed just a falling out.

The loan agreement is simple, it just identifies the loan and the terms.

The repayment date will need some thinking about for you as gaining successful pp is not a clearly identified moment...'repayable on demand' could be good enough but if you die and your estate calls in the asset he'll have to sell, possibly cheap....so if you are loaning him 100% of the purchase you might not get it all back.  You might not care though if you're dead.

Also if he has a mortgage on his part of this whole plot/property that'll have the first charge....if you set up your loan on 1st charge before he secures his mortgage that might jeopardise it.

You need a solicitor.

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