Member Article

Parents in the West Midlands putting £10,000s at risk by simply 'hoping for the best'

A third (35%) of parents in the West Midlands now see it as their ‘parental duty’ to contribute to their child’s first property purchase, with around half (47%) gifting over £10,000 to their child and one in six (17%) contributing over £50,000, according to new research from QualitySolicitors Talbots.

In the process, parents in the region are making major sacrifices, with one in eight (13%) remortgaging and a further 9% selling their home and downsizing. However, the vast majority has no protection in place for their gift, with 80% saying they simply handed the money over with no legal advice and ‘hoped for the best’.

That means should their child’s circumstances change, for example splitting from their partner or falling into negative equity, the money could be lost. It also leaves children exposed to potential sibling disputes should a parent die.

QualitySolicitors Talbots, with seven offices across the Black Country and

Worcestershire, has launched a series of top tips to give legal and life advice to parents to help better protect themselves, their children and their money. The mini guides also include advice for buyers that are entering into property arrangements with other people…for example collectively buying with friends.

Parental sacrifices

According to the research, only 19% of parents in the West Midlands take any type of legal advice before contributing to their child’s purchase. This is all the more surprising given the sacrifices they make to help their children out with the vast majority (76%) dipping into savings and 6% even postponing their retirement in order to raise the funds to contribute to their child’s purchase.

Funding the purchase

As well as drawing on the bank of Mum and Dad, first time buyers across the region are looking at other ways into the property market with one in seven (14%) saying they have bought or will buy with a close friend. A further 4% buy in order to become a ‘live-in landlord’, bringing in a tenant to help with mortgage repayments.

Surprisingly though, 47% of buyers in the West Midlands entering into joint property arrangements say they’ve not even had an ‘informal discussion’ with the other parties involved about what would happen should their circumstances change, such as being made redundant, relationships breaking down or needing to sell the property.

In the dark

Over half (55%) of parents in the region said they did not feel fully aware of the legal implications and obligations of giving financial support to their child. First time buyers are as much in the dark as their parents – nearly half (41%) said they did not understand fully the legal implications of getting financial support from a third party.

Buyer concerns

Over three quarters (81%) of first time buyers in the West Midlands who have accepted financial support admit having concerns about accepting it. Around a third (30%) feel worried that they’ll never be able to repay the loan. A further one in five (22%) feel guilty about owing someone else money and 28% feel ‘caught in a trap with no way out’. A quarter (25%) even admit to feeling ‘resentful’ that they’re ‘financially obligated’ to others.

Martyn Morgan, Conveyancing Expert at QualitySolicitors Talbots, commented: “It is natural for parents to want to do as much as they can to help their children get a foot on the ladder. However, the research shows that often their goodwill is misplaced and can actually lead to more problems further down the line if something goes wrong.

“Our message would be protecting yourself isn’t a sign of mistrust, far from it. It’s actually the best way of protecting the long-term relationships you value.

“The mini guides are designed to help those entering into property arrangements to navigate the issues we see time and again and get people thinking about protecting themselves better. Protecting yourself doesn’t have to be complex or costly and it can save heartache and tens of thousands of pounds in the future.”

QualitySolicitors Talbots has enjoyed a major year of growth, investing £500,000 into a new office in Dudley and acquiring Lumsdon’s Stourport practice as part of a desire to increase its coverage in Worcestershire.

The firm, which also has a presence in Codsall, Halesowen, Kidderminster, Stourbridge and Wolverhampton, has seen turnover rise by 12% as a result, reaching £6m by the end of 2013 and targeted to hit £7.75m in 2014.

It has developed a reputation for taking an innovative approach to legal support, including being the first in the West Midlands to open at lunchtimes, Saturdays and, more recently, to extend its hours for clients from 8.00am to 6.00pm.

This was posted in Bdaily's Members' News section by Russ Cockburn .