The Bank of Mum and Dad and the Need for Cohabitation Agreements

Posted onNovember 16, 2023

When Mum and Dad are helping you buy your first home or assisting you in moving up the property ladder don’t forget the need for a cohabitation agreement or other type of relationship agreement.

In this article, our family law solicitors look at what a cohabitation agreement is and why you need one.

Online and London Family Law Solicitors

For family law legal advice call the expert London family lawyers at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.

The Bank of Mum and Dad

Let's start with some statistics.

The bank of Mum and Dad has provided their children with a staggering £98 billion over the last 5 years. Those are not figures plucked out of the air by our family law solicitors.

These are statistics provided by financial firm SunLife. The figures are based on parents over the age of 50 and using data from SunLife's customers and the Office for National Statistics.

Sunlife even analysed how much money parents in London and the South East handed out to their offspring. In London and the South East, the figure comes in at £36.5 billion.

Unsurprisingly most of the money handed out by parents went towards their children making property purchases, though not necessarily for deposits on first flats. Many children also need financial help to upsize to family accommodation as their families grow or to help cope with rehousing after the effects of divorce or relationship breakdown.

With gifts of £36.5 billion in London and the South East, there is a need to ensure that the generosity of parents is protected.

Buying a property with the help of Mum and Dad

If you are buying a property with the help of Mum and Dad then you need to ensure that their gift is protected. That may be a condition of the gift or parents may not realise the risks associated with a gift of money.

You can protect family money:

If you are using a gift from Mum and Dad to help buy a property with your girlfriend or boyfriend you need a cohabitation agreement
If you are using a gift from Mum and Dad to help buy a property with your fiancé or fiancée you need a prenuptial agreement
If you are using a gift from your Mum and Dad to buy a property with your husband or wife you need a postnuptial agreement. If you are in a civil partnership, you need a civil partnership agreement

If you are buying a property on your own you will still need a cohabitation agreement if you have a partner who will be living with you or spending most of their time at the property. That’s the case even though their name is not on the title deeds and their name is not on the mortgage.

If you are not in a relationship when you buy the property you will need a cohabitation agreement if a new girlfriend or boyfriend moves in with you after the property purchase.

What is a cohabitation agreement?

A cohabitation agreement is a type of relationship agreement.

Other types of relationship agreements include:

Deeds of trust
Prenuptial agreements
Postnuptial agreements
Civil partnership agreements

A relationship agreement sets out what should happen to assets (including property) if you split up from a partner.

Why you need a cohabitation agreement

An unmarried partner or a spouse can make a claim against your property even if:

They are not a legal owner
Their name is not on the mortgage
They have not paid the mortgage

Most people don’t realise about equitable rights and beneficial interests in a property until it is too late and a claim under property or trust law is made against their property by an unmarried partner. That claim can include a share of the equity in the property that was only made possible by a gift from Mum and Dad.

If you are married the claims against a property are more wide-ranging as the family court has jurisdiction to make a financial court order based on needs rather than solely on property rights or contributions.

Property claims can be stopped in some cases by a cohabitation agreement or they can be minimised if you are engaged to be married by a prenuptial agreement. If you are already married or in a civil partnership a postnuptial agreement may be of benefit.

You can use a relationship agreement to ringfence money given to you by parents to use as a deposit on your home. Alternatively, the agreement can be more wide-reaching in scope.

For example, a cohabitation agreement could say that after you receive the deposit monies back (expressed as a figure or as a percentage of the value of the property) any equity is split 50/50 or 60/40 depending on how you both contributed to the mortgage and household bills.

If the property is owned by you and your partner has not financially contributed to the property it is just as important to have a cohabitation agreement to prevent a spurious claim. Otherwise, they could say that they have a beneficial interest in the property and you may feel obliged to give them a few thousand to make their claim go away so you can move on with your life.

Next steps

The gift of money from parents is wonderful as it allows so many people to get on the housing ladder years earlier than they could have done without financial help from the bank of Mum and Dad. That gift deserves protection and that can be achieved with a relationship agreement that suits your personal and financial circumstances.

Online and London Family Law Solicitors

For family law legal advice call the expert London family lawyers at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.

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