Private Client
WHAT TO CONSIDER IF YOU’RE THINKING ABOUT BUYING OUT MUM AND DAD FROM THE FAMILY HOME OR HOLIDAY HOME
Adult children may be in a position to buy the family home or holiday home from their parents.
Buying a home from family, particularly the family home or bach/crib, can sometimes become complicated, despite everyone’s best intentions. Many of these issues can stem from family dynamics, rather than the legal considerations around buying and transferring property.
Family Expectations
The family member(s) who purchase the property may have to field awkward requests from other siblings or family members who invite themselves to stay. Those other family members may not necessarily expect to contribute financially, because, after all, it used to be Mum and Dad’s. It can also complicate family relationships, if the previous owners still expect access, or to be able to treat it as their own. Some of these dynamics cannot be appropriately recorded in a written agreement, but they are definitely worth considering, before entering into this type of purchase. You may own the property, but still be subject to a raft of family expectations and requests. If your children or grandchildren will also be expecting to use the property, setting clear expectations at the outset will benefit everyone.
Doing Your Homework
If you do decide to go ahead, make sure you also get the home and property checked out, just as you would if you were buying from a stranger. The rose-coloured glasses inevitably come off after a purchase, and being saddled with unexpected repairs or a new housing development just around the corner, can all affect value and enjoyment. Obtaining a building report and checking local Council records will give you a much better overall picture of the property and potential changes to the surrounding area.
Purchase Price
The purchase price is also an area that can cause conflict. It may be wise to obtain a valuation so you can be sure any price agreed between family is accurate. If you are purchasing the property at less than market value, you (and your parents) may wish to consider how this will affect your parents’ estate planning. It may also be practical to consider how the transaction will be explained to the rest of the family (if appropriate) to ensure that there are no misunderstandings or assumptions of preferential treatment.
Agreement
An agreement for sale and purchase can be drawn up with the assistance of a lawyer, together with any loan or finance arrangements that are agreed between you and your parents. If the property is of particular sentimental value, you may also wish to consider obtaining separate legal advice about how to protect your position if your relationship breaks down or your circumstances change in the future.
Need more information or help?
The team at Brookfields can provide practical advice and assistance tailored to your specific circumstances. We have decades of experience in advising on family trusts and generational ownership structures to record your intentions. Please let us know how we can help.
