The increase in the number of parents lending their children money to buy a property has led to a growing number of family disputes that sometimes end up in court.
A recent case involved a woman who provided her son with £170,000 to buy a home in June 2005. In November, he repaid £90,000.
In 2015, the son received £350,000 compensation after being diagnosed with mesothelioma. He died the following year.
Under the terms of his will, his estate was due to go to his wife and various charities. However, the mother sought to recover £130,000 from his estate, alleging that she provided the money to him as a loan.
She said that he had made interest payments between 2005 and 2010 but stopped after his diagnosis, when they agreed that she would instead be entitled to a percentage of the increased value of the property. The £130,000 she was claiming represented one-fifth of the alleged value of the property at the time of the son’s death.
The son’s wife resisted the claim, arguing that the mother had paid the money as a gift.
The judge found that the mother had not proved that any sum was outstanding and that, even if the £90,000 that the son had repaid to her was a loan, the balance of the money was a gift.
The High Court upheld that decision, saying there was no documentary evidence that there had been a loan and the son had not mentioned any money due to his mother when he was drawing up his will.
There was also no evidence to substantiate the mother’s case on interest.
The case highlights the need to draw up written agreements when lending money to family members.
It’s not unusual for the people involved to have different views of what was agreed, especially when trying to recall discussions from several years earlier. It’s important that everything is recorded in a legal document to avoid disputes in the future.
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Mother fails to recover £130,000 ‘house loan’ from son’s estate
FARRELL v BURDEN (2019)
QBD (Freedman J) 05/12/2019