As a parent you always want to assist your children wherever possible and in many cases this involves providing financial assistance to help them get into their first house. It may seem like a no-brainer and the right thing to do by lending money to a loved one, but unfortunately circumstances change and relationships deteriorate.
Therefore it’s wise to be aware of the dangers of lending money for the purchase of a property and not having your interest registered on the Title. If you are not registered as an owner of the property on the Title, then legally you have no ownership of the house, despite contributing funds to its purchase.
If circumstances do change and you subsequently want to protect your interest in the property difficulties can arise and exactly what remedy is available will depend on the exact circumstances of the case.
One remedy that is available is to claim a beneficial ownership in the house. In deciding if you do in fact have a beneficial ownership in the property the court will consider such things as whether an agreement existed between the parties and the amount contributed by the unregistered owner.
The Case of Dimitrijevic v Dimitrijevic:
A recent case which highlighted the risks of such an arrangement, was that of Dimitrijevic v Dimitrijevic [2014] NSWSC 863, which involved a dispute between a father and son over the ownership of a property in Sydney.
In this case a father who was an elderly pensioner had been living in Australia since 1970. In 2006 with his health declining he invited his son to move to Australia and act as his carer, agreeing to ‘buy a house’ for his son for them both to live in.
In 2007 the father sold a house he owned in Hobart for the amount of $350,000.00 and both father and son moved to Sydney to be closer to family. The son purchased a house in his name for $378,000.00 in Sydney, with the purchase price consisting of a mortgage for $100,000.00 taken out by the son and the balance coming from the father out of the proceeds of the sale of his house in Hobart. The father was not registered as a co-owner of the Sydney property, leaving his son as the only registered owner on the Title.
The father contributed the funds to his son’s purchase under the arrangement that he would live in the house with his son who would care for him, however the relationship between father and son deteriorated and unfortunately for the father there had been no formal arrangement drawn up between the parties and his son subsequently claimed he was the sole owner of the house as the money given to him by his father was an outright gift, with no conditions attached.
The Court’s Decision:
The court had to consider the objective facts in this case, as both the father and son told different stories as to the ownership arrangement of the house. In considering the facts the court held that:
- a common intention existed that the house was to be purchased in the name of the son for the joint benefit of the father and son living in it together;
- the father provided the bulk of the purchase price under this intention; and
- the son in accepting the money from his father did so on the condition that his father had provided it to him to allow him to purchase the house in his name, but that in providing it to his son he would be cared for in the house.
While the court did find that the father should therefore be able to claim a beneficial ownership in the property, the court was not prepared to be drawn on the actual percentage which should be owned by each party, stating that their ownership should not be measured by the funds provided by each party.
Instead the court found that the common intention that existed between the parties was for the property to be equally a home for both the father and the son and therefore decided that the son held the property on trust for his father and himself in equal shares. This was in spite of the father contributing almost 75% of the funds for the purchase of the house. This meant that due to his failure in documenting their arrangement formally and failing to put his name on the Title he faced a large monetary loss and a much-reduced ownership of the property.
Things to Consider:
This case should be seen as a warning of the dangers of contributing funds towards a family members purchase of a property without documenting the arrangement.
If you are considering contributing funds, such as helping a child with a deposit for a property, then it is wise to look at the options available to protect your interest in the property. Unfortunately even though you may consider you are helping out a loved one and they will do right by you, relationships can quickly sour and circumstances may soon change, so it is wise to protect your interests.
You can record your interest on the Title of the property at the time of purchase even if you are only contributing a small amount, or alternatively have a lawyer draw up a legal agreement to protect your interest and ensure that it is documented.
If you have already entered into such an agreement and provided funds to help out a family member or friend, a lawyer can still provide advice as to the best way to legally protect your interest in the property.
Even if the transaction has already occurred, you should consider obtaining legal advice as to what steps can be taken to protect your position.