On whether your parents will get their deposit money back if you and your partner separate, what was intended by your parents at the time?
Be clear as to whether it was intended to be a loan or a gift.
If it is intended to be a gift it should be recorded by your parents at the time. If it is a loan, you should have documents drawn up to record the intention as specified below.
If you and your partner live in the home together it will be classified as the family home (relationship property) under legislation.
As a result, any equity including the deposit will be divided equally between both of you in the event of separation. To protect your parents’ funds, you should consider a contracting out agreement.
A contracting out agreement allows you and your partner to opt out of the relationship property legislation either partially or completely.
In your circumstances, the agreement could be narrow in scope and simply ringfence the funds your parents have contributed, by specifying that these funds are to be repaid to your parents’ bank account in the event of your separation.
Preparing a contracting out agreement
It is always beneficial to raise the intention of a contracting agreement at the start of the relationship. For a contracting out agreement to be enforceable, several requirements must be met, including that you both have independent legal advice.
It takes time (weeks or months) for these sorts of agreements to be prepared, negotiated and signed.
We suggest that if you wish to pursue this option you act promptly, preferably before the sale and purchase agreement has been signed, and the deposit paid, as at this stage your partner will start accruing entitlements under the legislation.
Both your and your partner’s lawyer will need to sign the agreement to confirm they have provided legal advice.
Family lawyers generally will not sign an agreement hastily. They must ensure their client properly understands the agreement and how the terms compare with what they would receive under the legislation.
Your partner does not have to sign the agreement. Assuming the agreement is drafted simply to protect the funds your parents have contributed to the deposit for your/their benefit, you could consider offering to meet your partner’s reasonable legal fees.
What if my parents want me to repay the deposit funds?
If your parents are expecting you to repay the deposit funds, then the funds have been loaned to you and your partner.
The options to best ensure your parents are repaid are to:
-Document the loan in a loan agreement, to be signed by you and your partner and your parents
-Register the loan as a mortgage on the title to the property.
Having a contracting out agreement signed by you and your partner, as mentioned above, would provide an extra layer of protection.
Who gets to keep the ring if we separate?
The engagement ring would be considered a gift from you to your partner.
Gifted items are generally not classified as relationship property under the legislation in the event of separation.
The exception is where the gifted item has been used by both parties or the household during the relationship, but this is unlikely to be the case with an item of jewellery.
Conclusion
As lending becomes more difficult, the desire to have certainty with advances from parents becomes more important.
The intention of the funds for the deposit is key if your parents want to protect the deposit. You need to take proper legal advice early.
If you do not take any steps to preserve the funds your parents have provided to you for the deposit, then they will become relationship property funds.
We suggest you promptly seek advice from a lawyer about having a contracting out agreement prepared.
