Parents are now buying houses for their children. To keep the kids in Sydney, parents are assisting their children into the market by helping them out with the deposit. The new trend being that as the child cannot obtain sufficient finance to buy the property, the parents are putting the deposit down in their own name.

Mum and dad put up the deposit, and the children pay the mortgage. This gets the kids into the marketplace and provides the parents with a level of security because the property is in their name. The problem with this approach is that the parents assume it protects against the power of the live-in lover. This couldn’t be any further from the truth!

Under the Family Law Act 1975, a de facto marriage is constituted after 6 months of cohabitation. Upon a de facto relationship being formed, a partner can make a claim through the Family Law Court.

Once your child starts to contribute to the mortgage, they have a constructive trust over the property, being an equitable interest in the property. In fact, considering the property was bought for the purpose of the child owning it, there is a large likelihood that a court would order that the child owned the property.

For these reasons, the move-in-lover now has a claim on the property. Just because the parent’s name is on the property, the moment your child starts paying the mortgage and obtains an interest, the de facto then has a claim.

What I am about to say may spoil spontaneity and may be like a cold spoon to lust, but it’s the only way of protecting property. If a lover moves into the property, and it appears that this relationship is going to be long-term, a binding financial agreement should be considered by the young people. This is like a prenuptial agreement; in that it is an agreement to split assets at the time people start living together. It does sound cold, but it is imperative to protect property. Frankly, when people get together they always make decisions on how expenses are to be split, there is no reason why this discussion cannot be had by boyfriend and girlfriend.

The only thing really cold about it, is that to be binding, each of them need to have a certificate signed by a solicitor that they know that they are doing and its fair.