Buyers using a Help to Buy Scheme need protection

Rose Macfarlane, solicitor at Adams & Remers says that homebuyers using one of the government’s new Help to Buy schemes, which are helping to stimulate the housing market recovery, should ensure they consider legally protecting themselves for a change in personal circumstances.

The four main schemes – Help to Buy, Shared Ownership, New Buy and the recently launched Help to Buy Mortgage Guarantees are all aimed at first time buyers with some also open to previous homeowners meeting certain criteria. Restrictions on what can be done with the property however may make it difficult for a couple if their relationship breaks down.

Because the schemes are all primarily aimed at first time buyers, there is a high chance that there will be a high take up of younger people who are planning to cohabit with a partner. This group needs to consider their legal position if the relationship breaks down if they don’t have the legal protection provided by marriage or a Civil Partnership.

If the property has been purchased by a couple in joint names who are not married or in a civil partnership, it is important to record ‘who brought what’ to the table as a deposit, as the first responsibility is to pay back the remainder of the loans on the property. You should especially record where financial gifts or ongoing help from parents may have been used to fund the deposit or to help pay the mortgage.

People should consider asking a solicitor to draw up a Declaration of Trust which details how much each party has put into the property, what their ongoing contribution will be and how much each party should get if they then decide to sell the property, after the loans have been paid.

People need to be particularly aware that if their circumstances change, then depending on which scheme they have used, there may be restrictions on whether they could sub-let the property for example if they couldn’t afford to live in it alone.

Buyers may also be restricted from selling the property on the open market if it has a first refusal clause allowing a housing association the opportunity to buy it first.

Whilst these schemes will no doubt be useful in helping many who otherwise wouldn’t be able to buy a home of their own to do so, they need to give thought to the ‘what if’s’ of life to ensure their dream doesn’t turn into a financial nightmare.