When buying a property, many people often have gifted funds that help contribute towards the cost, or deposit of a property. If you are using a gifted deposit, it is essential that you inform your solicitor of this information.

It is a crucial element in your transaction as your lawyer will have to check your source of funds as part of their Money Laundering obligations and internal procedures. It is also important to declare this as there may be an additional fee involved with regards to the gift. This is due to the additional work and checks that are required. The fee can then be added into your conveyancing quote and this will help you have a better idea of an overall anticipated figure.

What is Required?

If you are buying or re-mortgaging a property with the assistance of a gift, your solicitor will need to verify the source of funds to comply with Money Laundering Regulations.

The Money Laundering Regulations set out the additional obligations for law firms working in areas of law which have a higher money laundering risk. The regulations state that firms must put measures in place to identify their clients and monitor how they use their services. In order to do this with a gifted deposit, evidence as to where the funds are obtained is required. This is usually by checking bank statements however, in some cases, more evidence may be required .

Alongside the verification of the funds, your solicitor will also require identification of the giftor. This is usually, one proof of address and one photographic form of ID. For instance:-

  • Passport/Driving License
  • Utility Bill
  • Bank Statement
  • Council Tax Bill

In many cases, your solicitor will also require a gifted deposit letter. This letter, written by the giftor, clarifies the details of the transaction. It should specify the amount of the gift and the full names of the giftor and receiver.

The letter should also be signed and dated by the giftor for verification purposes.

Mortgage Lenders

Where a mortgage is being utilised to purchase a property, it is often the solicitors duty to inform your mortgage lender that gifted monies are being received and used. There may also be additional conditions that the mortgage lender may have, and this would need to be satisfied in order to comply with mortgage lender requirements.

Each lender will have different requirements in respect of gifted deposits so the CML (Council of Mortgage Lenders) Handbook must be checked to ensure the lenders requirements are adhered to. For instance, some lenders may not accept gifted deposits at all, with some only accepting gifted deposits from family members. On the flip side of this, some lenders can also be flexible in regards to gifted funds.

Further Considerations

It is always recommended that a giftor obtains independent legal advice in respect of the funds. This will allow them to be fully informed of the potential current and future implications they may need to be aware of. The solicitor acting for you in your purchase, cannot provide this advice as it would be a conflict of interest.

Prior to completion, a bankruptcy search will also need to be performed against the giftor to ensure that they have not been declared bankrupt. If they have, there may be future implications from potential creditors who may try and obtain the gifted funds back from you.

How Can Timms Help?

If you are considering purchasing a property and would like a conveyancing quote, please contact the conveyancing team on freephone 0800 011 6666 or use our free online calculator here.