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Rise in Legal Action To Recover Home Loans Provided by Parents

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Recently published statistics from Quanta Capital, a London-based litigation funding provider, has revealed a significant increase in the number of parents who, having previously provided their children with finance to buy homes, are now resorting to formal legal action to recover their money.

Instances of such claims have increased six-fold over the past five years, with UK Courts now seeing an average of 14 cases per month. The legal fees involved in these actions can be extremely high; a recent case which saw parents intervening in a property sale to prevent their estranged daughter-in-law benefitting from the sale of their sons house following a divorce ended up with the parents losing and paying over £380,000 in legal fees.

Evidence from legal experts who specialise in family property disputes supports the Quanta Capital findings, with some reporting a three-fold increase in similar litigation over the past five years. It is thought that the growth in house prices over the past twenty years - particularly in London and the South East – has played a big part, as funding from parents has increasing become a necessity to enable their children to get on the housing ladder. The problems often arise if their children subsequently split up with their partners, with parents then demanding repayment. Much of the litigation results from uncertainties as to the nature of such funding; for example, was the money provided by the parents a gift, a loan or an investment? Pressure on parents retirement savings and pension pots are also cited as a reason for the increase in claims.

 

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