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A couple are keen to purchase their mother’s house, so she can move to a smaller home, but they cannot afford the full market value. Our legal experts provide their conveyancing advice.


Q. My mother in law is a widow living alone. She has decided that she wants to buy herself a small flat and says my husband and I should buy her house from her so that it does not go out of the family.

She lives in a very expensive area and we cannot afford to pay her the full market value. However, we can pay her a price that would afford her to pay off her equity release mortgage and buy her new flat. She is very happy about this. She has a pension and savings and manages well financially. Can we do it, and are there consequences of not paying the full market price?


A. You can purchase your mother in laws house at an under value, but she should have full capacity, understand what she is doing, and receive independent legal advice. An up to date figure should be obtained to establish the amount due to redeem the equity release mortgage.

The difference between the price you pay for the property and the market value will be deemed to be a gift from your mother in law to you and your husband. It would be prudent to obtain a valuation of her property from Royal Institute of Chartered Surveyors registered valuer. The gift may have consequences should your mother in law need to apply in the future for state or local authority benefit. The gift may also have inheritance tax implications.

Instead of buying the entire property you could buy an interest in it, in which case you would need to agree how the property is held and in what proportion, and the parties’ obligations. Record this information in a declaration of trust. It should be remembered that there may be a stamp duty liability. All three of you should consider making or updating your will.


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