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At Forum Law we have been instructed by a number of clients who have provided statutory declarations to banks to the effect that the client will not ever request or demand the repayment of loans to their children for the purchase of property. In most cases our clients have been asked by the banks to provide these statutory declarations “at the last minute” just before the completion of the purchase of the property and the request has come from a mortgage broker via the child purchasing the property. In each case our client (the parent) has felt pressured to sign the statutory declaration so the purchase can complete.
The consequences of signing a statutory declaration are clear. The content of the declaration must be true and correct and the declarant cannot seek to avoid the promises made in the declaration. The maximum penalty for not complying with the promise in the declaration or making a false declaration is imprisonment.
Our clients have sought advice to escape their obligations under the statutory declaration, as in most cases our clients wish to formalise the “loans” to their children (and the child’s partner who will benefit from the loan). The difficulty the client faces is two-fold. Firstly, they are bound by the declaration. Secondly, the advance from a parent to a child for the purpose of purchasing a property can be deemed to be a gift unless a formal loan has been set up to the satisfaction of a court.
We advise all well-meaning parents to address these issues with their children BEFORE the children purchase a property so that there is no last-minute pressure on parents to sign statutory declarations which then prohibit the parent from ever having any recourse to claiming the monies advanced or claiming an interest in the property, even in the event of a relationship break-up or in the event of a bankruptcy of their child or the child’s partner.