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When parents lend to children

When parents lend to children

By Legal Practitioner's Liability Committee

Practice & Procedure Real Property 


Be alert to the risks when advising on parent loans to home buyers. Last year, financial services comparison site Mozo reported that young home buyers in Australia have borrowed $65.3 billion from their families, making the bank of Mum and Dad the country’s fifth biggest lender. The June 2018 LPLC column “Take a step back” discussed the need to properly assess your client’s position and the risks they face. This is particularly important when acting in a transaction where parents lend money to their child to help them buy a house. As a practitioner it is essential you consider who you are acting for and whether anyone else could think you are looking after their interests. If you are acting for the child in the purchase of the property, you should recommend that the parents obtain their own independent legal advice and tell them you cannot advise them. Alternatively, if you are asked by parents to document a loan to their child you need to make it clear you are not acting for the child and recommend the child get their own legal advice.

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