Rights of Resentment?

Hello,

My partner and I plan to move in to my partner's mother's house. The mother is seeking Rights of Residence, and Support and Maintenance, legal clauses before she signs over the deeds to my partner.

I'm OK with the Right of Residence, and I'm hoping the banks are too, but the Support and Maintenance has me a bit on edge.

Anybody went through this process of owning a home, and what exactly would Support and Maintenance generally signify? For example, if I were unable to pay for a major leak, would my partner and I have to take out a loan to cover the repair, as legally I have to "support" the mother?

Would be great to hear any feedback.

Lenar3556

You have made a slight freudian slip in the title......
And unfortunately it is a sentiment that has been known to arise down the road in these types of arrangements. Tread carefully.

When you mention you hope that the bank would be happy, what is the involvement of a bank in the proposed course?

The support and maintenance terms would need to be clarified as to what this refers to?

In any case, each party to any such agreement should seek independent legal advise in advance.

@Lenar3556

Thanks for the reply, @Lenar3556.

Ha, you're correct.

Some banks do not like the Rights of Residence clause as it could counteract a possible scenario whereby they need to repossess a house if the mortgage payments cannot be made. Some banks will not touch an applicant if they have such a clause in the legal documentation -- this is according to a QFA.

Currently, the legal process is parked with the parent, as their legal team will not proceed with cooperation from me and my partner. They have not detailed the maintenance and support clause; instead, a general clause has been added to a legal draft of the doc.

My partner and I plan to get our solicitor involved soon to look over the maintenance and support clause. I guess requesting more details to be added would not be a complex process? Maybe people might get offended, but a healthy mind is important for a person taking out a mortgage.

Lenar3556

I had initially thought that the house was to be gifted, subject to conditions. But the plan is that you and your partner would be buying it? At a very preferential price?

I would agree with your QFA, any mortgage on terms like that would be a specialised product and a very hard sell to any financial institution. The house represents poor security in the circumstances. If the price was low, you might have other options in terms of unsecured term loans.

nibtrix

Just wondering about your example in the OP about a major leak that you would have to pay for, are you and your partner not planning to become the owners of the property? If so it would be your responsibility to deal with/pay for any maintenance or repairs anyway. Although for something like a major leak you should have insurance that would cover any repairs.

HI Lenar and nitbix. The house is being bought for a small sum, but the main residence needs remodeling. The section the parent lives is a separate part (equivalent o a detached house) of the house with a different mains supply, and so on.

Yeah the unsecured loan does not sound favorable and I'm sure it comes with a heavier structure than a standard mortgage. Additionally, switching the mortgage might not be possible, right?

Mrs OBumble

TimberTones wrote: »

... switching the mortgage might not be possible, right?

Switching it from what/who to what/who, exactly?

Marcusm

TimberTones wrote: »

HI Lenar and nitbix. The house is being bought for a small sum, but the main residence needs remodeling. The section the parent lives is a separate part (equivalent o a detached house) of the house with a different mains supply, and so on.

Yeah the unsecured loan does not sound favorable and I'm sure it comes with a heavier structure than a standard mortgage. Additionally, switching the mortgage might not be possible, right?

You’ll find it hard to raise a mortgage on a property where you do not acquire good marketable title, ie one free of claims in priority to the mortgagee. The right of residence would be an impediment to the mortgagee (lender) enforcing its mortgage in default. This would be a specialist lender only.

Peregrinus

You are absolutely right to be seeking clarity in advance about exactly what the scope of your obligations would be. It's in everybody's interests that you and your partner and your partner's mother all share a common expectation about what you will and will not do.

The thing is, what may happen in the future is unknown; you may face issues in the future that none of you contemplate at present. So you won't be able to agree exactly what you will do in every possible contingency. Instead you need to agree broad general rules.

Your mother-in-law is seeking rights of residence and rights of support and maintenance. I think you need clarity on what "support and maintenance" exactly she expects. You seem to be thinking in terms of paying for repairs to the property she will live in, but support and maintenance normally means much more than that; it means the provision of the necessities of life, or a sufficient income to cover them. Is your mother in law expecting a regular allowance to cover her groceries, utilities, clothing, etc? That needs to be clarified.

You also need agreement about what is to happen if your mother-in-laws needs increase with age and frailty. Will your "support and maintenance" extend to the provision of home help, for instance, for tasks that she can no longer do herself? What if she needs personal care?

As regards the right of residence, I note that this is to be in a self-contained part of the property. For clarity, you could agree that you will maintain that property in the same condition that a landlord would be expected to maintain a property let to a tenant. It's in your interest to do this anyway, since you own the property and if you don't maintain it it will degrade, and the loss will fall on you.

And I agree with what others have said. Raising a mortgage for this transaction will not be easy.

JustAThought

I’d be concerned at what the ‘support’ might be presumed to entail? Does she think you will be responsible for her to enable her to continue living ‘independently’ in the annex should she become frail or infirm - or God forbid develop alzheimers or dementia? If she no longer has the collateral of a house to negotiate a nursing home place with will other siblings be expected to help physically mind her at home, or pay a share for 24/7 in ‘her’ home care, or pay for private nursing home for her? What about medical insurance, medical bills or hospital stays? Is that part of maintenance?

I’d really want that nailed down.
Is longevity in the family?

Victor

TimberTones wrote: »

The house is being bought for a small sum

Be careful that this does not attract Capital Acquisitions Tax. For most properties, this shouldn't be a problem with a transfer from the mother-in-law to their child, but may be problematic in a transfer from the mother-in-law to you.

@JustAThought

Thanks, Victor. Yes, I can by-pass the Capital Acquisitions Tax by waiting three years, but I'm exposed and only protected by my marriage and the possible mortgage clauses that my partner and I sign.

@JustAThought. I had the same thoughts on the clause. I agree, and I need to iron out what exactly "support and maintenance" means. I plan to ask my solicitor to go in as an optional party; that way, I can pick or choose if I need to contribute to this unusual "support and maintenance" request. I think this should protect me from any responsibilities and put me in control of decisions. What do you reckon?

@Peregrinus

@Peregrinus and @Marcusm. Good points. I can actually see the bank's perceptive. They cannot reclaim an asset if commitments happen to befall my partner and I. Ireland has strong laws to protect people in their homes--unlike America and the like.

Unfortunately, we would be like a landlord, but we would not be getting rent. I do not like the clause and I need to have a few nugget clauses myself to protect me from any unwanted future situations. I probably will offend people, but I feel offended with the clauses enforced on me. Legally, I would have more responsibility to protect the family versus the parent's siblings. This is very wrong, right?

I have many concerns with a specialist mortgage, such as the following concerns:

- I guess my options for switching mortgages would be very limited?
- My partner and I would get very high APR rates due to the risk, so we would be losing thousands over a 20-30 year timeframe.
- A provider could slap us with whatever clause they want to ensure their asset is protector; like dogs, we would have to bark and roll around for our "owner"

nibtrix

TimberTones wrote: »

Legally, I would have more responsibility to protect the family versus the parent's siblings. This is very wrong, right?

Well... you're getting a house for far below market rate in return, right? So presumably the siblings are getting nothing out of it and would now get nothing from the sale of their parent's house. Seems like you SHOULD have more responsibilities/liabilities in return, to be fair.

Personally I would stay far away from this situation though.

CIARAN_BOYLE

Ask yourself how much you are getting from buying a house this way.

At least you are locking up the asset rather than looking after the woman for years and hoping for it in the will.

Ask yourself what the financial benefit is. Then ask yourself if its worth it. Also make sure you have support and maintenance agreed.

Hi nibtrix. No, the siblings are getting the deed transfer money. The parent has rights of residence and a "support and maintenance" clause.

Good reflective questions, Ciaran. Hidden costs would be the support and maintenance requirements and the higher specialist mortgage rate. These items could stretch the cost to fall inline with straightforward property ownership. Food for thought!

Peregrinus

TimberTones wrote: »

Hi nibtrix. No, the siblings are getting the deed transfer money. The parent has rights of residence and a "support and maintenance" clause.

So it seems that mother-in-law is giving you and your spouse the house in return for:

(a) you granting her a lifetime right of residence in the house; plus

(b) you making an (as yet, somewhat vague) commitment to lifetime maintenance and support for her; plus

(c) you making cash payments to her other children.

This is a complex and unusual transaction, and there are a number of things that need to be teased out before you can decide whether it's a good idea or not.

First, as already mentioned, the content and scope of the maintenance/support commitment needs to be clarified. What exactly might this cost you in the long run, and are you getting the house at a sufficiently generous discount to make the deal attractive?

Secondly, your obligations as (in effect) "landlord" of the part of the premised your MiL will occupy. These are easier to get a handle on because we know what landlord's obligations are in terms of the standard of accommodation to be provided and who pays for what.

Thirdly, tax. The introduction of the siblings complicates matters; they are getting cash but giving nothing in return, and furthermore they are getting cash from you, a stranger, rather than from their mother. It might be better if you paid MiL, and she then made gifts to her other children. But talk to a tax adviser.

Only when you have nailed all this down can you decide whether you want to engage in this transaction, and it's only at this point that you need to think about how you are going to finance it.

There is a restructure you could consider, separating the transactions into two, like this:

First transaction: you and your spouse buy the house from MIL at a discount, reflecting the fact that you will grant her a lifetime right of residence in part of the property.

Second transaction: With the money she has got from you, MIL makes substantial payments to all her children (including your wife) in return for the children jointly entering into a commitment to provide support and maintenance for her for life. Effectively, she's giving them an advance on their inheritance from her, in return for a commitment to give some back to her should it turn out that she needs it during her own life.

This way you'd pay more for the house — there's no discount for the support and maintenance commitment, because that's not part of the house purchase deal. But your spouse would get some of that back, plus you yourself would not be party to the support and maintenance commitment (though your wife would). The obligation to support/maintain your MiL would be borne by her children, which instinctively seems right.

(They'd have to agree among themselves - ideally, in advance - how they were going to share the burden of support and maintenance. Will they divide the cost equally? In proportion to their own respective earnings?)

JustAThought

Lots of insightful questions here for the OP.

I was looking up basic inheritance tax liabilities for gifts /transfer of ownership of houses recently and I think I recall that if the original owner(parent) lived for 5 further years after the gift of the house to a child then there were different (more favourable) inheritance & financial tax thresholds applied to the child than the normal ones ( if the parent had died and left it to them). This was either from the Citizens Information or Revenue sites.

OP - have you had a tax accountant look at
this whole situation for for you? I would. They would have quite different range of insights and outlooks to a lawyer.