Lending money to a family member

[phoenixfly]

Hi, I am new on here but need some advice,
I lent my son in law some money for a deposit on a house with my daughter on the understanding that when his mother sold her house, which is for sale, she would give him the money to repay me.
I am preparing a promissory note between me and him, but as the money is coming from the sale of his mothers house do I have to include her, or how do I write it out

Thank you

[R0b]

Re: Lending money to a family member

Hello pheonixfly, I'm not sure a promissory note would work with what you are asking. The mother would need to be a party to the agreement otherwise it would fail.

Why not set out a simple loan agreement with all 3 names attached to it: yours, the son in law and the mother. In agreement tha you loan the son in law a sum of money, the mother agrees to repay this sum from the proceeds of sale of the house (you would need to identify the house, address and location even better the title number to the land of you can) within X days of completion of the sale. If a failure to pay the sum back the son in law and the mother shall be join and severally liable.

I don't know what the relationship is between you guys but when drafting the agreement you might need to take this into consideration.. Loans between family can be problematic especially if relationships break down.

[Openlaw15]

Re: Lending money to a family member

Hi, I am new on here but need some advice,
I lent my son in law some money for a deposit on a house with my daughter on the understanding that when his mother sold her house, which is for sale, she would give him the money to repay me.
I am preparing a promissory note between me and him, but as the money is coming from the sale of his mothers house do I have to include her, or how do I write it out

Thank you

Regardless of whether you produce a promissory note or not, under property law if you provide a deposit to a property it's likely you will gain a beneficial interest for that amount, possibly along with benefitting from increases in the property's value. The couple will hold the legal ownership but you will likely have a beneficial interest. In this case, for a registered property, you could contact the land register service and ask about the process for putting a notice or restriction on the couple's property. This way, it'll stop the couple from selling the property, or others buying it, without paying you first. I think this remedy would be more suitable than an apparent promissory note. A promissory note will probably support your claim to said beneficial interest (technical term, 'implied trust'). An alternative is being named in the couple's Will for the amount that you lend them.

[phoenixfly]

Re: Lending money to a family member

Regardless of whether you produce a promissory note or not, under property law if you provide a deposit to a property it's likely you will gain a beneficial interest for that amount, possibly along with benefitting from increases in the property's value. The couple will hold the legal ownership but you will likely have a beneficial interest. In this case, for a registered property, you could contact the land register service and ask about the process for putting a notice or restriction on the couple's property. This way, it'll stop the couple from selling the property, or others buying it, without paying you first. I think this remedy would be more suitable than an apparent promissory note. A promissory note will probably support your claim to said beneficial interest (technical term, 'implied trust'). An alternative is being named in the couple's Will for the amount that you lend them.

Trouble is ,the money I lent them is for my two other children, I gave my daughter some and lent them the rest on the understanding that i would be repaid when his mother sold the house, she said she was giving them the money so i lent them it on her behalf.
A charge would only work when they sold the house which they don't intend to do and as I need the money back in the near future being named in their will will not work either. Could the house they bought be used as colateral ?

[phoenixfly]

Re: Lending money to a family member

Hello pheonixfly, I'm not sure a promissory note would work with what you are asking. The mother would need to be a party to the agreement otherwise it would fail.

Why not set out a simple loan agreement with all 3 names attached to it: yours, the son in law and the mother. In agreement tha you loan the son in law a sum of money, the mother agrees to repay this sum from the proceeds of sale of the house (you would need to identify the house, address and location even better the title number to the land of you can) within X days of completion of the sale. If a failure to pay the sum back the son in law and the mother shall be join and severally liable.

I don't know what the relationship is between you guys but when drafting the agreement you might need to take this into consideration.. Loans between family can be problematic especially if relationships break down.

Wouldn't a promissory note between the three of us be the same, I have read that it is legally binding as well

[charitynjw]

Re: Lending money to a family member

Can a promissory note be a 3-way deal?

It's usually an agreement where the maker promises to pay a sum of money to the payee (either on demand or at some time in the future).
Or is that too simplistic?

[Anthony72]

Re: Lending money to a family member

Just a thought, and something that has been mentioned. Loans between family members can be difficult and I do think that registering an interest with the land registry is somewhat akin to using a sledgehammer to crack a nut.
Not only is it not suitable for your needs but will also in all likelihood cause friction between you and your daughter and your daughter and her partner .

Are you in contact and on good terms with your son in law's mother ?

You could I suppose ask her to act as a guarantor for a loan agreement between you and your son in law

[phoenixfly]

Re: Lending money to a family member

Just a thought, and something that has been mentioned. Loans between family members can be difficult and I do think that registering an interest with the land registry is somewhat akin to using a sledgehammer to crack a nut.
Not only is it not suitable for your needs but will also in all likelihood cause friction between you and your daughter and your daughter and her partner .

Are you in contact and on good terms with your son in law's mother ?

You could I suppose ask her to act as a guarantor for a loan agreement between you and your son in law

I was thinking the same thing myself, I am on good terms with his mother and she knows of my concerns, whether or not she would sign an agreement is another matter, I have asked my daughter to find out if she will. I am beginning to wish I hadn't lent them the money, but they had to move out of their rented house after only a year so it was the only way to give them more security

[Diana M]

Re: Lending money to a family member

I lent my son in law some money for a deposit on a house with my daughter on the understanding that when his mother sold her house, which is for sale, she would give him the money to repay me.
I am preparing a promissory note between me and him, but as the money is coming from the sale of his mothers house do I have to include her, or how do I write it out

Hello Phoenixfly

Back to basics

How long ago did you make this arrangement? Ideally a promissory note would have been done at the outset not in retrospect.

Did you have your agreement with your son-in-law to repay the "loan" to him (did you transfer the money to his bank account?) in writing at the time when you lent the money? An email or a text exchange may help you.

Or did you transfer the funds to your daughter who may have transferred them to your SIL?

How did your son-in-law commit his mother to the repayment of the "loan"? What evidence do you have that she agreed (in case you need to include/join her in any future legal proceedings which I hope not}

Is there any issue as to whether this money you lent was a gift not a loan underwritten by his mother?

Di

[Diana M]

Re: Lending money to a family member

A charge would only work when they sold the house which they don't intend to do and as I need the money back in the near future being named in their will will not work either.

I agree.

Di

[phoenixfly]

Re: Lending money to a family member

Hello Phoenixfly

Back to basics

How long ago did you make this arrangement? Ideally a promissory note would have been done at the outset not in retrospect.

Did you have your agreement with your son-in-law to repay the "loan" to him (did you transfer the money to his bank account?) in writing at the time when you lent the money? An email or a text exchange may help you.

Or did you transfer the funds to your daughter who may have transferred them to your SIL?

How did your son-in-law commit his mother to the repayment of the "loan"? What evidence do you have that she agreed (in case you need to include/join her in any future legal proceedings which I hope not}

Is there any issue as to whether this money you lent was a gift not a loan underwritten by his mother?

Di

Hi, The arrangement was made a month ago, a verbal agreement was made between both my son in law and my daughter, his mother told me that she was giving them the money when she sold her house, the money was transferred into my daughters account, part went to her solicitor and the rest to pay tradesmen for work to be done, there is no issue about the money being lent, everyone agrees that it was a loan that will be repaid when his mothers house is sold

[Openlaw15]

Re: Lending money to a family member

Just a thought, and something that has been mentioned. Loans between family members can be difficult and I do think that registering an interest with the land registry is somewhat akin to using a sledgehammer to crack a nut.
Not only is it not suitable for your needs but will also in all likelihood cause friction between you and your daughter and your daughter and her partner .

Are you in contact and on good terms with your son in law's mother ?

You could I suppose ask her to act as a guarantor for a loan agreement between you and your son in law

On your facts you've already lent the money with a verbal condition. Under the law, you cannot make a promissory note from a past event/ act. You cannot make a contract or a loan agreement on a past event/ act. You cannot make a guarantor from a past event/ act. So, even if you were to make a contract (agreement) or promissory note, if there were problems with the family members paying it, the promissory note is unlikely to be binding. You should have held onto the money and not lent it until you sorted out the legalities.

[phoenixfly]

Re: Lending money to a family member

On your facts you've already lent the money with a verbal condition. Under the law, you cannot make a promissory note from a past event/ act. You cannot make a contract or a loan agreement on a past event/ act. You cannot make a guarantor from a past event/ act. So, even if you were to make a contract (agreement) or promissory note, if there were problems with the family members paying it, the promissory note is unlikely to be binding. You should have held onto the money and not lent it until you sorted out the legalities.

Is it not true that I can get a promissory note signed after the event with the agreement of the person I loaned the money to.
or state that the agreement was executed on todays date with the intent that it be effective from a proir date

[Openlaw15]

Re: Lending money to a family member

Is it not true that I can get a promissory note signed after the event with the agreement of the person I loaned the money to.
or state that the agreement was executed on todays date with the intent that it be effective from a proir date

A promise is saying you vow (promise) to do something. You likely have a verbal contract anyway. If there were negotiation period there could be grounds to say the verbal contract terms were being dealt with before formal writing. On your facts though, as the period has passed - ie you already gave them the consideration (ie the deposit for the property), you can't now put it in writing as it's too late. As I said, you have a verbal contract and you could rely on this just like you could a contract in writing. For extra security, if you put a notice or restriction on the property you're providing further evidence of the verbal contract.

In writing: promissory note/ contract issues

You cannot promise to do something in the current to affect the past, in general. If the person wanted to be awkward, could just say it's not binding, and in my view a court is unlikely to enforce it as it's a past event. So, in law you cannot make a promise via a loan agreement from the past in your situation. If the person/ couple didn't go to a lawyer, or take it to court, it may work. It's like in contract law, you cannot make a contract from a past event. Contract requires agreement: offer and acceptance; consideration (ie something for something), mainly. Agreement and consideration cannot be for a past event. It is therefore not an offer or promise as no one - who thinks like a lawyer - would think it was fair if you tried to contract with them for something they already had (ie money/ deposit for the property), based on a promissory note.

[phoenixfly]

Re: Lending money to a family member

A promise is saying you vow (promise) to do something. You likely have a verbal contract anyway. If there were negotiation period there could be grounds to say the verbal contract terms were being dealt with before formal writing. On your facts though, as the period has passed - ie you already gave them the consideration (ie the deposit for the property), you can't now put it in writing as it's too late. As I said, you have a verbal contract and you could rely on this just like you could a contract in writing. For extra security, if you put a notice or restriction on the property you're providing further evidence of the verbal contract.

In writing: promissory note/ contract issues

You cannot promise to do something in the current to affect the past, in general. If the person wanted to be awkward, could just say it's not binding, and in my view a court is unlikely to enforce it as it's a past event. So, in law you cannot make a promise via a loan agreement from the past in your situation. If the person/ couple didn't go to a lawyer, or take it to court, it may work. It's like in contract law, you cannot make a contract from a past event. Contract requires agreement: offer and acceptance; consideration (ie something for something), mainly. Agreement and consideration cannot be for a past event. It is therefore not an offer or promise as no one - who thinks like a lawyer - would think it was fair if you tried to contract with them for something they already had (ie money/ deposit for the property), based on a promissory note.

found this on another legal website;
One cannot go back in the sense that you've described. However, the parties are free, TODAY, to prepare and sign a promissory note about a loan that was made in the past. In other words, it would be dated today and list when the loan was originally made and reflect the repayment agreement terms.