When an elderly parent is living in the matrimonial home

It is becoming increasingly common for elderly parents to move into their child’s home, perhaps because the parent is finding it difficult to manage living on their own.

And such an arrangement may entail the parent making a significant financial contribution towards the home, such that they acquire an interest in the property.

But what if the child lives with their spouse, and their marriage breaks down? How does the court sort out what should happen to the property?

The answer was provided by a recent case that took place in the Central Family Court in London, in which the wife’s mother had moved into the matrimonial home.

Before deciding what shares the husband and the wife had in the property, the court first had to decide what share, if any, the wife’s mother had in it.

Now, obviously this exercise would be easy of the wife’s mother’s share had been formally agreed and recorded. But in this case, as in so many others, it was not.

The relevant facts of the case were as follows.

The husband and wife had lived in a number of homes prior to the purchase of the current matrimonial home, in 2012. The property was purchased in the joint names of the husband and wife, but it was understood that the wife’s mother would also live there. Indeed, it had been chosen because a semi-separate Annexe could be built, for the wife’s mother to live in.

The husband and the wife could not have afforded the property without the financial assistance of the wife’s mother, who contributed £130,000 to the purchase price of £881,161 (including associated costs).

In addition, the wife’s mother contributed significant sums to towards the cost of building, and subsequently improving, the Annexe, including £75,720 in 2012 and £20,000 in 2013.

The court directed that the valuer who valued the property try to put a value on what the construction of the Annexe had added to the overall value of the property. The valuer stated that the construction of the Annexe likely added £200,000 to the value of the property. As the agreed value of the property was now £1,540,000 this suggested the Annexe constituted approximately 13% of the overall value.

The wife’s mother argued that her contributions towards the purchase of the property and the building of the Annexe gave her an interest in the property.

The judge found that the contribution towards the purchase of the property was actually a gift. The wife’s mother had gifted £350,000 to each of her three daughters, and the £130,000 was part of the gift to the wife. Accordingly, it did not provide the wife’s mother with an interest in the property.

However, the judge found that the sum contributed in relation to the Annexe was not a gift. It was clear that there was an understanding between the parties that the Annexe was to belong to the wife’s mother, and this was why she was paying for it. The separation of the costs relating to the Annexe was not absolute, but the sums paid by the wife’s mother were significant.

In the circumstances the judge found that the wife’s mother had an interest in the property amounting to 12% of the net equity in the property. Accordingly, he ordered that the property be sold, and that the wife’s mother receive 12% of the net proceeds, with the balance being divided between the husband and the wife (the wife received 56%, in order to meet her housing needs).

You can read the full report of the case here.

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